Analytical Study of Labor and Employment Policy of Bangladesh

Submitted to:

Mr. Sheikh Morshed Jahan Associate Professor

Course instructor Bangladesh Studies

Submitted By:
Md. Mashrur Rahman Khan(ZR-11) Adib Iqbal ZR-12) Shah Shihab Sadman(ZR-27) Al Imran Bin Khodadad(ZR-46)

Institute of Business Administration University of Dhaka March 28, 2012

Introduction:
Our report is an analysis of the policy of Bangladesh regarding Labor and employment. It will consider different propositions of Labor Acts 2006, Bangladesh Labor law (Amendment) 2010,National Labor Policy 2010, National Child Labor Elimination Policy 2010(Draft). These policies are incepted and worked on by member of staffs of Bangladesh Ministry of Labor and Employment in order to reduce unemployment & poverty through productive employment & human resource development by maintaining good industrial relation & relation development between workers & employers.

Objective:
To find out the suitability of the policies regarding the labor and employment in Bangladesh is the main objective of this report. It includes the reliability of these acts for employers and employee, whether it favors the employee or the employer and whether it has any loop holes in it. Another goal is to find out the overall effect of these policies and the issues that rises concerning these policies and whether these policies are best fitted for Bangladeshi situation and if there are any shortcomings concerning certain provisions of the proposed policies. Specific objective: The minimum wage act Child labor elimination Trade union (CBA) Gender Equality

Scopes and limitations:

Our study is concerned with only the policies affecting the private and public sector enterprises and due to time and resource constraints, our study is going to be limited to Dhaka.

Methodology:
Our collection of data will consist of both primary and secondary sources of information. We are going to conduct a few interviews with concerned stakeholders for primary data. For secondary data, we will examine a few cases and reports on the topic.

The primary purpose of the labor law of Bangladesh:

The idea behind the inception of labor law of Bangladesh was to ensure statutory rights of farmers and labors, provide directives regarding basic needs for working citizens, ensure equal opportunity among different levels of workers, create merit based job opportunity; remove discrimination, bar forced labor and ensure other rational worker rights. In our report we have focused on 4 different issues that are of great importance considering the economical situation of Bangladesh.

Minimum Wage Act:

The generally-cited objective for fixing minimum wages is:
Eliminating sweating or exploitation: Avoiding unfair competition in the labor market Protecting the purchasing power: Indexation according to inflation Reducing poverty: A direct attack on poverty by ensuring minimum standard of living Removing unfair competition: Curb the tendency to earn profits through means such as lowering the price of an important factor of production to unfair levels. Ensuring equal pay for equal work: Women in relation to men, discrimination concerning geographical differences, castes and tribes etc. Preventing industrial conflicts Fixating a standard will prevent industrial disputes

Consequences for violating these facts:

Payment of wages lower than the minimum wage rate is punishable by imprisonments for a term which may extend to 6 months or by a fine of up to tk 5,000 or both.

Drawbacks:
According to the labor act of 2010(draft) the lowest amount of salary that can be paid to a worker is TK.3000. This salary is decided considering two factors. Family Size and Average Calorie needed for survival. By multiplying the average size of family (5.2 persons) with the cost of procuring the foods that supply the needed calorie the minimum wage is calculated. The salaries for the other level of workers is based on this minimum salary and indexed by considering factors like education, rent, living standard etc. Since a

family needs more that just foods for survival, the minimum wage is very low compared to the living cost. The salaries of the workers are supposed to be subject to indexation in order to adjust for the inflation. Even though the law specifies that a review must be undertaken before the lapse of 3 years, the shortest period for the review of an industry by the minimum wages board is really 4 years (cotton textiles industry) and the longest 18 years re-rolling mills and, in most cases, with a preview periodically of 10-15 years. In addition to the slowness in arriving at decisions by the minimum wages board , there is considerable delay (for instance, 6 months) between the date of the boards recommendations and publication of minimum wages in the official gazette (entry into force) There is a lack of inspection staff to verify the implementation of the law. Although procedures for decision making seem to be formalized, in practice minimum wages are not fixed on the basis of collection or analysis of relevant data, such as the needs of workers, price movements, etc. Besides, there is a macro economic relationship between minimum wage act and unemployment. By setting the minimum wage above the market clearing level the aggregated supply exceeds the aggregated demand of the labor resulting unemployment.

Business Impact:
Minimum wage is the sole concern of the government and it sets the benchmark of wage for the labor. In recent times there was much chaos within the workers in the garments industry in the country due to low minimum wage. Considering all possibilities the government raised the bar of wages to satisfy the need of the workers. But it left behind both micro and macroeconomic effects for instance the drastic downfall in profit in the industrial sector (mostly in RMGs) and also a greater scale economic problem concerning higher inflation rates and reducing demand for labor resulting in unemployment.

Child Labor Elimination Act

The government has strict policies for mitigating child labor in order to provide a solution to the existing problem regarding Child labor. The important issues that are highlighted are the following: Classification between child labor and working children Wages for child labor and work hour Education, health and nutrition of child labor Working environment of working children Special Action Plan for the Physically Challenged, Specially Disadvantaged, Street Children, Backward and Ethnic Children

Drawbacks:
Biggest drawback of child labor law is the difference between definition of child labor and working children. Although according to the predominant law every person under 18 is considered underage. But in the law only up to 14 years olds are considered as adolescence and is prohibited from working. Persons from 14-18 years are recognized the government as working children. This existing differentiation enables exploitation of child labor. The Act also predicts that government from time to time through gazette notification would publish the list of hazardous occupations and the list would come within the ambit of the prohibitory clause. However, it provides provision for engaging a child or an adolescent in light work under special circumstances for specific working hours subject to the certification by a physician. Since there is no sustainability from the government to prepare the list and to make sure the working children are safe from that, there is one loophole to this act and the factories are can easily mend it to their way. Birth and Death Registration Act 2004 (Act XXIX of 2004) is a major safeguard for the protection of rights of children. This Act has made it compulsory to register the birth of a child which would resolve the future complexity relating to the determination of the age of a child. But with this huge population that the government has to serve, it is impossible to ensure registration of birth in the highly dense slums or in the remotest part of the country with the current infrastructure and manpower. A number of people are still not taking help of health care centers when delivering babies. So monitoring them become difficult let alone registering their birth. Again fake birth registration can easily be done through bribery and what not. These make enactment of child labor difficult. Though the government imposes act to the large firms not to recruit children and underage employees and runs inspection regularly, the small firms e.g. garages and shops remain uninspected. Moreover there are street children working as rickshaw puller, tokai, sellers at traffic signals remain invisible to the government.

Business Impact:
Due to enactment of child labor the supply of labor with lower wages (which was mostly compromised of under aged workers) has decreased resulting in rise in production cost and reduction in output leading to higher price levels resulting in inflation.

Trade Union Act:

Objective:
Industrial stability and protecting workers' legal right Reducing income inequality Creating the social justice in wider spectrum To ensure independent trade unions structure and

Management of workers' rights and improving their quality of life Propose reforms necessary to achieve maximum productivity To restrain management from taking action which are irrational, illogical, discriminatory or prejudicial to the interests of labor To secure termination rights of the job To eliminate communication gap with management and working labor

Drawbacks:
The trade union act recognizes any registered union by the workers as a CBA. Since there is no regulatory body to oversee the formation, objectives and structure of the trade union it is often used to express political and financial ideologies rather than securing the rights of the labors There are no definite sets of parameters or resolution list specified under this policy. As a result of which the policy mostly depends on the ideology of the trade unions leaders Ambiguity in the policy leads the trade union to think they are as powerful as the management which ultimately leads to clashes regarding the management issues

Business Impact:
Trade unions creating more positions by the permission of management and appointing more than need of workers. Its creating a surplus of manpower but not of productivity. Trade union of Bangladesh bargains more than they understand because of the limitations of their knowledge. So it becomes difficult to make any decision by consulting with the TU. If dont consult then they strike. It is the backend support of politics what is creating them more powerful. Trade union is legal and it has the right to discuss with the management. That is why TU think about its power. When they think they have equal power of management then clashes are started. In companies labors are awarded for good work and threatened for bad work. But if its punished then trade union interfere and dont let to happen the punishment. So it increases crime of the labors. Trade union leaders always try to save their interest first then the labor. And it is always communicated that management body did the wrong. So this unethical performance creates conflict between TU and managerial body. For the power of politics trade union always dishonor the management. They dont listen to them; dont obey orders even set their compensations by their own. All is because of the faulty environment of politics of Bangladesh

Gender discrimination:
Objective:
Encourage women empowerment in economy and increase womens participation in the labor market To build a safe, healthy and women-friendly work environment Ensure maternity benefits and safety during pregnancy Guarantee womens equal involvement, equal opportunities and respect Provide platform to facilitate education and training to build a skilled and educated women labor force

Drawbacks:
There is still considerable disparity in mens and womens wage rates in Bangladesh although the principle of equal wages for equal work is guaranteed by law. On average womens wage rates are considerably lower than men showing womens earnings to be approximately 58.5 percent of mens. Furthermore whereas 61% of female salaried workers earn less than 1000 taka per month, only 16% of their male counterparts earn an equivalent amount confirming entrenched wage-based gender discrimination. Considerably fewer women (26.9%) than men (51.6%) define themselves as self-employed considering the obstacles faced by women in starting up small businesses. Particularly due to lack of education and exposure many women are unable to meet collateral requirements, have difficulties in negotiating their way through the maze of banking regulations and requirements. Moreover lack of business training and advisory support services force hinders their entrepreneurship. Insecure working conditions are a major feature of female employment in Bangladesh, where a large proportion of womens employment is casual and/or seasonal. Given the higher proportion of women than men in informal sector occupations, such as domestic service and unregulated small-scale industry, womens employment is generally less protected than that of men. Labor legislation is extensive in Bangladesh, but poorly enforced. Unionization in the formal sector is relatively widespread, but lower in industries employing a high proportion of women, such as garments. Moreover, unions are often tied to political interest groups and rarely take action in womens gender issues.

Business Impact:
Due to enactment of this policy the government has managed to amplify its female labor supply to nearly two folds which led to growth in different business sectors and also provided opportunity for women to work with greater freedom in the MSMEs providing higher growth to the economy.

Bibliography:
1. Murshid, K. A. S., Iqbal, K and Ahmed, M., Report on the baseline of Employment, November 2002, International Organization for Employment, Regional Office for South Asia, Dhaka 2. Farid, K. S., Mozumdar, L., Kabir, M. S. and Hossain, K. B. (2009), Trends in Employment Law: Case of Bangladesh, Journal of Bangladesh Agriculture University, Vol. 7, No. 2, pp 387-394 3. Siddiqui, T. and Abrar, C. R., (2003), Worker Payment and Trade union in Bangladesh, Farmer and Labor Movements Research Unit, Social Finance Programme, International Labour Office. 4. Siddiqui, T. (2004) Efficiency of RMG Workers, Asian Development Bank, Manila.

Interview:
1. Dr. Md. Farashuddin, Ex Governor of Bangladesh Bank, VC of East West University 2. Dr. Nazmul Ahsan Kalimullah, Professor, Department of Public Administration, University of Dhaka. 3. Md. Faruk-al-Nasir, Chairman of Shanin Group of Industries