Abstract
This chapter examines the dynamics of inflation and wage adjustments in the labor market of Bangladesh, especially keeping in view the rising food inflation in recent years. The analysis shows that the daily wage laborers in both agriculture and non-agriculture sectors, who constitute the largest poor group in the country, are usually able to protect the level of their daily real wage in the face of rising inflation through upward adjustment in the nominal wage rate without any substantial time lag. A similar behavior is also noticed in the informal labor markets that set the daily wage rates in construction, services, transport (including rickshaw pulling) and other low-paid activities in which the poor are the major participants. The poor day laborers in Bangladesh have some ability to at least partially revise their nominal wage income rather quickly to compensate for the loss in real income due to inflation. On the other hand, the self-employed category and salaried poor households, are more likely to be negatively affected since their real income is eroded by rising inflation while they pay higher prices for purchased goods. The remaining major poor group comprising nearly 10 percent of the poor households in both rural and urban areas belongs to unemployed/not working category households and these households, no doubt, become extremely disadvantaged with rising inflation.
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Notes
- 1.
The number of day laborers, who mostly work in agriculture, increased from 8.6 million in 2005–06 to 10.6 million in 2010, an increase of 23 percent. Over the same period, total employed labor in the country rose by 14 percent. See BBS 2011.
- 2.
- 3.
In practice, enterprises are considered informal in Bangladesh if they are not registered with the relevant authority. Thus, employment in the informal sector comprises all employment in informal enterprises including self-employed/own account workers, unpaid family helpers, day laborers, paid employees in informal enterprises, informal employers and other similar categories. Outside the unregistered and/or small enterprises sector, employment may be considered as informal if it lacks core legal or social protections (e.g. domestic workers). Moreover, de facto informal employment may also exist within the formal sector such as for different categories of casual workers.
- 4.
According to the Household Income and Expenditure Survey (HIES) 2010, nearly 48 percent of the poor workers work in the agriculture sector while 27 percent are in the services sector and the rest in the manufacturing sector. It is also reported that half of the poor workers are concentrated in daily wage employment. See BBS 2011.
- 5.
The five regions are: Northern (Rangpur division), Western (Rajshahi division), Central (Dhaka division), Eastern (Chittagong and Sylhet divisions), and Southern (Barisal and Khulna divisions).
- 6.
For details on nominal and real wages at regional levels, see figures in Appendix.
- 7.
This has often been made possible through the pursuit of the widely used traditional practice of setting nominal wage rate in many locations on a daily basis keeping in view the price of rice in the local market. This not only protects the real income of the poor day laborers but also ensures their access to a minimum quantity of the wage good (rice).
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Appendix
Appendix
Impulse responses to wages for daily labor household groups
Impulse responses to wages for fixed income household groups
Nominal daily wage of agricultural and non-agricultural labor by region. (a) Agriculture. (b) Non-agriculture
Real daily wage of agricultural labor by region. (a) Deflated by group-specific CPI inflation. (b) Coarse rice equivalence in Kg
Real daily wage of non-agricultural labor by region. (a) Deflated by group-specific CPI inflation. (b) Coarse rice equivalence in Kg
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Mujeri, M.K., Hossain, M., Chowdhury, T.T. (2020). Labor Market Dynamics, Inflation and Wage Adjustments in Bangladesh. In: Hossain, M. (eds) Bangladesh's Macroeconomic Policy. Palgrave Macmillan, Singapore. https://doi.org/10.1007/978-981-15-1244-5_3
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