Authors: Eduardo Gonzalez
Florida International University, USA
Florida International University, USA
The world economy is constantly changing and shifting from location to location, in search of the next most efficient location that can produce goods. This has been true since the “Silver Century” when Europeans traveled the world in search for goods that would bring them profit in return for things that they had in abundance (Brook). The race to the bottom is characterized by this motive. It is a way of attaining efficiency and in certain places, avoiding the markets (Rivoli). However this race has become natural in the quest for the success of businesses and the development of countries. The race to the bottom searches for cheap labor, cheap investments, and flexible regulations. When there are no more of these things in a given area, the race moves on in search of a place that will grant producers flexibility and cost efficiency. All of this is for not if a sizeable workforce is not found. We pose the question “What aspects of Bangladeshi labor attract the textile industry?” We will analyze labor in Bangladesh and why it is so attractive to foreign companies. It is important to understand that labor is not only the people, but the living and financial conditions of people as well as the social dependencies that these people have. Labor provides the gears for which production can become efficient. The wages of workers, the facilities of workers, and the regulations of workers can become obstacles to producers that can make or break their investments. It is necessary to have a workforce that can be content with receiving jobs from foreign producers to be able to operate with cost efficient investments. Bangladesh satisfies the aforementioned criteria. It is a country that is rising in the world arena and is considered one of the next places for the race to the bottom.
Background to Bangladeshi Labor:
Bangladesh has a population of more than 127.5 million people (globalfootprints.org). It is one of the most densely populated countries in the world. Most people live below the living standard, forcing the majority of people to seek jobs that will provide them with more profit. The Bangladeshis that live in rural areas move to the cities where there are supposed to be jobs and better living conditions. However, there are fewer jobs and homes than there are people moving to the cities, thus producing a string of shantytowns where people live in terrible conditions (globalfootprints.org). These conditions have led people to welcome the coming of textile factories and the development of the industry in Bangladesh. Textile manufacturers are always looking for the next location that will give them an edge in efficiency and cost. They need to find places that will provide them with an efficient labor force and that will render their investments more valuable than anywhere else. Bangladesh seems to be the place where the textile industry has shifted to in response to the multitude of Bangladeshis that need consistent and substantial wages.
|Labor in Garment Industry|
The economic and social history of Bangladesh can be traced to 1971 when the country gained its independence. Since then it has increased its real per capita by 130 percent and has been able to cut poverty levels by 50 percent (ruralpovertyportal.org). To understand the drastic transformations the country has undergone, one must perceive it as a mostly rural country with agriculture being its original and primary form of revenue. Urbanization has changed this and emphasized on industrial development instead of agricultural development (ruralpovertyportal.org). Rural Bangladeshis have been left with little land and have been forced to rethink their lifestyles. The process of urbanization and the rise of factories have required more land, specifically land that has belonged to rural Bangladeshis. The country still employs 44 percent of its labor in the agricultural sector (ruralpovertyportal.org). Aside from this statistic, Bangladesh can be considered the current country in the race to the bottom as textile manufacturers seek workers that will work for lower wages.
Labor has specifically attracted the textile industry to Bangladesh because of the huge workforce and the relatively low wages that Bangladeshis are willing to accept. The current average wage is five thousand takas per month (Kiron). Eighty takas are equivalent to one dollar. This makes the monthly wage of a worker to be around sixty-two dollars. There are also several other reasons why companies have chosen to target Bangladesh for investment. In regards to labor, the country has a large segment of the population that is young and takes part in the labor force. 57 percent of the population is under 25 years old. They are also highly literate, having a 72 percent literacy rate (leopardasia.com). This part of the population can provide more work efficiency than a labor force that is older. Companies address efficiency concerns by investing in countries that will obviously provide them with more output at a lower cost. 78 percent of the country’ export earnings come from the textile sector. This sector accounts for 5 percent of the country’s total national income (Malhorta). This gradual ascendency has turned Bangladesh into the prime candidate for the next country in the race to the bottom. Cheap labor that is educated and plentiful makes for a very lucrative opportunity for textile companies. Despite all of these attractive characteristics of the country’s labor, unemployment persists and people continue to live in below standard conditions.
Considering the youthful labor force is significant, when comparing Bangladesh’s current economic state to its condition in the 1980s. During the 1960s and the 1970s there was a vast growth in people being born and this has predominantly led to the current wave of young workers in the 1990s and the 2000s. The Bangladeshi labor force has gone from 30.9 million in 1985-1986 to 56 million in 1995-1996 (nationsencyclopedia.com). This increase is a product of the rise in population and the search for a better lifestyle in cities. A significant portion of the labor force is employed in rural areas. Work in rural areas is very harsh and drives people to finding jobs that will be relatively more comfortable and that will pay better (nationaencyclopedia.com).
Our research led us to a textile engineering student in Bangladesh named Mazharul Islam Kiron. He operates his own blogging site specifically based on textiles. He relayed to us the current predicament of the labor force in Bangladesh. Kiron said that most people live below the living standard in Bangladesh. Unemployment is a common problem in this country and the garment sector seems to alleviate this issue. Kiron said that it is the largest field in terms of providing employment to people. He tells that around 50 lakh people are involved in the garment industry alone. This is equivalent to 5 million people. The sheer amount of people working on textiles alone is evidence to what a growing sector textiles has become for Bangladesh. The country has the potential to outmaneuver many other countries home to textile factories because of the evident devotion to textiles and the continued employment growth in the sector. The textile industry has benefited from the conditions in Bangladesh because of the need for employment, the migration of rural Bangladeshis to cities, and because of the low wages being paid to the workers when compared to the developed countries where these firms come from.
The MFA and Bangladesh:
Despite these favorable conditions for the development of the textile industry, Bangladesh has only recently been targeted by companies to produce textiles. January 1, 2005 marked the end of the MFA, or Multi Fiber Agreement, which had led the world of textiles and garments since 1974. The MFA imposed quotas on the amount developing countries could export to developed countries (Saxena). The quotas posed a problem for developing countries. However the EU did not impose such restrictions on these countries, one of which was Bangladesh. This gave way to a massive expansion of the RMG sector, the Ready-Made Garments sector in the country. Although Bangladesh was expected to suffer in comparison to other competitors such as China, orders for textile goods kept coming after the MFA expired and reached an expert overturn of about $10.7 U.S. dollars in the year 2007 (Saxena).
Productivity and competitiveness have been the major issues that Bangladesh has faced since the fall of the MFA. International trade strategies, international garment buyers, and international NGOs combined with coalition building among stakeholders in the sector has resulted in significant and favorable changes at both the government and factory levels. This has allowed Bangladesh to remain competitive and has resulted in an unprecedented cooperative movement. Although Bangladesh is predicted to do well in the RMG sector, in order to expand it needs to make investments in human capital and technology, rather than just reduce costs. These investments will stimulate the creation of positive working environments and will provide the needed stimulation for the industry to innovate and prosper.
In an interview for the Asia Foundation’s Economic Reform and Development Program, BGMEA (Bangladesh Knitwear Manufacturers and Exporters Association) president Falzul Haq stated, “Bangladesh is doing well after the end of the MFA, but we are not satisfied. We have the potential to grow more… [the question is] do we want to do 25 million dollars of business, or stay at 10.5 million?” The year 2008 proved to be important for the garment industry. Vietnam entered the WTO in 2008, which made the country one of the largest competitors for Bangladesh and the recession in the U.S. and EU markets gave way to a decline in imports from the Bangladeshi market (Saxena).
In a study conducted in Dhaka in January and November of 2008 by the Asia Foundation for Economic Reform and Development, various groups of people were interviewed and asked their notion of competitiveness and what they thought were the key factors for success at the factory level and state level. These four groups were international buyers, government officials, factory owners and middle managers. Some factory workers were also interviewed. Although these groups had different opinions, they all ultimately agreed that productivity was the most important factor in ensuring competitiveness for the Bangladeshi market. These groups also agreed that productivity was the area that needed the most improvement (Saxena). When asked, factory workers stated that the quality of products, wages, good working conditions, healthcare, and training were factors that affected a factory’s competitiveness (Saxena).
Perception of what constitutes good working conditions has changed over time amongst factory workers. In previous years, workers wanted their basic needs such as increased wages, healthcare and safety to be met, but in more recent years, demands for respect and the yearning to be heard have risen among the workers. This has led many in the garment sector to emphasize on establishing a positive work and factory culture, motivating workers, and communicating with them (Saxena). In 2008 workers still linked productivity and increased wages. A worker stated, “If wages are increased, the quality of work will improve and more buyers will come” (Saxena).
International retailers agreed that it is cost, along with productivity, that makes a factory competitive. Reliability and pre-production assistance are also factors that were identified as pre-conditions for an international buyer to trust a factory. National labor laws and international labor standards were also mentioned as conditions for export to the U.S. and EU. Compliance to these is now considered necessary, but not sufficient, for a factory to maintain its competitiveness. Buyers mentioned an appreciation for Bangladesh’s quality amongst its entrepreneurs and its work force (Saxena).
Government assistance has become necessary in order for competitiveness in the Bangladeshi textile sector to thrive. Factory managers and international buyers agree with such aid. Both groups expressed a need for more infrastructure, trade facilitation and cost of production (Saxena). Workforce and productivity are amongst the most important factors that make Bangladesh a competitive country in the garment sector, but the poor infrastructure and working conditions are amongst its weaknesses.
Bangladesh has proved its ability to be a low cost producer of quality goods after the phasing out of the MFA. If investments in training, labor conditions, and infrastructure are made, along with producing quality items, Bangladesh will remain among the top sources for international buyers and secure its position as a top competitor in the textile industry.
Labor Laws and Conditions:
The flexibility of labor in Bangladesh is also protected by laws. Even though companies have taken advantage of the lax restrictions in Bangladesh, there have recently been laws implemented that protect workers. The recent, Labor Act 2006, and other similar policies have been established to provide workers with appropriate holidays, work hours, safety, minimum wages, and justification for dismissals. This gives workers a guarantee that their jobs are safe and that they will work in a healthy environment (legalsteps.com.bd). In Bangladesh the weekly holidays are Friday and Saturday. Workers typically work 8 and a half hour a day and can stop for a meal and prayer. The total work hours per week sum up to be 48 hours (boi.gov.bd). This framework helps create a standard from which workers can compare with their own jobs. It can help them make demands for fair treatment and avoid being exploited. Kiron made a point that has relevance to this issue. He recalled that there had been a series of strikes on behalf of the work unions in response to poor wages and facilities. This was a small occurrence and nothing out of the ordinary, but it demonstrates that workers have a voice in determining how they work and resolving issues in the workplace. Worker unions in Bangladesh have a lot of say in working conditions and privileges. They are usually affiliated with a political party which gives them some sort of leverage in the government (nationsencyclopedia.com). As a result of this collective action, workers can ask for better wages r better facilities as was the matter of the aforementioned demands.
However, workers unions have not been as effective in the private sector. These unions are banned from Export Processing Zones, or EPZs, and these areas are even exempt from the labor laws. In 2004 worker association was permitted, but in 2007 this was revoked by a state of emergency and restrictions were implemented on unionization (solidaritycenter.org). EPZs are even exempt from having to abide by certain labor laws (nationsencyclopedia.com). Companies involved in the textile industry could take advantage of the labor force without having to abide by certain labor laws that would otherwise limit their ability to control cost efficiency. Having factories in Bangladesh allows them to be flexible with wages and prerequisites.
These exemptions seem to be made to attract foreign investment. Companies will want to invest in a location that can give them flexibility and a significant workforce. This particular aspect of labor combined with the current situation of the workforce in Bangladesh has generated the ideal scenario for Bangladesh to become the next large competitor for foreign investment in the world. A reliable and conscious workforce is crucial to generate a positive output. Labor in Bangladesh has several aspects that make it more attractive than labor in many other locations. Bangladesh has a large amount of workers that are educated and these workers are in need of jobs. The currency is valued much lower than the dollar making it the ideal place for cost efficiency and competitiveness. The government even provides companies the ability to waive certain labor laws in order to maximize production in EPZs and attracting even more foreign investment. Labor in Bangladesh seems to have all of the ideal characteristics for foreign investment and the continued growth of the textile industry. Bangladesh produces quality goods that cost relatively less than in other locations and has a labor force that acknowledges this type of work. This makes the country the perfect candidate in the current race to the bottom.
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