In Bangladesh’s ready-made garment sector, which produces many of the clothes the rest of the world wears, the government recently raised the monthly minimum wage – to 12,500 taka (or about $113 dollars). For the 4 million garment workers in Bangladesh, unfortunately, this doesn’t approach a living wage – one that provides a sustainable rate of pay that allows a decent standard of living – particularly given the steep increase in the cost of living in recent years.
That means that a garment worker in Bangladesh might not have enough money to pay for basic necessities, like food, shelter or health care for their family – even working full time.
The gap between the minimum wage and a living wage is not unique to Bangladesh. The rest of the world, including the United States, is grappling with this issue.
When the word “wage” is brought up, one of the first things that comes to mind is the minimum wage. This is understandable given the dominant role minimum wages played in shaping the lives of millions of workers in the United States and abroad since the early 1900s. In theory, minimum wages put a floor on employers bidding down wages to cut labor costs and undercutting the competition.
But over time, this meant that minimum wages became the going wage rate for low-skilled employment in both small and large businesses. Although initially workers were the intended beneficiaries of minimum wage rules, over time, in many countries, the minimum wage’s purchasing power eroded with inflation. The last increase in the federal minimum wage in the United States, for example, was nearly 15 years ago.
In February, the International Labor Organization hosted a meeting of experts on wage policies, including the living wage. The meeting signaled a pivot in the conversation from minimum wages to explicitly talking about living wages – as the Department of Commerce and Department of Labor’s own Good Jobs Principles urge as well. Higher pay and good jobs not only ensure a dignified life for workers and their families, but also create a clear competitive advantage when it comes to a company’s recruitment, retention and overall success. Employers are also increasingly being asked whether their workers can adequately live on the wages paid to them, even if they are already earning above the minimum wage.
At the ILO convening, which lasted five days, employers, governments and workers ultimately reached a consensus on a definition of the living wage, principles for estimating it, and steps the ILO will take to promote convergence between the minimum wage and the living wage. So, while there are still many definitions of a living wage, the ILO views it as “the wage level that is necessary to afford a decent standard of living for workers and their families, taking into account the country circumstances and calculated for the work performed during the normal hours of work.”
This clarity and shared understanding is a win for everyone.
It will take time to assess the impact on wages and policy in places like Bangladesh – or the United States. But it’s a step in the right direction at a time when wages are unsustainably depressed in too many corners of the world.
Basel Saleh is the chief international economist at the U.S. Department of Labor’s Bureau of International Labor Affairs. Follow ILAB on X/Twitter at @ILAB_DOL and on LinkedIn.
