Wage growth falls to 7-year low in FY22

The wage growth in Bangladesh declined to a seven-year low of 6.06 per cent in the last fiscal year, highlighting the struggle low-paid workers are facing owing to the higher cost of living, official figures showed.    

The growth rate in 2021-22 is six basis points lower than the previous fiscal year, according to the Wage Rate Index (WRI) of the Bangladesh Bureau of Statistics.

In an encouraging sign, however, the wage growth rose in the first month of the current fiscal year.

The increase stood at 6.56 per cent, up from 6.47 per cent in June and the highest in seven months, data from the BBS showed on Wednesday.

The WRI is intended to measure the movement of wages of low-paid skilled and unskilled workers over time in the main sectors of the economy and is also used to calculate the changes in real wages.

Ironically, the decline in wage growth came at a time when average inflation surged to a seven-year high of 6.15 per cent in 2021-22.

What is more, average inflation outpaced the wage growth rate in FY22, the first time since FY15, when inflation stood at 6.15 per cent against a wage growth of 4.94 per cent.

The national statistical agency calculates the average wage rate of low-paid skilled and un-skilled labourers belonging to 11 occupations in the agriculture sector, 22 occupations from the industrial sector and 11 occupations from the service sector.

Agricultural workers suffered the most in FY22 as their wages grew at 6.10 per cent, the slowest pace since FY15. 

Wages for industrial workers were up 34 basis points to 5.85 per cent and that of service sector workers advanced by 25 basis points to 6.32 per cent.

"The real income of workers in these sectors has fallen in general," said Selim Raihan, a professor at the Department of Economics at the University of Dhaka.

"As a result, they are not being able to buy the same quantity of goods and services they could afford in the past."

At the peak of the coronavirus pandemic, many people lost jobs and incurred earnings losses. Economic recovery was witnessed towards the end of 2021 and at the beginning of 2022, helping people find jobs again and compensate for income losses.

But the new inflationary pressure since the outbreak of the Russia-Ukraine war has created additional pressure for the low-income people and the new poor created by the fallout of the pandemic since the conflict has sent food prices and commodity costs higher. 

Higher commodity prices are largely responsible for the spike in inflation since Bangladesh is an import-dependent nation.

"But the prices of the imported items are not falling in Bangladesh in line with their decrease in the global markets," said Prof Raihan, calling on the government to eliminate the scopes for price manipulation and market distortions.

The executive director of the South Asian Network on Economic Modeling, a think tank, urged the government to address the inflationary pressure to lessen the burden of the higher cost of living.

"Social protections have to be beefed up."

On August 2, the government began selling edible oil, lentil, sugar and onions at subsidised rates among one-crore families across the country through the Trading Corporation of Bangladesh. The sale would continue until August 14.

Prof Raihan said this assistance would aid one-fourth population of the country, but the support is limited since the frequency and quantity might not be enough to offset the rise in the prices of basic items.

Another challenge is reaching out to the informal workers, who account for 85 per cent of the country's labour force, making it difficult for a nation like Bangladesh to come up with a national minimum wage.

"The formalisation of informal workers is a major challenge for the government," said Prof Raihan.

His suggestion is to create a national database of the sectors with high informalisation, eradicating the hassles businesses run into if they want to become formal, and showing the benefits of getting formalised.  

"A flawless database of workers is needed to implement the government's planned universal pension scheme and the existing social safety net programmes in a true sense."