Pick a value
- No elements found. Consider changing the search query.
- List is empty.
- What we stand for
- Our members that move with us
- See the impact we create
- Knowledge sharing
Research in Bangladesh shows that the COVID-19 pandemic has had a massive impact on the garment sector. Factories were faced with increased cost of production while unit prices and orders declined. Not surprisingly, faced with loss in employment and income, workers bear the brunt.
The garment industry is notoriously competitive in terms of delivery time and price. Across the global supply chain, margins and buffers have consistently been too low. Due to the pandemic, underlying problems that have existed for years have now risen to the surface, like the immense power imbalance between brands and factories in garment supply chains, which resulted in increased pressure on factories with lower order volumes and prices being pushed down further. Not surprisingly, this negatively impacted the millions of workers who depend on the garment industry for their employment and income.
Against this backdrop, Fair Wear commissioned two research studies. The South Asian Network on Economic Modelling researched the impact of COVID-19 on the costs of production and orders in Bangladesh. Interviews were conducted with 54 factories in the four production hubs: Dhaka, Gazipur, Narayanganj, and Chittagong. Karmojibi Nari – a female-led, non-profit organisation – examined the impact of the pandemic on garment workers in Bangladesh through a questionnaire survey administered to 500 workers (125 respondents each from the aforementioned regions).
The research shows that expenditures for firms within the ready-made garment (RMG) industry—be it production costs, overhead costs, share of labour costs, operational costs, and transportation costs—have all risen over the Covid period. The research also shows that the pandemic resulted in lower unit prices, smaller order sizes/values, downward pressure on factories’ mark-up, cancellation of orders and delays in buyers’ payments. The situation appears particularly difficult for factories that produce woven items, reflecting the change in consumer behavior brought about by the Covid pandemic.
Considering these increased costs and coupled with the wave of order cancellations and the decrease in demand for RMG products, it is not surprising that the workers within this industry have been among the hardest hit. The reduction in production and the closing down of factories have directly contributed to decreased work hours, cuts in bonus payments and other issues brought about by economic uncertainty.
In this regard, the research found that the average monthly income (including overtime) of garment workers decreased during the Covid pandemic. The average income dropped to its lowest level in the month of April, averaging BDT 5,425, when factories faced a government-imposed one-month closure. The survey data reveals that the average income gradually increased from May and had almost returned to the pre-Covid levels in October, as factories began to resume operations and overtime hours started to go up again.
Furthermore, the study revealed that four in every ten respondents claimed that their factories retrenched workers during the Covid period. The rate of retrenchment was slightly higher in knit factories and comparatively lower in composite factories. Job loss and retrenchment occurred more in the first three months of the Covid outbreak in the country. Workers reported arbitrary and informal methods to retrench workers, and a lack of notice period observed. The studies also found that not all workers received their due wage or overtime allowance after being retrenched.
Furthermore, only 39% of retrenched workers are currently involved in income-earning activities. Male workers engaged in rickshaw pulling, vegetable selling, labouring and street vending, among other things, while female workers engaged in tailoring, and as domestic workers, among other things. The average monthly income of such workers dropped to BDT 5,056, less than half of the average income of workers pre-pandemic.
The fact that RMG producers of Bangladesh were forced to comply with the buyers’ demands of a price cut or accept abrupt cancellation and delay in payment of orders already delivered highlights the power imbalance between brand and factory and the producers’ lack of leverage in negotiating fairer trade terms during the pandemic.
The intensifying competition in the global RMG market and the absence of an effective international regulatory authority with the capacity to oversee and enforce deals among parties are two factors which have contributed to the capitulation of producers. The combination of these two factors and the economic crisis prompted by the Covid pandemic have induced a zero-sum game where the buyers hold all the advantages. Therefore, to the buyer’s demand for a price cut, the factory’s only rational response is to accept the deal, due to the lack of any other viable alternatives. The factory can either sell it or keep it unsold. In case of not selling, the seller loses everything they could have earned. When agreeing to sell, even at a lower price that is below the cost of production, it could (partly) cover salaries of the workers, try to avoid complete shutdown and keep the business afloat.
The full reports are available below for more information: