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Addressing Worker Unrest in Bangladesh: Balancing Wage Adjustments and Security Measures

By Asif Khan, CFA

Chairman

EDGE AMC Limited

Posted on: 01 Sep, 2024

Yesterday I spoke to an experienced finance professional working in the Pharmaceuticals industry to understand the worker unrest we are hearing about in multiple sectors (see news link below for an example). My goal was to understand what exactly was happening.

The issue seems to be a mix of two things. One group is taking advantage of the law and order situation and working selfishly and opportunistically. Another group may have some legitimate grievances that accumulated over the years.

My contact suggested two solutions to the problem that should be used simultaneously.

1. The carrot: We are aware that the cost of living has seen a major spike since 2022. Currency depreciated significantly and we saw a spike in inflation. In Nov 2023, the minimum wage for RMG in 5 categories was hiked by 56.25% after several years. However, some other sectors and industries did not see an adjustment. The carrot is the formation of a wage board that will review compensation in non-RMG sectors. Personally, as someone who believes in market-based pricing, I am a bit hesitant to advocate administered wages but in the current context, this might not be a bad idea. It can reduce unrest and push factories to become more efficient and productive.

2. The stick: The carrot has to be accompanied by the stick to deal with the more unethical and opportunistic groups. Historically, industrial police could have easily taken things into control but the current context is different. Given the police is still not fully functional it makes sense to take help from the military. The army doesn't need to intervene but its presence can have a calming presence while the industrial police do their job.

We are well aware that inflation is very high right now. Just demand-side policies will fail to control inflation and will make the situation worse. Factories need to run to ensure adequate supply and even make up for the days lost in July and August. Despite limited resources and too many commitments, the interim government must move on this issue quickly.