Wages fail to keep up with soaring inflation
Muhid Hasan :
The monthly wage growth for workers in Bangladesh has remained below the inflation rate for the past 32 months, beginning in February 2022, indicating that many workers are likely reducing consumption to manage financial pressures.
According to the Bangladesh Bureau of Statistics (BBS), wage growth rates for the first three months of the current fiscal year (July-September 2024-25) were 7.93 per cent, 7.96 per cent, and 8.01 per cent, respectively.
By comparison, inflation rates over these months were considerably higher, at 11.66 per cent, 10.49 per cent, and 9.92 per cent, highlighting that inflation has effectively eroded the gains from wage increases.
For FY24, the wage growth for low-skilled and unskilled workers averaged 7.74 per cent, whereas the Consumer Price Index (CPI), indicating general inflation, rose by 9.73 per cent.
Similarly, in FY23, CPI surged to 9.02 per cent, with wage growth standing at only 7.02 per cent, the BBS data showed.
This disparity has meant that lower-income households, including the broader working population, are likely consuming fewer essentials and minimizing their expenses, which experts warn could lead to adverse social effects.
The prolonged gap between wage growth and inflation raises concerns among experts about potential issues such as malnutrition and reduced access to education for a substantial segment of the population.
Persistent inflation and subdued wage increases are increasingly linked to economic disparities. These conditions could destabilize societal structures and stifle long-term economic growth, they added.
Bangladesh’s inflation rate has remained above 9 per cent for the past 19 months, as per data from the BBS.
The trend of wage growth lagging behind inflation has been observed since FY2013-14 through FY2022-23. BBS data reveals that nominal wage rates have increased by an average of 6.26 per cent over this period, while inflation consistently surpassed 7 per cent.
From FY2013-14 to FY2022-23, wage growth in the agricultural, industrial, and service sectors ranged between 5 per cent and 7.01 per cent, while inflation varied from 7 per cent to 9.02 per cent.
The BBS estimates the average monthly wage rates of low-paid skilled and unskilled workers across 63 occupations, including 17 from agriculture, 30 from industry, and 16 from the service sector.
Renowned economist Dr. Debapriya Bhattacharya observed that Bangladesh’s labor force has not received a fair share of wage increases over the past decade.
“While economic development has occurred in Bangladesh over this period, the labor class has not received their rightful share of income growth,” he noted.
He also added, “Inflation operates like a tax, impacting everyone, especially the poor and middle-income families, who struggle to match their income growth with rising household costs.”
Regarding the widening gap between inflation and wage growth, economist Rizwanul Islam, former special adviser on employment at the International Labor Office in Geneva, remarked that declining real wages are a significant factor contributing to increased income inequality.
He emphasized, “Real wages for workers have effectively decreased over time. Rising prices are affecting not only the poor but also lower-middle-income groups.”
