Abstract
The purpose of this research is to adapt to the monopsony theory and disregard the neoclassical economic theory with regard to minimum wage policy. The other purposes of this study are to analyze the present minimum wage policy in Bangladesh. Is minimum wage system really effective? If so, what should be the standard for effective application of minimum wage legislation? The methodology of this study is qualitative. I have created a theoretical debate and developed hypotheses in this scholarship. The hypothesis developed from the debate of neoclassical theory clarified that the minimum wage law might not have an adverse effect. Instead, a standard minimum wage law, along with an appropriate implementation process, may have a positive effect on society. This study finds inadequate mechanisms to implement minimum wage provisions under the Bangladesh labor legislation. Therefore, the present minimum wage policy has not been implemented to its fullest as required to protect workers’ right in Bangladesh. This paper also shows that a minimum wage policy will have an effect if strict adherence to the standard of ILO Conventions is complied with. This study also creates a balancing test between neoclassical theory and monopsony theory on the application of the minimum wage system. Finally, this manuscript has taken a stanch with monopsony theory favoring the application of minimum wage law in the garment manufacturing industry. It is an original research paper. The strength of this type of research is that it benefits the practitioner and the pertinent stakeholder to gain new insight.
This is a preview of subscription content, log in via an institution to check access.
Similar content being viewed by others
References
Ahmed, J. U., & Hossain, T. (2009). Industrial safety in the readymade garment sector: a developing country perspective. Sri Lankan Journal of Management, 14(1), 1–13.
Ahmed N, and Nathan, D, (2014). Improving wages and working conditions in the Bangladeshi garment sector: the role of horizontal and vertical relations. Published by the University of Manchester (Capturing the Gains). Working Paper 40. www.capturingthegains.org, Accessed on 1 August 2019.
Anker, R. (2011). Estimating a living wage: a methodological review. (conditions of work and employment series no. 29) ILO working papers 994663133402676, International Labour Organization. http://www.ilo.org/public/libdoc//ilo/2011/111B09_199_engl.pdf, Accessed on 12 July 2019; See also, Moazzem, K.G., et al., (2013). Estimating a living minimum wage for the ready-made garment sector in Bangladesh. Centre for Policy Dialogue (CPD) and Berenschot, the Netherlands.
Antonova, S., & Tudoreanu, M. (2009). The effects of a raised minimum wage on employment: differences across states and social groups. Issues in Political Economy, 19, 69–89 http://www.elon.edu/docs/e-web/students/ipe/volumes/Atanova%202009.pdf, Accessed on 15 July 2019.
Aoki, M. (2001). Towards a comparative institutional analysis. Cambridge: MIT Press.
Bangladesh Labour Act, (2006). Act no. XLII, s. 138–149. https://ogrlegal.files.wordpress.com/2015/11/bangladesh-labour-act-2006-english.pdf, Accessed on 12 July 2019.
Card, D., & Krueger, A. B. (1994). Minimum wages and employment: a case study of the fast-food industry in New Jersey and Pennsylvania. The American Economic Review, 84(4), 772–793 https://www.jstor.org/stable/2118030?seq=1#page_scan_tab_contents, Accessed on 11 July 2019.
Chowdhury, N. J., & Ullah, M. H. (2010). Socio-economic conditions of female garment workers in Chittagong Metropolitan Area: an empirical study. Journal of Business and Technology (Dhaka), 5(2), 53–70.
Colander, D. (2000). The death of neoclassical economics. Journal of the History of Economic Thought, 22 (2). See also, Aspromourgos, T., (1986). On the origins of the term ‘neoclassical’. Cambridge Journal of Economics, 10(3), 265–270.
Davis, K., and Trebilcock, M. J., (1999). What role do legal institutions play in development? Published in University of Toronto. https://www.imf.org/external/pubs/ft/seminar/1999/reforms/trebil.pdf, Accessed on 18 July 2019.
Deakin, S., & Sarkar, P. (2008). Assessing the long-run economic impact of labour law systems: a theoretical reappraisal and analysis of new time series data. Industrial Relations Journal, 39, 453–487 https://onlinelibrary.wiley.com/doi/epdf/10.1111/j.1468-2338.2008.00501.x, Accessed on 12 July 2019.
Deakin, S., Lele, P., & Siems, M. (2007). The evolution of labour law: calibrating and comparing regulatory regimes. International Labour Review, 146(4), 133–162.
Eichner, A. S., & Kregel, J. (1975). An essay on post-Keynesian theory: a new paradigm in economics. Journal of Economic Literature, 13(4), 1293–1314.
Gindling, T. H., and Terrell, K., (1995). The nature of minimum wages and their effectiveness as a wage floor in Costa Rica. World Development, 23. file:///C:/Users/HP/Downloads/1-s2.0-0305750X9500047G-main.pdf, Accessed on 13 July 2019.
Hirsch, B. T., & Schumacher, E. J. (1995). Monopsony power and relative wages in the labor market for nurses. Journal of Health Economics, 14(4), 443–476 https://digitalcommons.trinity.edu/cgi/viewcontent.cgi?article=1019&context=hca_faculty, Accessed on 12 July 2019.
Hossan, C. G., Sarker, A. R., & Afroze, R. (2012). Recent unrest in RMG sector of Bangladesh: is this an outcome of poor labour practices? International Journal of Business and Management, 7(3). https://doi.org/10.5539/ijbm.v7n3p206 Accessed on 19 May 2019; See also, Chowdhury, M. A., Ali, M., and Rubba, R., (2006). WTO, post-MFA era and the Bangladesh RMG sector: An assessment of performance and challenges. South Asian Journal of Management.
Islam, M. S., (2016). Profit over life: industrial disasters and implications for labor and gender. In Social Justice in the Globalization of Production. Palgrave Macmillan UK 126–143.
Lee D, and Saez E, (2012). Optimal minimum wage policy in competitive labor markets. 96 J. PUB. ECON. 739. https://journals.scholarsportal.info/pdf/00472727/v96i9-10/739_omwpiclm.xml, Accessed on 12 July 2019.
Lewis, P. (1997). Policy forum: minimum wages the economics of the minimum wage. The Australian Economic Review, 30(2), 204–207 https://onlinelibrary.wiley.com/doi/pdf/10.1111/1467-8462.00019, Accessed on 20 July 2019.
Liscow, Z., (2014). Reducing inequality on the cheap: when legal rule design should incorporate equity as well as efficiency. Faculty Scholarship Series 5018. http://digitalcommons.law.yale.edu/fss_papers/5018, Accessed on 12 July 2019.
Machin, S., & Manning, A. (1994). The effects of minimum wages on wage dispersion and employment: evidence from the U.K. wage councils. Industrial and Labor Relations Review, 47(2), 319–329.
Rama, M. (1996). The consequences of doubling the minimum wage: the case of Indonesia. World Bank Policy Research Working Paper No.1643.
Robinson, J. (1969). The economics of imperfect competition (2nd ed.). London: Macmillan.
Rogowski, R., and Wilthagen, T., (1994). Reflexive labour law: an introduction. Rogowski, R., and Wilthagen, T. (eds.), reflexive labour law, (Deventer, Kluwer).
Roy Weintraub, E, (2002). The concise encyclopedia of economics: neoclassical economics. The author is an economics professor at Duke University and associate editor of History of Political Economy. (this article has no page numbers). http://www.econlib.org/library/Enc1/NeoclassicalEconomics.html#abouttheauthor, Accessed on 17 August 2019.
Samuelson P. A., and Nordhaus W. D., (2004). “Economics” (18th). Glossary of terms, ‘normative vs. positive economics’ at page 5-6.
Syed, R. F. (2015). Working condition in the garment manufacturing industry of Bangladesh: an empirical analysis. A research report submitted to the ‘Institute of Research and Training’ (IRT). Dhaka: Southeast University.
Syed, R. F., (2018). “Minimum wage policy for garment manufacturing workers in Bangladesh”, LL M (thesis), School of Law, University of Ottawa, Ontario, Canada.
The Constitution of the People’s Republic of Bangladesh. (1972). Art. 14, 15 (a) (b) (d), 20 (1) (2), http://bdlaws.minlaw.gov.bd/act-details-367.html, Accessed on 1 May 2020.
Wang, H., Appelbaum, R. P., Degiuli, F., & Lichtenstein, N. (2009). China’s new labour contract law: is China moving towards increased power for workers? Third World Quarterly, 30(3) https://www.tandfonline.com/doi/full/10.1080/01436590902742271?src=recsys, Accessed on 5 June 2019, 485–501.
World Bank, (2008). Doing business 2008: comparing regulation in 178 economies. Washington, DC, International Bank for Reconstruction and Development. https://doi.org/10.1596/978-0-8213-7231-9, Accessed on 7 August 2019.
International instruments
SAARC Social Charter, (2004). Art. II, para. 2(viii), https://www.jus.uio.no/english/services/library/treaties/02/2-03/saarcsocial-charter.xml, Accessed on 12 July 2019.
The General Survey of the Report on the Minimum Wage System, “International Labour Conference” (2014). (103rd session) report III (part 1B). Paragraph 299, 301, 309, 311, 312, 320. International Labour Office, Geneva, http://www.ilo.org/wcmsp5/groups/public/%2D%2D-ed_norm/%2D%2D-relconf/documents/meetingdocument/wcms_235287.pdf, Accessed on 14 July 2019.
The International Covenant on Economic, Social and Cultural Rights, (ICESCR), (1966). Art 7, https://www.ohchr.org/en/professionalinterest/pages/cescr.aspx, Accessed on 12 July 2019.
The Minimum Age Convention, 1973 (No. 138). https://www.ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:12100:0::NO::P12100_INSTRUMENT_ID:312283, Accessed on 2 July 2019.
The Minimum Wage Fixing Convention, (1970) (No. 131) with Special Reference to Developing Countries (Entered into force: 29 Apr 1972). Art. 8. https://www.ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:12100:0::NO::P12100_INSTRUMENT_ID:312276, Accessed on 17 July 2019.
The Minimum Wage-Fixing Machinery Convention, (1928) (No. 26). Art. 7, http://www.ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:12100:0::NO::P12100_ILO_CODE:C026, Accessed on 30 July 2019.
The South Asian Association for Regional Cooperation (SAARC, 1985). http://www.saarc-sec.org/, Accessed on 7 July 2020.
The United Nations Universal Declaration of Human Rights (UNUDHR, 1948). https://www.un.org/en/universal-declaration-human-rights/, Accessed on 7 July 2020.
The Universal Declaration of Human Rights, (UDHR),( 1948). Art. 23(2) (3), https://www.ohchr.org/en/Library/Pages/UDHR.aspx, Accessed on 12 July 2019.
Author information
Authors and Affiliations
Corresponding author
Ethics declarations
Conflict of interest
The author declares no conflict of interest.
Additional information
Publisher’s note
Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.
Rights and permissions
About this article
Cite this article
Syed, R.F. Theoretical debate on minimum wage policy: a review landscape of garment manufacturing industry in Bangladesh. Asian J Bus Ethics 9, 211–224 (2020). https://doi.org/10.1007/s13520-020-00106-7
Received:
Accepted:
Published:
Issue Date:
DOI: https://doi.org/10.1007/s13520-020-00106-7