Living Wage, Living Planet: Part Two

In part one of our “Living Wage, Living Planet” blog series, published last week, we shared the theory behind our claim that paying garment workers in Bangladesh a higher wage would be good policy not just for workers but also for the health of the environment. To summarize, the theory suggests that:

• The global apparel industry’s high level of carbon emissions defines it as one of the primary contributors to detrimental climate change;
• By virtue of their employment in this emission-heavy industry, garment workers in Bangladesh are active participants in climate change-inducing activities;
• Garment-producing factories and workers’ neighborhoods in Bangladesh are located in a part of the world that is extremely susceptible to shifting climate patterns, such as increased rain and rising sea levels;
• Due to low wage rates garment workers in Bangladesh often have no choice but to work excess hours, beyond the legal limit, to earn enough money for food, housing, and other basic necessities, thus contributing even more to the carbon-emitting fast fashion industry;
• One solution would be to pay workers a fair, living wage so that they can work less hours and benefit from an increased planet and safer environment as brands move away from fast fashion and lower their production demands.
• Finally, a useful definition of the living wage is the following:

The remuneration received for a standard workweek by a worker in a particular place sufficient to afford a decent standard of living for the worker and her or his family. Elements of a decent standard of living include food, water, housing, education, health care, transportation, clothing, and other essential needs including provision for unexpected events. (Global Living Wage Coalition (GLWC))

In this blog we present the results of our living wage calculations based on an adjusted version of the Anker Methodology. We provide a brief summary of the methodology and our results. After this we present the details of our calculations, for those interested.

Note: Banner photo courtesy of a garment worker in Bangladesh.

Calculating a living wage

Calculating a living wage that makes sense given the definition we are using requires a number of steps, but we have a guide for how to do it called The Anker Methodology. The methodology involves calculating the cost of a basic but decent life by calculating the cost of the following expenses: food, housing, other essential needs, and a small margin for unforeseen events. The methodology calculates this for an average household in the target country—a household of four in Bangladesh. This estimated cost of a decent life is then defrayed over the average number of adult earners in a household in the target country to get the living wage estimate. The average number of adult earners per household in Bangladesh is 1.58—one way of thinking about this is that half the time in a household of four two adults work, and half the time only one adult works.

But we do not strictly adhere to the Anker Methodology because we are skeptical that getting agreement on what constitutes decent housing is easy. So we have used a range of housing costs in our calculations based on what we know about workers’ current living conditions. This forces a discussion of what constitutes “livable” housing in a context where the current norm is for a household to eat, socialize, and sleep in one small room with one window and door, and only have access to a kitchen and bathroom shared with nine other households.

For example, this is a typical living space for a garment worker in Bangladesh:

And this is a typical shared kitchen:

Living Wage and the Wage Gap

Using our modified Anker Methodology, our calculations show that there is a large gap between what workers currently earn each month and what constitutes a minimal living wage in the industrial areas of Bangladesh. Based on our estimates (including a range for housing costs, which we discuss in detail below), we estimate the monthly, minimal living wage range for each study area in Bangladesh to be:

• Dhaka: Tk. 17,870 to Tk. 22,394
• Satellite areas (Gazipur, Narayanganj, and Savar): Tk. 19,536 to Tk. 23,191
• Chittagong: Tk. 20,579 to Tk. 24,939

To calculate the wage gap, we calculated the gap between the living wage estimates calculated here and what workers earned during a standard workweek during the period when we collected the living expenses data (the first quarter of 2022, Q1 2022). To estimate what workers currently earn in a standard workweek, we used monthly salary and overtime payment data and weekly work hours data (converted into monthly data) to calculate what workers would have earned if they had, in fact, worked a standard workweek, which is 48 hours (8 hours a day, 6 days a week) in Bangladesh.

The average monthly wage in Q1 2022 ranged from Tk. 10,920 to Tk. 12,673 for women and Tk. 12,039 to Tk. 14,400 for men depending on the area. These wage payments include all the overtime and excess hours they worked in these months.

As we have reported elsewhere, workers worked excess hours in Q1 2022, so their standardized income, which reflects what they would have earned in a 48-hour workweek was between Tk. 8,840 and Tk. 10,157 for women and between Tk. 9,691 and Tk. 11,168 for men, depending on the area. Depending on the area and the living wage benchmark used, the wage gap at the start of 2022 was anywhere from Tk. 9,030 to Tk. 14,782 per month for women and Tk. 8,179 to Tk. 13,771 for men.
 

The data presented here are from several different surveys conducted by MFO and SANEM through the GWD channel of communication. This channel connects with about 1,300 workers every week, of whom 76% are women. We collect housing expenditure data weekly, and in order to inform our calculation of the living wage we also asked respondents additional survey questions to collect data on different types of household expenditures.

Details: Cost of a basic decent life for a worker

Food Costs

The Anker Methodology begins with identifying a model diet for people in Bangladesh. The model diet, shown in Table 2, comprises 2,188 calories. Edible grams of different nutrients are based on the Dhaka Living Wage Benchmark Report which also includes 18% of miscellaneous costs (5% for miscellaneous foods not listed, 10% to allow for some variety, 3% for minimal waste and spoilage). Some foods contain inedible parts such as fruits with inedible skin or fish with bones, and we used grams purchased including both edible and inedible parts.

Table 1: Model Diet and Food Cost per person per day

For each food item grams purchased were calculated based on edible parts of each food item from the Living Wage Benchmark Report.

Note: The Dhaka Living Wage Benchmark Report estimated one 6-edible gram egg per person per week and we instead used our estimated price of one egg regardless of its weight. Based on the data collected from the workers, an egg costs about Tk. 10 in all areas.

To estimate the cost of our model diet per kg for each area, we asked garment workers about the prices of different food items in their area. We then calculated the cost per person based on the grams purchased. However, we did not ask about the cost of tea and onions and hence estimated the cost using a 0.85 and 0.64 inflation rate from the Dhaka Living Wage Benchmark Report for Dhaka and Satellite areas, respectively. This inflation rate was calculated based on the changes in prices for all other food items from that report in comparison to the data we collected.

The model diet costs Tk. 12,076 per month for the reference size family for satellite areas, Tk. 11,188 for Dhaka, and Tk. 11,614 for Chittagong.

Housing costs

Housing standards for garment workers participating in the GWD initiative would be considered poor based on any developed nation’s standard, with the conditions shown below:

• One room around 100 square feet
• One bed per room for all persons sleeping in the room
• Shared toilet and bathroom with nine other households
• Shared cooking area with nine other households

To identify more “upscale” housing we identified workers who were paying more than the typical rent of Tk. 3,500. When we asked them to describe their living conditions we got a variety of answers, but none included having a kitchen or bathroom of their own. Here is a sample of housing that is more expensive than typical:

• 1: “I live in a flat with 4 family members. There are 2 rooms, 2 beds, 2 wardrobes, and a TV. We share the common kitchen and bathroom with 5 other households.”
• 2: “I live in a one big room house with 5 members of my family including 3 children. I have a tv, a fan, light, a bed, and a wardrobe. We share the bathroom and kitchen with 4 other households.”
• 3: “I live in one tin-shed room with attached bathroom. It has a bed, a TV and a fridge. I share the common cooking place and 2 bathrooms with 7 other households.”

Rent for houses in satellite areas ranges between Tk. 2,500 to Tk. 4,175, with Tk. 3,500 being the typical rent; Tk. 3,000 to Tk. 4,350 with Tk. 3,650 being the typical rent in Dhaka; and Tk. 3,500 to Tk. 6,000 with Tk. 4,175 being the typical rent for Chittagong.

The following photos give some idea of the housing workers live in.

Cement House

Tin House

Based on what we heard from workers living in more expensive housing we identified two alternative decent housing scenarios that are more livable:

• Most garment workers live with multiple household members and children in their houses, or, if they don’t, would like to have their children live with them. With this in mind, the bare minimum decent house should at least include 3 rooms (one bedroom for kids, one for adults, and a shared family room). These 2 rooms would not necessarily be as large as the main room, so we estimated additional space equivalent to 1.5 times the original, base room. The rent for this basic 3-room housing unit is estimated at Tk. 8,750 for satellite areas, Tk. 9,125 for Dhaka, and Tk. 10,437 for Chittagong.
• Same 2-bedroom house above but with a private bathroom and kitchen. We estimate that this would necessitate a space that would be 1.5 times the original, base room. The rent for this basic 5-room housing unit, including a private bathroom and kitchen, is estimated at Tk. 14,000 for satellite areas, Tk. 14,600 for Dhaka, and Tk. 16,700 for Chittagong.

Non-food, non-housing costs (NFNH)

Using data from the 2010/11 Household Income and Expenditure Survey the Living Wage Benchmark Report estimates the NFNH to food expenditure ratio as 0.5. This report uses the Anker methodology to adjust this ratio to a final estimate of 0.57.

To estimate the cost of non-food, non-housing costs (NFNH), we asked garment workers to tell us the prices of different expenses that constitute the NFNH needs of families. Such expenses include:  fuel, cosmetics, household hygiene products, mobile charges, transport expenses, clothing, medical treatment, educational expenses, cooking equipment, furniture, insurance expenditure, personal articles, gifts, leisure, interests, other expenses, and miscellaneous household purchases.

NFNH costs were estimated to be Tk. 7,235 for satellite areas, Tk. 5,355 for Dhaka, and Tk. 7,508 for Chittagong. Using the Dhaka Living Wage Benchmark report ratio of NFNH to food expense ratio of 0.57, NFNH costs were estimated to be Tk. 6,883 for satellite areas, Tk. 6,377 for Dhaka, and Tk. 6,620 for Chittagong. The two methodologies had very close results apart from the estimation for Dhaka.

Table 2 shows the estimated NFNH costs per month per household.

Table 2: NFNH costs per family per month

Living Wage Range and wage gap

Based on these estimates, including the range of housing costs, we estimate the living wage range to be:

• Dhaka: Tk. 17,870 to Tk. 22,394
• Satellite areas: Tk. 19,536 to Tk. 23,191
• Chittagong: Tk. 20,579 to Tk. 24,939

To calculate the wage gap, we calculated the gap between the living wage estimates calculated here and what workers earned during a standard workweek during the period when we collected the living expenses data (the first quarter of 2022, Q1 2022). To estimate what workers currently earn in a standard workweek, we used monthly salary and overtime payment data and weekly work hours data (converted into monthly data) to calculate what workers would have earned if they had, in fact, worked a standard workweek, which is 48 hours (8 hours a day, 6 days a week) in Bangladesh.

The average monthly wage in Q1 2022 ranged from Tk. 10,920 to Tk. 12,673 for women and Tk. 12,039 to Tk. 14,400 for men depending on the area. These wage payments include all the overtime and excess hours they worked in these months.

Table 3: Actual and Standardized Monthly Income, Q1 2022

As we have reported elsewhere, workers worked excess hours in Q1 2022, so their standardized income, which reflects what they would have earned in a 48-hour workweek was between Tk. 8,840 and Tk. 10,157 for women and between Tk. 9,691 and Tk. 11,168 for men, depending on the area. Depending on the area and the living wage benchmark used, the wage gap at the start of 2022 was anywhere from Tk. 9,030 to Tk. 14,782 per month for women and Tk. 8,179 to Tk. 13,771 for men.

Table 4: Wage gap by region*

*Note: in a previous version of this blog we calculated the living wage gap using actual income earned in 2021. This underestimated the wage gap for workers because many workers worked overtime in 2021. This update uses standardized workweek earnings for Q1 2021 to calculate the wage gap.

Below are the details of the calculations for the two different housing scenarios discussed above.

Living Wage for a 3-room unit with shared bathroom and kitchen

Our living wage estimate which includes food costs, housing costs (for a 3-room housing unit with shared bathroom and kitchen) and other non-food non-housing costs for the three zones is:

• Satellite areas: Tk. 19,536
• Dhaka:
  • Using GWD’s calculated NFNH costs: Tk. 17,870
  • Using the Dhaka Living Wage Benchmark report 0.57 food to NFNH costs ratio: Tk. 18,582
• Chittagong: Tk. 20,579

Table 4: Living Wage for a 3-room unit with shared bathroom and kitchen

Living Wage for a 5-room unit, including a private bathroom and kitchen

Our higher living wage estimate which includes food costs, housing costs (for a 5-room unit, including a private bathroom and kitchen) and other non-food non-housing costs for the three zones is:

• Satellite areas: Tk. 23,191
• Dhaka: Tk. 21,682
  • Using GWD’s calculated NFNH costs: Tk. 21,682
  • Using the Dhaka Living Wage Benchmark report 0.57 food to NFNH costs ratio: Tk. 22,394
• Chittagong: Tk. 24,939

Table 5: Living Wage for a 5-room unit, including a private bathroom and kitchen