A roadmap to reform our labor market

The July Revolution marked the end of the 15-year rule of Sheikh Hasina and her Bangladesh Awami League party.

The regime was marred by accusations of economic challenges such as high inflation and institutional failures such as corruption. The revolution was the result of widespread discontent over these injustices and inequalities.

The last straw that broke the camel’s back was the disproportionate response of law enforcement against protesting citizens.

However, the ouster of the Hasina government has opened the door for necessary reforms, especially in the labor market. Workers have historically faced discrimination and systemic failures, including unfair pay agreements, unsafe working conditions and violations of fundamental rights.

The main failure in the labor market comes in the form of hiring practices. In fact, the competition that fueled the flames of the revolution was an unfair recruitment mechanism, the quota system inherent in the government recruitment process.

The Awami League’s ouster revealed cases where qualified candidates were not allowed to join government jobs due to their political allegiance. This type of injustice also spread to the private sector, where nepotism and bias in hiring were widespread.

Now the interim government must completely overhaul the recruitment process. Systems such as BCS, which were introduced by the British as a discriminatory practice and means of oppressing the local population, must be abolished or at least modernized.

A dynamic need-based recruitment system for government jobs should be established. Following the practices of more institutionally stable democracies, such as those in the West, where the skills and qualifications of the individual, according to position, are prioritized.

The government could take inspiration from the private sector, where experience and qualifications are given priority. Government ministries, independently or with the help of a hiring entity, would recruit candidates based on their specialization and relevant knowledge on the subject.

An important factor in our labor market is that most jobs are informal. This practice allows owners to exploit workers by denying them the rights that a formal contract would allow.

On the other hand, the blue-collar jobs that actually allow formal contracts sometimes do not adhere to the relevant laws. These employees are therefore also confronted with exploitation. Because government jobs strictly adhere to the formalities of a contract, this is the only suitable option for many, even if they can get higher wages in private jobs.

In this regard, formal contracts should be made mandatory, incorporating fundamental agreements between employees and employers. Such contracts should include compensation for damages, overtime, health insurance and post-employment benefits such as pensions.

Although workers are entitled to temporary leave, sick leave and maternity benefits, these rights are often violated. If formal contracts cannot be imposed, workers’ rights should be universally accepted and enforced.

Pay regulations remain one of the most controversial issues in the labor market.

In December 2023, the minimum wage for the garment industry, the largest employer in the manufacturing sector, was adjusted to Tk 12,500 – an increase of 56%, but far below the 188% demanded by the unions. Similarly, the minimum wage for tea workers was fixed at only Tk 170 per day, while there was a demand for Tk 300.

Given the current economic climate, these wages are grossly inadequate and reflect a systematic bias favoring owners over workers.

The Minimum Wage Board currently reviews wages every five years. It consists of a chairman, a neutral member, one member representing the owners and one member representing the employees.

For the purpose of carrying out the tasks referred to in Article 139, the wage council must also consist of the following members: one member representing the owners of the industry concerned and one member representing the employees engaged in the industry concerned.

Currently, the board consists of a judge as chairman, a government secretary representing the owners, a union representative loyal to the recently deposed people, and a professor from the University of Dhaka.

To ensure fairness, a reform is needed to establish a pay commission that includes all relevant stakeholders from different sectors. Instead of a general body, this committee could use a modular system tailored to different industries.

Permanent specialists and part-time consultants with industry-specific knowledge must be employed.

Safe working conditions are a fundamental right of an employee. But in Bangladesh they are often overlooked. Although the 2013 Rana Plaza disaster led to some safety improvements in the apparel sector, other industries continue to suffer such accidents.

The construction and shipbuilding sectors are particularly dangerous, with an average of 126 and 13 worker deaths per year respectively between the years 2013 and 2023.

The existing security measures in the Bangladesh Labor Act, 2006 should be strictly enforced. Existing labor laws in Bangladesh provide a framework for protecting workers’ rights, but are not uniformly enforced.

Regular safety inspections and fines for non-compliance would force management to adhere to safety standards. A comprehensive safety guideline needs to be formulated, tailored to the unique requirements of different industries. Furthermore, a formal compensation mechanism for work-related accidents is essential to replace the current ad hoc system.

In 2023, between 1,000 and 5,000 workers were fired during the garment workers’ strike for fair wages, despite legal protections on paper. Section 195 of the Labor Act 2006 prohibits new hiring during a strike unless necessary to prevent serious damage to machinery.

Section 211 establishes the right to strike, while Section 20 outlines the right to notice and compensation for dismissal. However, these laws are often ignored, especially in the informal sector, where workers are dismissed without notice or compensation.

Reforms should clarify the definition of a legal strike to avoid ambiguity.

Both factories and other offices often lack childcare facilities, forcing parents to spend a significant portion of their income on substandard childcare, despite the fact that Section 94(1) mandates such facilities in companies with 40 or more female employees.

Effective reforms require strict enforcement of existing laws. Favoritism towards industry owners must be curbed and the rights of both laborers and white-collar workers must be protected.

While unionization and labor activities should not infringe on the rights of entrepreneurs, the current imbalance that disproportionately favors employers must be addressed to create an equitable workplace.

By addressing wage disparities, ensuring worker safety and strictly enforcing labor laws, Bangladesh can create a fairer and more equitable labor market that serves the interests of all its citizens.

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Sheikh Tausif Ahmed is a research associate at SANEM. E-mail: (email protected). Eshrat Sharmin is a senior research associate at SANEM. E-mail: (email protected)

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Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views and opinions of The Business Standard