Bangladesh As 2nd Largest Exporter Of Clothes Pressured To Raise Wages

Bangladesh as 2nd largest exporter of clothes pressured to raise wages

Major global fashion retailers, such as H&M and Gap, have pledged to increase the prices of clothing produced in Bangladesh to assist local factories in compensating for the surge in workers’ wages. This commitment was disclosed by a U.S.-based association representing over 1,000 brands, American Apparel & Footwear Association (AAFA).

Bangladesh stands as the second-largest exporter of clothes globally, following China. Following clashes between factory workers and law enforcement resulting in fatalities, the government recently mandated an almost 60% rise in the minimum monthly wage to 12,500 taka ($113) effective from December. This marks the first increase in five years.

Factory owners expressed concerns about the wage hike, foreseeing a potential 5-6% increase in costs, which could dent their profit margins. Labour expenses typically account for an estimated 10-13% of the total manufacturing costs.

AAFA highlighted its commitment to responsible purchasing practices aimed at supporting these wage hikes, advocating for the implementation of an annual minimum wage review mechanism to ensure Bangladeshi workers aren’t adversely affected by shifting macroeconomic conditions. Retailers from the United States and Europe serve as the primary purchasers of clothes made in Bangladesh.

Bangladesh’s clothing industry, employing approximately 4 million individuals, has historically benefited from lower wages. The ready-made clothes constitute a significant part of the economy, contributing to almost 16% of the GDP.

Despite the recent minimum wage increase, considered insufficient by some workers, Bangladesh still trails behind other clothing manufacturing hubs in the region such as Vietnam, with an average monthly wage of $275, and Cambodia, where it stands at $250.

However, the workers are demanding bigger salaries. On Thursday, workers ceased operations in several factories and clashed with the police for a second consecutive day to protest the increase in pay. This led to the shutdown of nearly 40 factories in the country.

According to witnesses, the protesters, aiming for a wage hike twice the amount offered by the government, resorted to throwing stones at police and damaging numerous factories in Gazipur, a significant garment production area situated on the outskirts of the capital, Dhaka.