Muhid Hasan :
Over the past two and a half years, wage growth for low-income earners in Bangladesh has consistently lagged behind inflation, exacerbating financial difficulties for many in this demographic.
Data from the Bangladesh Bureau of Statistics (BBS) reveal that wages for low-income and unskilled workers began to lag behind inflation from the fiscal year 2022 and continued into July of the current fiscal year 2024-25. Despite a higher average wage growth rate in FY2020 compared to inflation, the situation has reversed since then.
In the recently concluded financial year 2023-24, the wage growth for low and unskilled workers was 7.74 per cent, while the Consumer Price Index (CPI), a measure of overall inflation, rose by 9.73 per cent.
This resulted in a wage-inflation gap of 1.99 percentage points. Similarly, in FY23, CPI surged to 9.02 per cent, while wage growth stood at 7.02 per cent. This disparity has forced many low-income individuals to reduce their consumption, affecting their access to basic necessities and quality of life.
The situation worsened in July 2024, with the gap between wage growth and inflation reaching 3.73 percentage points, the highest in at least a decade. The Wage Rate Index (WRI) showed a decline in wage growth to 7.93 per cent, while overall inflation hit 11.66 per cent.
The WRI, which covers 63 occupations across agriculture, industry, and services, reflects the real wage pressures faced by workers. Economists express concern over the long-term implications of this gap, including potential increases in malnutrition and diminished educational opportunities for a significant portion of the population.
The inflation-wage gap also highlights broader economic injustices, impacting societal stability and hindering long-term economic growth. Those with higher incomes and investments in appreciating assets like real estate and stocks are better positioned compared to low-income individuals with fewer assets.
Rizwanul Islam, an economist and former special adviser for employment at the International Labour Office in Geneva, noted that the decline in real wages contributes to rising income inequality. “Inflation acts like a tax, disproportionately affecting the middle and poorer classes as they struggle to increase their incomes sufficiently to support their households,” he said.
The interim government faces pressure to restore business confidence, particularly among those linked to the previous regime, to help curb inflation. Following Sheikh Hasina’s departure to India on 5 August, political instability has raised fears of violence, further complicating the economic situation.
