DHAKA — A prolonged wage dispute in Bangladesh’s garment industry risks damaging a critical economic engine while adding to political turmoil that has rocked the country in recent weeks.

After major protests and violent clashes with police, the government last week mandated a 56% hike in the monthly minimum wage for workers making ready-made garments, to 12,500 taka or about $113. But workers said the increase was “paltry” and not enough to cope with soaring food prices and record inflation. Almost all unions, collectively representing 4 million people in the sector, rejected the hike and have continued to boycott shifts and block roads in Gazipur and Ashulia, the two main industrial belts on the outskirts of Dhaka.

The protests, widely considered the worst wage-related unrest in a decade, have coincided with countrywide blockades by the main political opposition Bangladesh Nationalist Party (BNP). They are demanding that Prime Minister Sheikh Hasina resign immediately so that the next election, due in January, can be held under a neutral caretaker government.

Not only has Hasina steadfastly rejected that demand, she has sought to tie the two protest strands together, blaming the garment strikes on the BNP and warning of a stern response.

“Garment workers should be aware that they would have to return to their villages and live in unemployment if they cause damage to factories,” Hasina told a recent gathering in Dhaka. “We know who incite these protests and acts of vandalism, and we know which individuals from BNP are involved.”

Ready-made garments are a vital source of income. They account for about 80% of Bangladesh’s annual exports of $55 billion and 16% of its gross domestic product. At a time of growing concern over dwindling foreign exchange reserves, the country can ill afford disruptions in the industry.

The wage dispute, coupled with the political protests and scores of arrests of opposition figures, is clouding the future of the economy as well as Bangladeshi democracy itself.

Labor union leaders protest in Dhaka, asking for compensation for garment workers who died in clashes with police. (Nazmul Islam)

At least 130 factories have been forced to shut down because of worker walkouts. Police have responded with brute force to suppress the demonstrators: A total of four workers have died in the clashes so far, while at least 11,000 unnamed garment workers have been charged over violence and vandalism.

In addition, some factory owners have suspended operations on their own citing the labor law, which entitles them to close factories “due to illegal strikes.” A total of 78 factories employing over 300,000 workers have suspended operations for an indefinite period.

Union leaders express frustration with the government’s stance on what they call “just and legitimate” protests. One, who asked to remain anonymous, said that Hasina’s statement had created a “climate of fear” among the workers, as they believed it had given police a license to crack down harder.

Kalpona Akter, president of the Bangladesh Garment and Industrial Workers Federation, said laborers were disheartened to see that the government accepted the factory owners’ hike offer without considering their demands.

“We wanted a minimum wage of 23,000 taka ($209) a month,” she said. “Considering the rising food prices and inflation, even this amount is very small for workers and their families. With the declared minimum wage [$113], it will not be possible for the workers to survive,” Akter told Nikkei Asia.

She stressed that the garment protests had no political motivation or affiliation, contrary to what Hasina hinted at.

Last month, the Centre for Policy Dialogue estimated that the minimum wage in the ready-made garment industry should be at least 17,568 taka. Economist Khondakar Golam Moazzem, research director at the Bangladeshi think tank, said they made their estimate after conducting a survey of food and other spending patterns of hundreds of workers from multiple factories.

Moazzem said that the weaker taka must be taken into account.

“The last time the minimum wage was revised, workers used to get around $95 because the exchange rate of the taka against [the dollar] was 84. Now, the taka has gone through a massive devaluation,” he said, noting that $1 was going for about 124 taka on the unofficial market. “So, it means the real hike is less than 20%, not 56%, if we think in terms of [the U.S. dollar].”

He suggested factory owners should consider a wage hike in dollar terms because they are earning dollars. “With the devaluation of taka, their [earnings] have increased, as the sector is almost wholly export oriented.”

The South Asia Network for Economic Modelling, another local research organization, recommended an even higher figure of between 19,200 and 26,000 taka, depending on where workers live.

But industry insiders have pushed back against such calls.

Siddiqur Rahman, a former president of the Bangladesh Garments Manufacturers and Owners Association (BGMEA) who represented factory owners on the Wage Board, told Nikkei Asia that the 56% wage hike is “more than enough” and a further increase would make the whole sector “unsustainable.”

“We are earning in dollars but at the same time paying in dollars for our raw material, which still comprises our lion’s share of cost,” Rahman argued. “Besides, the cost of all utilities has increased by many times in the last couple of years. The margin is very thin now.”

Faruque Hassan, current BGMEA president, told reporters on Sunday that some major foreign buyers had already expressed serious concerns about the ongoing protests. “They are holding orders and will not place any new orders if this situation continues,” he warned.

But activists accuse factory owners of trying to scare the protesting workers.

“The [factory] owners say their margin is too thin to increase the wage but that’s not true,” labor rights activist Taslima Akhter told Nikkei. “Some major foreign buyers have already pledged to purchase apparel at higher prices.”

A recent Reuters report quoted Stephen Lamar, chief executive of the American Apparel & Footwear Association — which represents more than 1,000 brands — as saying that U.S. buyers would offset the additional wage expenses Bangladeshi apparel makers face.

“After the last two [initial] wage hikes were declared back in 2013 and 2018, the government intervened and revised those to meet workers’ demand,” said Akhter, who acts as the coordinator of Bangladesh Garments Workers Solidarity. In 2018, after similar but less violent unrest, the government increased the wage by 51%.

“We hope the government will do the same now, as the demands made by the workers are very justified,” Akhter said.

Correction: An earlier version of this story overstated the number of workers in the garment sector, due to a conversion error. It has been amended.   

The article appeared in the Nikkei Asia.