Report on

How Bangladesh determines wages for its labors

Course title: Labor Economics and Compensation Theory
Course code: HRM370

SUBMITTED TO:
DR. SHIBLY KHAN

SUBMITTED BY:
NAOMI NITEE SARKER
ID:1911171

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 Letter of Transmittal

1ST March, 2022

To
Dr. Shibly Khan
Independent University Bangladesh
Subject: Submission of report on how Bangladesh determines the wage rate for labor
Dear Sir,
It is an honor and great pleasure for me to present our report on How Bangladesh determines the
wage rate for its labor. This report gave me an opportunity to apply my theoretical and analytical
expertise, views, ideas, which will be good start for our future professional career.
I hope you will find the report presented in an appropriate manner. I deeply appreciate your
cooperation.
Thanking you and looking forward to receive your cordial approval of your submission.

Thanking You

Naomi Nitee Sarker

ID:1911171
School of business
Independent University, Bangladesh

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Table of Contents
Introduction ................................................................................................... 4
Background of the Labor Market in Bangladesh ........................................... 4
Data Analysis of the Labor Market of Bangladesh .......................................... 5
Wage Data of Bangladesh .......................................................................... 11
Computation of Wage Rate Index .............................................................. 13
Wages in the Garments Industry .................................................................. 14
Conclusion and Findings ............................................................................... 15
References .................................................................................................. 15

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 INTRODUCTION

Labor force of any developing country like Bangladesh is a major partner to the economic growth
and development. Generally, we consider persons above 15 years are considered as labor force.
The labor market of Bangladesh has increased significantly by 24.25 million between 1999 to 2015.
Labor force according to the Labor force survey (LFS) has been defined as the sum of employed
and unemployed person. Combined, it represents the available supply of labor for the production
of goods and labors.
Employment and unemployment are another crucial terminology used in LFS. LFS defines
Employed as all persons of 15 years or old who during a specified period of time was actively
involved in any form of work in return for wage or salary, profit or family gain. Unemployment on
the other hand portrays the exact opposite concept of employment. Unemployment indicates the
proportion of labor are willing to work but still not involved. Unemployment is often confused
with Underutilization. Labor underutilization is defined as the mismatch of the supply and
demand of labor (BBS, 2017)

Background of the Labor Market in Bangladesh

The contemporary labor market of Bangladesh can be characterized by as an ever increasing rate
of labor force participation and increases in underemployment. As a matter of fact, the supply of
labor force is growing at almost twice than the rate of growth in population. According to
Bangladesh Bureau of Statistics, 67% of total population were aged 15 or older. Additionally, of
this 50.4% were female (BBS, 2017). According to Bangladesh Bureau of Statistics (2010),
between 1996 and 2005 the labor force increased at 42.6 percent of the entire population. What’s
interesting is that of this growth 31.7 percent has been male and 126.5 percent of growth in
female workers. This trend however stayed at 81.9 and 35.6 percent at respectively at 2016.

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There doesn’t seem to be any difference in percentage of total population between rural and
urban areas. (BBS,2017)

Labor market in Bangladesh can be categorized as three categories: formal, rural informal and
urban informal. Of this only a small portion of the entire working population work formal. This
trend is common with countries having high population growth like Bangladesh. Here the informal
sector occupies the most of the labor force (BBS, 2018). So for Bangladesh, informal economy has
been the most significant in the growth dynamic
World Economic Forum on Gender Gap, reports that Bangladesh ranks 68th according to its gender
gap index. The Women’s participation in different productive activities is somewhat restricted
due to the social and theological ideology

DATA ANALYSIS OF THE LABOR MARKET OF BANGLADESH

Population and labor force composition:

Population, if used efficiently can be the biggest asset for development. In case of Bangladesh
from 1999-2000 to 2015-16, the population increased by 34.15 million. However, of this the
working age population increased only by 24.25 million and the portion of employed population
increased by 20.53 million. That reflects that the rate of increase of labor market is much lower
than that of the total population. This further instigates a concern that there exists a failure to
utilize the entire population. Another interesting fact is that till 2010, there exists a male
dominance in the total working age population. However, the situation has quite changed in
recent years (2015-16) as the female portion of working age population significantly increased.
This reflects that more skilled female labor is emerging and engaging as part of the labor force.
However, the amount of female employed population is still less than half of the total male
employed population.

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Table 3.1: Changes in the size of Labor Force and Composition

[Fig 1 shows that the percentage changes in labor force based on gender. In all case percentage
increases in female labor force is higher than the percentage changes in male labor force.
Specially in last 7 years’ rate of changes of female labor force (5.36%) is almost five times of
changes of male labor force (1.15%)]

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Present status of youth labor force:
The female population in youth labor force (40.9%) is higher than the male (30.6%).

Table 3.2: Youth labor force distribution (% in total labor force)

LABOR FORCE PARTICIPATION RATE:

The labor force participation rate (LFPR) can be defined as the percentage of the labor force in
contrast to the entire working population. It portrays the relative size of the labor supply currently
available to produce goods and services. It acts as an important indicator for economic growth.
Therefore, this can be seen as an effective tool to monitor progress in the labor market (QLFS,
2015-16). If we divide the working age in three groups we can see that highest labor force
participation rate can be found in the second group (age 30-64) and is applicable in every case.
Another thing we can visualize that the participation rate of female is almost half of the male in
both area (rural and urban). As the labor force is male dominated there is no significant difference
between LFPR of male in rural and urban area. On the contrary as females are have more
opportunities of engagement in rural area far more women participate in it.

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 Table 3.3: Labor force participation rate in percentage (aged 15 or older by age group, sex and
area)

Employment population by Sector and gender:

While it is very complex to estimate the Employment population by sector from the last survey it
can be clearly be seen that there exists a male dominance in both agriculture and non-agricultural
sectors. However, it can also be seen that there has been a decrease in the agree cultural sector
according to the LFS in 2015-2016. However, we can also see that the female employment in
agriculture is highest in that time. It can be also seen that in three survey the Male employment
shows a growth or positive trend, however no trend can be found for female employment.

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Changes in the structure of the employment:

When it comes to the structure of employment we can see that from 1999-2000 to 2015-2016
there has been a slight increase in self-employed as percentage of total employment. Here,
Employee as a percentage of total employment has a significant increased slope. On the other
hand, unpaid family labor which is predominantly females shows a decreasing trend. This can be
due to increase of women as skilled worker. It can be visualized that self-employed population
has significantly increased from 35.1% in 1999-2000 to 43.2% in 2015-16. Employee also
increased from 12.6% to 39.2% of total employment within the same period but the unpaid family
helper/labor decreased from 33.8% to 14.47% of total employment.

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Changes in the rate of unemployment:

When it comes to Rate of unemployment at national level we can see that there exists a
decreasing slope from 1999-2000 to 2010. Additionally, the female unemployment rate has also
decreased from 7.8 in 1999-2000 to 5.1 in 2010. On the contrary the male unemployment rate
has increased from 3.4 to 5.1. However, from 2015-16 we see that the situation has reversed with
Female unemployment rate up to 6%, and male unemployment rate decreasing up to 3%.
However, the national level unemployment rate remains almost identical (4.3% in 1999-2000 and
4.1% in 2015- 16).

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 WAGE DATA OF BANGLADESH
Real wages:

In the below mentioned table we can see estimated real wage for 2006-2007 to 2011-2012. From
here it is evident that only in agriculture sector there has been a constant increase. However, the
construction sector has the highest wage index in 2011-2012. Construction and industry both
sector provide a continuous increasing till 20008-2009 and fall in the next year. Surprisingly in
both sector the indexes rose again in 2011-2012.

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 Table 3.4: Index of real wage, 2006-2012

Year Overall Industry Construction Agriculture

2006-2007 100.68 100.90 101.39 100.53

2007-2008 102.57 103.02 104.54 102.07

2008-2009 114.79 114.33 120.34 115.86

2009-2010 115.40 112.97 119.29 121.65

2010-2011 110.96 106.26 116.08 123.17

2011-2012 114.49 113.20 141.43 128.73

(Source: ADB, 2016)

Below we can see the Minimum Wage coverage in Major Industries.

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 Computation of Wage Rate Index
The wage rate index is an instrument of measurement for the movement of wages of low paid
skilled and unskilled labor in main sectors of the economy such as agriculture, industry and
service.
Wage Rate Index of Bangladesh is officially measured of wage which is compiled by simple
weighted average of seven divisional wage rate indices
Laspeyer’s formula is used for computation of wage rate index in the following way

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 Wages In the Garments industry

The government of Bangladesh has defined the wage structure for various industries. In
accordance with the Minimum Wage Ordinance 1994, the government has set BDT 500 for
apprentices and BDT 930 for workers per month. In 2013 it was decided that the minimum wages
for garment workers would be 5300 BDT with a 5% yearly increment, whereas the wages for
apprentices would be 4180 BDT. Apprentices are defined as workers who have worked in the
garment industry for less than three months. After successful completion of three months,
apprentices are appointed as workers. However, these wages fall far below the minimum wage
rate. Additionally, female workers are often discriminated against in terms of wage levels. This is
evident as almost 73 per cent of female workers do not receive even the minimum wage. On the
contrast, this number is only 15 percent for the male counterparts. In 2019 the minimum wage for
garment workers were set as 8000 BDT.

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 BEXIMCO TEXTILES

Beximco Apparels Limited has been a member of Beximco Group. It started its commercial
production in March 1985 under the name of Comtrade Apparels Limited. In the beginning it was
a joint venture project between Comtrade Limited of Lausanne, Switzerland and Beximco Group.
January 01, 1997 it changed its name to current iteration.

Beximco Apparels Limited in accordance with the minimum wage ordinance of Bangladesh for
garments, provides its workers minimum wage rate of BDT 9320 per month. For the apprentice
after the training they will be absorbed in grade no-7 of the concerned department.

CONCLUSION AND FINDINGS

In the case of Bangladesh, it is evident that the labor force participation is growing at a faster
pace than the current employment generating capacity of the economy. This, therefore creating
the issue of underemployment where the country is being unable to absorb this incremental
labor force in productive and remunerative employment. In order to overcome this issue, the
country needs to establish a more employment intensive economic growth. To achieve that
Bangladesh needs to adopt several complementary approaches such as giving priority to more
employment friendly growth policies, widening micro credit based and targeted employment
generating programs and special schemes for new job creation especially in rural areas

When it comes to wages however the minimum wage fixing criteria do not represent a standard
model nor are they suitable minimum wage levels. There need to be a standard basis on which
the wages would be provided so that it meets the requirement to meet living wage provisions.
The minimum wage should indicate an amount of wage that helps workers live life along with
their families with security, freedom and dignity. The minimum amount of wage should set in a
way that reduces risks, fulfills needs and realizes rights of the workers.

REFERENCES

1. Bangladesh Bureau of Statistics (BBS). (2010). Statistical Yearbook of Bangladesh-2010,

Dhaka, Bangladesh: Bangladesh Bureau of Statistics.
2. BBS, (2017). Quarterly Labor Force Survey Bangladesh 2015-16. Ministry of Planning:
Bangladesh
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3. ADB. (2016). Employment and the Labor Market in Bangladesh: Overview of Trends and
Challenges.
4. The Daily Star. (2013, November 25). Minimum wage for garment workers. The Daily Star.
https://www.thedailystar.net/news/minimum-wage-for-garment-workers
5. Butler, S. (2020, October 15). Why are wages so low for garment workers in Bangladesh? The
Guardian. https://www.theguardian.com/business/2019/jan/21/low-wages-garment-workers-
bangladesh-analysis.

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