From Minimum Wages to Living Wages? : A case study of the export-oriented garment industry in Bangladesh

University essay from Högskolan i Borås/Institutionen Textilhögskolan

Abstract: This text will take you on a journey to the Far East – Bangladesh to be more specific. Inspring 2008 I went there to find some answers to the question of wages. I wanted to know if achange in focus from minimum wages to living wages could be achievable. The question willunfortunately remain unsolved at the end of the essay. To predict the future would beimpossible. Instead three possible scenarios are presented. The likelihood of each and everyscenario is later discussed. The conclusions at the end of the essay are based on an analysis ofthe theories presented and the interviews proceeded.The starting point for the research is the relocation strategies of corporations, which areoutlined in the background chapter. This chapter also contains information about the garmentindustry in Bangladesh. The main research question is if there can be a shift from minimumwages to living wages in Bangladesh. In order to bring clarity to the question, three subquestions have been used. The first question looks into how wages are determined in theexport-oriented garment industry in Bangladesh. The second question concerns thecorporations’ responsibility for their workers. The third, and last, question addresses howcultural dimensions influence the corporations and how wages are set. To find the answers tothe sub questions I divided the research into four main topics: “Wages – Minimum and LivingWages”, “Morality, Ethics and Business Ethics”, “Employees as Stakeholders of theCompanies” and “The Cultural Dimension”. The topics are dealt with in separate chapters.The chapters contain a theoretical overview, as well as the information gathered from theinterviews.The chapters are followed by a further analysis of the empirical findings. The chapter onwages contains an in-depth explanation of the difference between minimum wages and livingwages. In the conducted study all workers were paid the minimum wage in coherence with thelaw. This wage was however much lower than what the definition of a living wage declares.Therefore many workers did over-time in order to reach a higher standard of living. Businessethics and the stakeholder theory will be used to discuss the opportunities and limitations ofthe responsibility of the corporations for their workers. The scholar Hofstede’s system ofmeasuring national cultural values will be used to look into specific cultural aspects.According to his system, Bangladesh has a high ranking in power distance, a low ranking inindividualism and a middle ranking in masculinity. These three dimensions will be discussed;both correlations and exceptions found in this study will be presented.The three possible scenarios for a change are presented in the conclusions. Firstly, theminimum wages could be changed into living wages, if the government decides on raising thewages of the garment workers. Secondly, the mentality amongst management could provide asolution to the change in focus. If managers could find advantages in paying their workersmore, it would open up for a brand new wage system. Thirdly, changes could come from theworkers themselves, through unification in the regard. This has however been valued as lesslikely to happen, because of the power distance prevailing in the country.

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