Enhancing efficiency: A way forward to adopt the new minimum wage

The minimum monthly wage for garment workers has been increased to Tk12,500 – a 56% increase from the existing Tk8,000 wage. This increase is for entry-level workers (5th grade). At the same time, the wages of apparel workers in four other grades also increased accordingly. 

The new wage structure was made effective from December 2023. 

In the Tk12,500 minimum wage, the basic wage is Tk6,700, house rent is Tk3,350, medical allowance is Tk750, conveyance is Tk450, and food expenditure is Tk1,250. 

The last time the minimum wage was increased was in 2018 from Tk 5,300 to Tk 8,000, which was around a 51% rise. Earlier, the minimum wage was fixed at Tk5,300 in 2013, up from Tk3,000 in 2010. 

Further back, it was Tk1,662.50 in 2006, Tk940 in 1994 and Tk627 in 1985.

It is noteworthy to point out that the manufacturers also provide the workers with a 5% mandatory increment every year to support them in adjusting to the burgeoning inflation. 

The good news is our apparel factories have been heavily investing in automation. The automated machine increases efficiency by 7-10% less than non-automated machines

However, living expenses in the country have steeply gone up in recent years. So, the increase in the minimum wage is undoubtedly a welcome move from the government and the manufacturers. 

So, now it's expected that every stakeholder in the apparel industry will play their respective role in implementing this minimum wage structure. Last time in 2018, we saw many of the brands and retailers, albeit with a few exceptions, not increase their prices paid to garment manufacturers in line with the minimum wage rise in Bangladesh. This should not be a repeated scenario as far as responsible business is concerned. 

Taking care of workers is of course manufacturers' responsibility, it's also a core responsibility of buyers in any form of sustainable and ethical business. So, the manufacturers need cooperation from the buyers now more than any time before.  

This year, the new wages were declared when apparel shipment from Bangladesh was on the decline owing to dollar shortage, an elevated level of consumer prices in the export destinations, and energy shortages at home. 

Our apparel export to the United States, the single largest export country for Bangladesh, declined 21.77% year-on-year in terms of value in the January-August period of 2023. In terms of volume, it declined by 29.10%, according to the Bangladesh Garment Manufacturers and Exporters Association (BGMEA). On the other hand, the apparel export to the European Union, the largest region for our shipment, declined 13.71% in value and 15.07% in volume. 

So, apparel manufacturers are trying their best to find ways to adopt this new increased minimum wage.  A card they have up their sleeve is to enhance efficiency. 

According to the Asian Productivity Organisation (APO) 2020 data, the average garment labour productivity is lower in Bangladesh than in all its competing countries except Cambodia.

The data show that Bangladesh's per-worker annual productivity level is $10,400 while for Vietnam it is $12,700, India $15,800, and China $23,800.
A skilled workforce is one of the fundamental requirements for efficiency and productivity growth. One of the reasons for the lower productivity of our workers is that they enter the factories without any training and learn there by trial and error. 

Though BGMEA runs 12 training centres and also arranges jobs at apparel factories for successful trainees, considering the huge industry and 4 million workers, it's not enough. The government needs to set up more training centres at the garment industrial hubs so that any worker can join a factory with at least some basic training at the centres. 

The factories need to strengthen their industrial engineering and planning departments with competent human resources. The planning ensures the optimum utilisation of all available resources. It also helps to reduce wastage of valuable resources and avoids duplication. 

So, the planning department of a factory should be able to plan in a way that ensures the highest return at the lowest possible cost. Thus, contributes to increasing the overall efficiency of the factory. 

The good news is our apparel factories have been heavily investing in automation. The automated machine increases efficiency by 7-10% less than non-automated machines. Automated machines for cutting, sewing and finishing can reduce the man-machine ratio (MMR), and thus save time and minimise cost as well. 

The supply chain is considered the main driver for any industry. According to industry research, the efficiency affected ratio is as high as 35% concerning how much efficiency is lost for the supply chain. 

Our import dependency on raw materials, inconsistency in utility supply, and higher rates of handling time in the port for importing the raw materials and exporting the finished goods are the major barriers to the supply chain. These need to be addressed to reduce the lead time for our apparel export. 

Ashikur Rahman (Tuhin) is the Managing Director of TAD Group. He is a former Director of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).