Recently, the minimum monthly wage for Bangladesh’s readymade garment (RMG) workers has been increased in 5 categories by 56.25%. Now, the minimum monthly wage for an unskilled garment worker in Bangladesh has been increased to Tk 12,500 (or $113.6), according to the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).
Impacts of wage increase on FOB prices in Bangladesh, or any other country, can be complex and influenced by various factors. Here are some key points to consider:
Cost of production
Labor is a significant component of the overall cost of producing garments. An increase in workers’ wages will directly impact the cost of production for manufacturers. As of the Knit Manufacturer, 35% impact on salary for the Sewing Unit only. There is the big impact at the Printing Unit as well, which is about 39% impact. Overall, the impact is 4-5% on FOB Price.
Competitive pressures
Bangladesh is a major player in the global garment industry, and its manufacturers often operate in a highly competitive market. If wages increase significantly, manufacturers may face challenges in maintaining competitive prices compared to other low-cost production countries.
Global supply chain dynamics
The garment industry often involves complex global supply chains. If wages increase in one country, brands and retailers may explore sourcing from other countries with lower labor costs, potentially shifting production to other regions.
Brand and consumer behavior
Some brands may absorb the increased costs to maintain a commitment to ethical and fair labor practices. Others may pass on the increased costs to consumers. The extent to which consumers are willing to pay higher prices for garments produced under fair labor conditions can influence this decision.
Automation and efficiency
Higher wages may incentivize manufacturers to invest in automation and improved efficiency to offset increased labor costs. This, in turn, could impact the overall cost structure.
Government policies
Government policies, including regulations related to wages and labor conditions, can play a crucial role in shaping the industry. Changes in government policies can impact how businesses respond to wage increases.
Social and ethical considerations
There is a growing awareness and demand for ethically produced goods. Some consumers are willing to pay a premium for products made under fair labor conditions. This can influence brands to prioritize ethical practices, even if it results in higher production costs.
Negotiations and collaboration
Collaborative efforts between manufacturers, brands, and workers’ representatives can play a role in finding solutions that balance fair wages with the economic viability of the industry.
In summary, the impact of workers’ wages increase on garment prices in Bangladesh depends on a combination of factors, including the response of manufacturers, global market dynamics, consumer behavior, and government policies. It’s a delicate balance between ensuring fair wages for workers and maintaining the competitiveness of the industry in the global market.
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