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Bangladesh’s ready-made garment (RMG) industry stands at a critical juncture. As the lifeblood of the country's economy, it generates over 80% of export revenue, creates employment, expands women's participation in the workforce and earns foreign exchange. Yet recurring wage disputes and industrial unrest expose a fundamental challenge: how can Bangladesh ensure that workers receive a fair share of industry gains while preserving manufacturers' competitiveness in an increasingly demanding global market?
The sector employs about four million workers, mostly women. Beyond export receipts, it supports household incomes, rural-to-urban mobility and broader economic stability. Workers are central to this success, yet their contribution is not always reflected in their earnings or living conditions. Employment generation alone does not guarantee economic security. Rising living costs, poor working conditions, limited social protection and abrupt layoffs continue to undermine workers’ welfare, making job quality, employment stability and purchasing power central to assessing the sector’s developmental contribution.
The existing minimum monthly wage of Tk12,500, set in December 2023, has come under renewed scrutiny as workers demand Tk30,000 to offset inflationary pressures. According to the Bangladesh Bureau of Statistics, headline inflation eased marginally to 8.27% in October 2026 from 8.34% in September 2026. However, non-food inflation increased to 9.89% from 9.30%, while national wage growth slowed to 7.63% from 7.90%. Real wage growth has therefore lagged behind inflation, eroding purchasing power. For low-income garment workers, whose earnings are largely absorbed by essential expenses, prolonged inflation leaves limited scope to rebuild savings or improve living standards.
Complicating this macro picture is the National Pay Scale, effective from July 2026, which will raise public-sector remuneration and household disposable income. While intended to restore public employees' purchasing power, the resulting surge in consumption may stimulate aggregate demand. With inflation remaining above the FY27 budget target of 7.5%, effective fiscal and monetary coordination will be essential to protect real incomes across all income groups.
Regional wage comparisons reveal the extent of the challenge. H&M Group's supplier-country wage data (March 2026) place the monthly minimum wage benchmark for garment workers at around US$102 in Bangladesh, compared with $124 in India, $135 in Pakistan, $163 in Vietnam, $172 in Indonesia, $208 in Cambodia and $294 in China. As Bangladesh’s inflation exceeds that of key competitors, including India, Vietnam and Indonesia, the disparity in real earnings has widened. While differences in wage-setting mechanisms and exchange-rate conversions limit direct comparability, the figures highlight the growing disconnect between low nominal wages and the cost of living. This raises concerns about the sustainability of an export competitiveness model built on low labour costs rather than productivity growth, quality improvements and greater value addition.
The newly constituted six-member wage board aims to announce a revised pay scale by December 2026. Its deliberations should consider workers' cost of living, household needs and purchasing power alongside productivity and manufacturers' capacity to pay. Transparent wage-setting, periodic reviews linked to inflation and meaningful consultations can help prevent recurring disputes and strengthen industrial relations.
Manufacturers face rising energy tariffs, gas shortages, borrowing costs and taka depreciation, driving up production costs, particularly for factories reliant on imported materials. Higher freight and insurance costs, fierce price competition and uncertain global demand further squeeze margins, particularly for smaller firms. Wage increases without productivity gains may raise unit labour costs, but competitiveness cannot rely on low wages. Improving efficiency, reducing energy waste, investing in technology and strengthening management can lower costs and support better pay. Global fashion brands and retailers must also promote fairer pricing and predictable orders instead of passing commercial pressures down the supply chain.
The external sector outlook underscores the need for deeper structural reforms. Bangladesh Bank's FY26 balance of payments (BOP) data show that RMG exports declined by 1% to $38.97 billion. Over the same period, total merchandise imports rose by 10.5% to $71.14 billion, widening the overall merchandise trade deficit to $27.29 billion. Although the taka has weakened to Tk124.75 per dollar as of 11 November 2026, higher domestic inflation has increased the real effective exchange rate (REER) to 106.29 against its FY24 base of 100, dampening export price competitiveness.
The challenge, therefore, extends beyond wage negotiations to the broader sustainability of the industry. Recurring labour disputes, employment uncertainty and weak grievance-redress mechanisms can disrupt production and undermine supply chain reliability. Authorities should strengthen labour inspections, promote independent mediation and ensure respect for lawful collective representation. Sustaining industrial stability requires constructive engagement among workers, employers and the state rather than enforcement alone.
Bangladesh must shift from low-cost production to productivity-led competitiveness. Investing in automation, worker training, safety, energy efficiency and higher-value goods can raise output, quality and cost efficiency. Skills development, career opportunities and stronger social protection should ensure workers share in productivity gains through higher earnings and better living standards. The country must also diversify garment exports beyond traditional apparel into non-cotton and man-made-fibre products, technical textiles and higher-value fashion. With LDC graduation approaching in November 2029, these reforms are vital to export resilience and global competitiveness.
Fair wages and industrial competitiveness are not mutually exclusive. Bangladesh's long-term position in the apparel market will ultimately depend not on how cheaply it can produce garments, but on how effectively it integrates decent employment, productivity and reliable supply chains. A more sustainable competitiveness model must recognise workers not merely as a production cost but as essential contributors to the industry's growth.
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The writer is a Research Associate at Policy Research Institute of Bangladesh (PRI).
She can be reached at [email protected]