December is a festive month, and it is more joyous for us since we got our independence as a nation in this month in 1971. We have just celebrated the 52nd Victory Day of Bangladesh on 16th December. Now the countdown toward Christmas and New Year has started. I am sure you have planned your vacation and I hope you will enjoy the time well with your family, friends and beloved ones. I wish you a Merry Christmas and a happy New Year 2024.
All’s Well That Ends Well. There were projections that U.S. holiday spending (Thanksgiving, Black Friday and Cyber Monday) this year will reach record level, and the November updates by the U.S. Census Bureau indicates that the predication are becoming true. This positive vibe brings the hope of a better and prosperous year ahead.
Further to my letters to you dated 20 September, 8 November and 17 November of 2023 regarding the minimum wage negotiation for the garment workers, this is to solicit your kind support to implement the new minimum wages.
You are perhaps aware that the final gazette of the minimum wages of the garment workers has been published by the government today. As per the gazette notification, the new wage has come into effect from 1st December 2023 and the workers will start drawing the new wages in the beginning of the new year, i.e. January 2024.
I am sure you are aware about the new wage system, let me recap for your better understanding. The number of grades is reduced to 4 from 7 as per previous grading system. As per the final declaration, the Grade IV replaces previous Grade VII (*previous refers to the minimum wage gazette of 2018), and Grade III replaces previous Grade V and VI. The Grade I and II of the previous gazette is removed in the new gazette. The removal of Grade I and II is made as per the official demands by the workers and employers’ representatives, and the merger of Grade V and VI was done as per the official demand by the workers representative and accepted by the wage board.
The gross monthly minimum wage of an unskilled worker in Grade IV (former Grade VII) workers remains the same as per initial declaration, which is Taka 12,500 gross (increased by Tk. 4,500, or 56.25%). Important to note that the basic-gross wage ratio for Grade IV workers increased from 51.25% to 53.60%, and we have accepted this respecting the demand of the workers.
For Grade III (former Grade V & VI) as per new grading order, the gross monthly wage is increased by 60.93%, i.e. from Tk. 8,420 to Tk. 13,550 (increased by Tk. 5,130). And for this grade the basic-gross ratio is increased from 52.02% to 54.61%. As I have mentioned that the previous Grade V and VI are merged in the new order as ‘Grade III’, this will better recognise and incentivise the skills gain and efficiency between a fresh/ unskilled worker and a skilled one. This also meets the demand by workers for a higher pay for the upper grade.
I am sending the final gazette of the minimum wages 2023 in the attachment for your kind information (the gazette is published on 20 December 2023 in Bangla).
Now, the industry is taking preparation to pay the workers as per the new wages from January 2024. BGMEA has taken steps to clarify the new wage system and the changes among our member factories. We have already completed 13 workshops for the factory personnel, half-day each, covering 1900 participants from 1300 factories in total. The purpose is to support factories to avoid any confusion while implementing the wage, as well as to make sure that compliance is being maintained in the process of wage upgrading.
The implementation of the new wage will have a significant impact on the costing in every factory undoubtedly, however the increase of minimum wages and ensuring decent living of the workers has been an urge of the global community and the fashion brands / retailers as well. In fact, we have received several letters from influential organisations like AMFORI, American Apparel & Footwear Association (AAFA), and Action Collaboration Transformation (ACT) when the wage negotiation was in progress. Few of them wrote to the Honorable Prime Minister of Bangladesh directly urging for living wages of the workers. The expectations from the European Commission and the United States on workers empowerment and rights, covering wage issues, got momentum through recent steps and engagements. And on the 15th December, 8 congressmen of the U.S. Congress signed a letter to AAFA urging them to initiate a set of actions which includes, among others, “Commit to maintaining a long-term sourcing relationship with your suppliers and to increasing your purchasing prices to fully absorb the additional labor cost”. We are also in support of better living of the workers in principle (in fact many of our factories provide a great number of non-wage and non-legally binding benefits to the workers) and we feel happy when our workers are happy, but we need a price that enables us to sustain a wage level. The Minimum Wage Board tried its best to strike a balance so that the workers’ livelihood is protected while the industry could also sustain. Now it is a moral responsibility for us to ensure that the new wages is fully implemented in due time.
Well, the minimum wages have not only increased in the garment industry, but also the allied industries had to revise their wages upward, pushing the cost of accessories and other inputs up. You are aware that in recent years our cost of production has gone exorbitantly high. Price of electricity has risen by 25%, gas price by 286.5%, diesel by 68%, and similar impact on transport and other cost factors are notable. From July this year Bangladesh Bank has increased the interest to curb inflation, which has pushed our cost of finance further up leading to increased cost of production and cost of goods. Also, bank charges and fees of the municipality and city corporation, including different registration and certification fees, have significantly increased. In the past decade, the industry invested millions of dollars to remediate our factories, and we are constantly investing in greener manufacturing, emission reduction, resource efficiency to meet the emerging due diligence requirement. Also, our factories are adopting state-of-the-art technologies and machineries, upgrading processes, to enhance efficiency, reduce wastage and to make the workplaces more comfortable and convenient for the workers, eliminating unnecessary motions and physical burden on them. This reduces fatigue among the workers and enhance their productivity. All these progresses and accomplishments are adding value to the supply chain and came through huge investment and cost which must be considered.
We have discussed these issues in a meeting with the brands, retailers, and their representatives at BGMEA Dhaka office on 15 November 2023. We are thankful to you for the instant response from many of you considering the adjustment of the wage increases in your price calculation. We have also received official letters from several brands confirming their stance on absorbing the wage increase in price. I would urge you to also consider the impact of other cost increases duly in addition to wage increase including factories investments in sustainability. This is absolutely important that we collaborate each other on this agenda as long as we want our supply chain to run smoothly and be able to deliver you the better. As far as we share a common vision to make the industry sustainable (especially within the ESG parameters), the importance of responsible purchasing practices cannot be overemphasised. I am sure this journey of support and collaboration will continue.
