Home ›› 14 Aug 2022 ›› Opinion
The government of Bangladesh brought a large section of the population under stimulus packages during the critical phase of Covid-19 virus.
Around five per cent of the total GDP was donated to the people who lost jobs and purchasing power. When the deadly effects of the virus began to subside, not only lower-income groups but also middle-income groups were seen to be purchasing daily necessities from trucks carrying outlets run by the Trading Corporation of Bangladesh (TCB).
Shortly after the seemingly improved conditions in terms of the spread of the virus, the fixed-income groups especially wage-earners have fallen into great troubles. Their limited income together with the historic inflation rate, the highest in nine years, all have dented their capability of purchasing goods.
The Russia-Ukraine war just after the hard Covid-19 times, came as a curse for the global economy. There seems to be no ways or signs of relieving the curse right now. The war that started in February last is responsible for economic turmoil globally. Bangladesh is now bearing an additional import cost of close to 50 per cent due to the conflict held between two European nations. High import costs lead to increased price level that recently went skyrocketing.
In June, Bangladesh experienced around a 7.56 per cent inflation rate. The people caught with cost-pushed inflation have become worried over sustainability issues with their fixed wages.
As Russia-Ukraine are key sources for supplying oil, gas, and food grains, Bangladesh is left with very limited options right now. Currently, Bangladesh has planned to search for alternative sources for importing energy and food grains as a result of imposing sanctions on Russia by the USA, no matter which country stands by Bangladesh in supplying oil, gas, and food grains. From now on, a huge subsidy for importing those has to be kept aside. Otherwise, the low and middle-income groups shall have to bear the brunt in the days to come. To cure the record level of inflation in Bangladesh is a daunting task without an iota of doubt. There is no alternative avenue but to increase the wage growth rate for the well-being of wage-earners.
Following the high inflation rate, the wage-earners working in three sectors of the economy- agriculture, industry, and services- are now losing purchasing capacity. The prices of daily necessities have gone beyond their purchasing power. There are around 44 occupations in the economy. Of them, 11 occupations are related to the agriculture sector, 22 in the industry sector, and 11 in the services sector. According to the Bangladesh Bureau of Statistics (BBS), Employed peopled in agriculture, industry and services are 40.6 per cent, 20.4 per cent and 39 per cent respectively. About 32.4 percent of people are employed in skilled agricultural, forestry, and fisheries, 17.2 percent in elementary occupations, 17.0 per cent in craft and related trade workers, 16.5 as service and sales workers, 6.8 per cent as plant and machine operators, 4.8 per cent as professionals, 1.9 per cent as technicians and associate professionals, 1.6 per cent as managers, 1.5 per cent as clerical support workers, 0.2 per cent in other occupations - BBS sources.
It is essential to underscore that most breadwinners are employed in informal sectors in Bangladesh which account for 85.1 per cent. Such types of wage-dependent people have been struggling to survive amidst notable price levels now existing across the country. The average monthly income of male managers is Tk 36.1 thousand, Tk 27 thousand for professionals, Tk 21.3 thousand for technicians and associate professionals, Tk16.3 thousand for clerical support workers, Tk 12.2 thousand for plant and machine operators, Tk 12 thousand for service and sales workers, Tk 10.7 thousand for craft and related trade workers, Tk 9.6 thousand for skilled agricultural, forestry and fisheries, Tk 8.8 thousand for elementary occupations, Tk 26.2 thousand for other occupations- BBS said in its report. According to BBS, the trend of average earnings of wage earners is Tk 11.5 thousand in 2013, Tk 12.9 thousand in FY 2015-16, and Tk 13.3 thousand in FY 2016-17. Is it possible to survive with the existing wage growth rate (6.47 per cent) against the inflation rate ( 7.56 per cent)?
If the wage growth rate in an economy does not match the inflation rate, the wage earners become vulnerable. State-run Bangladesh Bureau of Statistics ( BBS) authority measures the wage rate index (WRI) to cope with the inflation rate. The WRI shows the trend and changes in wages of wage-earners. The BBS recently came up with WRI in view of the recent upward trend in the inflation rate that came under criticism. According to WRI, the wage growth rate was recorded at 6.47 per cent in June against the historic 7.56 per cent inflation rate. While measuring WRI, nominal wages and real wages of low-paid skilled and unskilled laborers are considered. When a day lobour gets wages from his or her employer, it is called nominal wages. While nominal wages are adjusted to the inflation rate, it turns into real wages. If nominal income remains unadjusted to the inflation rate, the real income shrinks. If analyzed the last three months’ record of wage growth, wage growth could not exceed the inflation rate. Wage growth in May recorded 6.38 per cent , 6.47 per cent in June, 6.56 in July against the inflation rate 7.42 per cent, 7.56 per cent and 7.48 per cent. Food inflation was 8.30 per cent in May, 8.37 per cent in June and 8.19 per cent in July resulting in facing a worsening situation for the wage earners.
According to the BBS record, for the last seven years, the trend of wage growth was alike despite the fluctuations in the inflation rate. In FY 2015-16, the wage rate was 6.52 per cent , 6.12 per cent in FY 2020-21 and 6.06 per cent in FY 2021-22. All are informed that low-income group people spend around 60 per cent on purchasing food items of their total income The significant gap between the inflation rate and wage rate index is widening over the last couple of months. Its immediate solution is required with a view to the increasing purchasing power capacity of the wage-earners. The government has to take measures in respect of increasing real income taking the current price level into consideration. If the gap exists and widens, there is a possibility of a rising poverty rate.
In respect of setting a monthly minimum wage, Bangladesh, in the eye of the International Labour Organization (ILO), could not perform up to the standard or expectations. On the contrary, a 5.9 per cent real minimum wage was decreased during 2010-19. The Global Wage Report 2020-21 revealed that Bangladesh ranked fifth from the bottom among 136 economies in respect of monthly minimum wage. The report prepared by the ILO said that the minimum wage in Bangladesh was US$ 48 in 2019 - the lowest in Asia and the Pacific region. In minimizing the poverty rate, there is no alternative but to make adjustments to nominal wages considering the current trend of the inflation rate. If the wage-earners fail to lose purchasing power with their earned wages, the entire labor force is set to suffer from malnutrition problems resulting in decreasing labor productivity growth. The state has to come forward for hiking the wage rate in view of the inflation rate existing now. The sooner, the better.
The writer is an economic affairs analyst. He can be reached at mazadul1985@gmail.com
