RMG crisis is an economic problem, not a political one

Garment workers are back on the streets in Bangladesh, demanding higher wages. The government appears to have been caught off guard. Yet there is little surprising about the unrest. Wage disputes in the ready-made garment industry recur every three to five years, usually as the next round of minimum-wage negotiations approaches.

The pattern is familiar enough that the government should have anticipated it. Instead, it is confronting another round of protests without having addressed the economic conditions that make them inevitable.

This time, however, the pressures are more severe. Workers have lost purchasing power, factory owners face shrinking margins, and the wider economy offers few alternatives for either group. A settlement that might have worked during an earlier wage dispute may no longer be sufficient.

Four developments have made the situation particularly difficult.

The first is inflation. Years of weak economic management, monetary expansion to finance government borrowing and the recent fuel-price shock associated with the Iran war have pushed up household expenses. The minimum wage agreed upon in 2023 has steadily lost its purchasing power.

The second is the weakness of the broader economy. Private investment has fallen to exceptionally low levels, economic growth has slowed, and unemployment remains a serious concern, particularly among young people. Workers who lose their jobs have fewer opportunities elsewhere. Economic insecurity also makes relatively small disputes more likely to develop into larger protests.

The third is the growing pressure on informal employment. Street hawkers, electric rickshaw drivers and other informal workers have traditionally absorbed people unable to secure formal jobs. Many migrated to Dhaka from rural areas because they had few alternatives. Recent enforcement drives against roadside businesses have threatened their livelihoods. Their grievances increasingly overlap with those of garment workers, creating the conditions for wider unrest.

There is also a political dimension. The Awami League, removed from power in 2024, has sought to regain political influence. Sheikh Hasina has announced plans to return in December, raising concerns that some supporters may attempt to exploit labor unrest.

But political involvement, whether suspected or established, cannot adequately explain why workers are protesting. The economic grievances exist independently of any political campaign.

Factories that cannot close, workers who cannot leave

The financial condition of many garment factories is considerably worse than public discussion suggests.

Demand in Bangladesh's principal export markets, the United States and Europe, has weakened. President Trump's tariffs on Chinese products might have created an opportunity for Bangladeshi manufacturers to capture additional orders. Instead, Bangladesh's garment exports to the United States fell 6.25% during the first seven months of 2026, while competitors including Cambodia and Indonesia recorded growth.

Conditions in Europe are also difficult. Chinese and Indian exporters facing restrictions in the American market have increased competition elsewhere, adding pressure on prices.

According to Eurostat, the average price of Bangladeshi garment exports to the European Union fell 7.43% to €13.76 per kilogram during January through August 2026. The average price across all EU apparel imports was €19.65 per kilogram.

Bangladeshi manufacturers are therefore competing largely on price, even as their production costs rise.

Energy has become a particularly expensive problem. Gas shortages and unreliable electricity supplies force many factories to rely on diesel generators for substantial portions of their operating hours. Both gas and diesel have become more expensive. Manufacturers receive less for their products while spending more to produce them.

Under these conditions, a significant portion of the industry is struggling to remain commercially viable.

An obvious question follows: Why do unprofitable factories continue operating?

For many owners, closure is financially impossible.

A medium-sized factory employing 5,000 to 10,000 workers could face more than 100 crore taka in statutory compensation and other worker-related obligations if it shut down. Some owners would be unable to meet those liabilities even after selling their factory assets.

Many also have substantial bank loans, including facilities that have already been rescheduled. Closing their businesses could immediately expose them to default proceedings.

They continue operating, sometimes at a loss, because the financial consequences of stopping may be worse.

Workers face an equally difficult calculation.

The minimum monthly wage of 12,500 taka is inadequate for meeting basic household expenses after several years of inflation.

Bangladesh also pays considerably less than competing garment-producing countries. Figures compiled by the Centre for Policy Dialogue show minimum monthly wages of approximately $170 in Vietnam, $171 in India, $200 in Cambodia and $243 in Indonesia. Bangladesh's minimum is worth approximately $102 at the current exchange rate, compared with around $114 when it was introduced in 2023.

Experienced garment workers generally earn more than the minimum, with higher grades receiving roughly 30% to 50% above entry-level pay. But that is precisely why demands for a substantial minimum-wage increase have attracted broad support.

An increase to 25,000 or 30,000 taka would affect the entire wage structure, raising earnings for experienced workers as well.

The conflict is therefore not simply between employers unwilling to pay and workers demanding more. Both sides face genuine financial constraints. Workers cannot maintain an acceptable standard of living on existing wages, while many employers cannot absorb a substantial increase without changes elsewhere in their businesses.

The government’s choices are narrowing

The dispute has also exposed a wider sense of economic inequality.

The government recently awarded approximately 18 lakh public employees salary increases averaging around 100%. Private-sector employees, including garment workers, generally receive annual increases of less than 10%.

The contrast has generated resentment well beyond the garment industry. Many private-sector professionals sympathize with demands for a minimum wage approaching 30,000 taka because their own earnings have failed to keep pace with living costs.

That resentment has been reinforced by government assistance to businesses.

The new administration has announced a 60,000 crore taka support package for entrepreneurs. Some beneficiaries have received similar assistance under previous governments, and concerns remain about the misuse of such facilities.

For workers, the apparent imbalance is difficult to ignore. Businesses receive financial support when they struggle, while employees are expected to adjust their household spending to deteriorating economic conditions.

The government must recognize this perception of unequal treatment rather than dismiss it as political agitation.

It should also avoid treating the protests primarily as a security problem. Even where political groups attempt to exploit legitimate grievances, police intervention cannot resolve the underlying dispute over wages and living costs.

The available economic options are limited.

Direct subsidies to garment manufacturers would place additional pressure on public finances at a time when government revenue is already insufficient to meet expenditure requirements.

One possible alternative is an adjustment in the exchange rate.

Several garment owners I have spoken with believe they could afford a minimum wage of approximately 25,000 taka if the exchange rate moved to between 130 and 135 taka per dollar.

With the dollar currently trading around 123 taka, that would require depreciation of roughly 6% to 10%. Exporters would receive more taka for their dollar earnings, potentially creating room to increase wages.

But depreciation is not a cost-free solution. Imported fuel, machinery, raw materials and consumer products would become more expensive. Higher import costs could feed through to domestic prices, reducing some of the purchasing-power gains workers receive from higher wages.

A weaker currency would also affect businesses outside the export sector and households dependent on imported goods.

Any adjustment would therefore need to be gradual, carefully managed and accompanied by measures to contain inflation. The government would have to assess whether the additional export earnings would be sufficient to support higher wages after accounting for increased production costs.

There is no guarantee that exchange-rate adjustment alone would solve the industry's problems. But it deserves serious examination alongside negotiations involving employers, workers and international buyers.

The government must also prevent the dispute from escalating. Police can temporarily clear roads or restore access to factories, but workers will return to protest if their wages remain insufficient.

Accusing protesters collectively of serving an Awami League agenda would risk alienating workers whose grievances are economic rather than political.

Bangladesh's garment industry remains central to export earnings, foreign-exchange receipts and millions of livelihoods. Its problems cannot be separated from the country's wider economic difficulties.

The government faces choices involving higher wages, inflation, factory closures and employment losses. None is painless.

But postponing those choices will not make them easier. A durable settlement requires acknowledging the financial difficulties of factory owners and the declining living standards of workers, then distributing the costs of adjustment as fairly as possible.

That is an economic task. It cannot be accomplished through policing or political accusations.

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Fahim Mashroor is the founder of Bdjobs.com