Written by Anika Tasnim
Over the past two decades, Bangladesh has emerged as one of the world’s most dynamic export-oriented economies where the export-to-GDP ratio is 10.4% in 2024 (Raihan, 2026). The country has built a reputation as a reliable manufacturing hub in global supply chains. Exports have generated millions of jobs, contributed significantly to foreign exchange earnings, and helped reduce poverty. Yet, beneath this success lies an ongoing debate about the financial sustainability of the export model and the wages paid to the workers who sustain it. The core of the debate is simple but complex in its implications: can Bangladesh maintain its export competitiveness while ensuring fair and sustainable wages for its workforce? As inflation rises and living costs increase, this question has become increasingly urgent for policymakers, businesses, and workers alike particularly at the time when Bangladesh is on a trajectory to potentially graduate from the United Nations’ Least Developed Country (LDC) status on 24 November 2026, with the transition period ending in 2029.
Bangladesh’s export industries operate within an intensely competitive global marketplace. International buyers, particularly large global retailers and brands, constantly seek lower production costs. Manufacturers in developing countries compete with one another to secure contracts, often leaving limited room for price increases. For Bangladeshi factories, this means operating within narrow profit margins while meeting strict delivery schedules and quality standards.
In this environment, labor costs have historically played a crucial role in maintaining competitiveness. Bangladesh’s relatively low wage levels have allowed the country to attract significant investment in labor-intensive industries. According to UN Women, the Ready-Made Garment (RMG) sector alone employs millions of workers, the 60-70% of whom are women from rural backgrounds. Their labor has helped transform Bangladesh into one of the largest apparel exporters in the world.
However, the reliance on low wages as a competitive advantage raises important economic and ethical concerns. For workers, the challenge is straightforward: wages often struggle to keep pace with the rising cost of living. Although headline inflation eased to 8.29% in November 2025, in recent years, it has increased the prices of essential goods such as food, housing, transportation, and healthcare. ILO (2024) stated that even when nominal wages increase, the real purchasing power of workers can decline if inflation rises faster (The Daily Star, 2026). The Global Wage Report notes that Bangladesh’s wage structure, particularly the minimum wage, has not kept pace with productivity growth, creating structural imbalances that hinder inclusive economic development (ILO, 2024). Moreover, South Asian labor markets, including Bangladesh, are constrained by structural rigidities and heavy reliance on informal employment, limiting upward mobility and equitable income distribution.
According to the Labour Reform Commission Report (2025), the majority of income is spent on basic necessities for many low-income households. As prices rise, families are forced to reduce spending on education, nutrition, and healthcare. This not only affects their immediate wellbeing, but also has long-term consequences for human development. The financial strain experienced by workers has therefore become an increasingly visible aspect of Bangladesh’s broader economic narrative.
At the same time, the financial reality facing manufacturers must also be considered. Contrary to popular perception, most factories do not capture a large share of the final retail value of exported products. The largest portion of profits in global supply chains often accrues to international brands, retailers, and marketing networks. Manufacturers in producing countries typically operate on relatively thin margins, which limits their flexibility when it comes to increasing wages.
This structural imbalance within global value chains creates a persistent tension. On one hand, workers demand higher wages to cope with rising living costs. On the other hand, factory owners argue that significant wage increases could reduce competitiveness and lead to the loss of export orders to other countries. The challenge for Bangladesh is therefore not simply a domestic labor issue; it is also deeply connected to the global economics of production and trade.
Another dimension of the wage debate is productivity. In many cases, wage growth in Bangladesh has not been accompanied by proportional increases in labor productivity. While the country has made remarkable progress in expanding manufacturing capacity, much of its production remains concentrated in relatively low-value segments of global supply chains. In case of the RMG industry, basic garment production often generates lower profit margins than higher-end apparel design, branding, or technological innovation. Moving up the value chain is therefore an essential step for the long-term sustainability of the export sector. Investments in technology, worker training, and industrial upgrading can improve productivity and allow firms to produce higher-value goods. In turn, this could create greater financial space for better wages without undermining competitiveness.
Other South and Southeast Asian economies, such as Vietnam and India, have maintained global export competitiveness while progressively improving labor conditions through strategic integration into global value chains and targeted industrial upgrading. Vietnam, for instance, has combined rising minimum wages with sustained export growth in manufacturing and electronics, supported by extensive participation in free trade agreements. Similarly, India has focused on expanding higher-value manufacturing sectors and enhancing productive capacity. In contrast, Bangladesh is increasingly facing pressures from rising production costs and intensifying global competition, which are gradually eroding its traditional low-wage advantage. These trends suggest that long-term competitiveness cannot rely solely on cost advantages; rather, sustained growth depends on productivity enhancement, skills development, and diversification into higher-value, innovation-driven sectors.
The transition, however, will not happen automatically. It requires coordinated efforts from multiple stakeholders. Governments must create policies that encourage industrial upgrading and skills development. Manufacturers need to invest in innovation and efficiency. International buyers should also take responsibility by ensuring fairer pricing practices within global supply chains.
Labor market institutions also have an important role to play. Transparent wage-setting mechanisms, effective labor inspections, and meaningful social dialogue between workers, employers, and government representatives can help address tensions before they escalate. Regular and evidence-based wage reviews can ensure that wage adjustments reflect changing economic conditions. It is equally important to recognize that wages are not merely a cost of production. The LRC Report (2025) states that fair wages can contribute to higher worker morale, improved productivity, and reduced turnover. When workers feel economically secure, they are more likely to invest in skills and contribute positively to the workplace. In the long run, this can benefit both firms and the broader economy.
Bangladesh is now approaching a new stage in its development journey. As the country moves toward the middle-income status and prepares for greater integration into the global economy, its development model will inevitably evolve. Competing solely on the basis of low wages may not be sustainable in the long term. Instead, the future competitiveness of Bangladesh’s export industries will likely depend on productivity, innovation, and value addition. Ensuring fair wages within this evolving economic structure will be a critical challenge. It requires balancing the financial realities of global trade with the legitimate expectations of workers who contribute to the nation’s economic success. Policymakers must therefore view wage policies not only through the lens of cost, but also through the broader perspective of inclusive growth and social stability.
Bangladesh’s export success story is one of resilience, entrepreneurship, and hard work. The workers who power its factories are central to that story. As the country charts its path forward, addressing the relationship between financial sustainability and fair wages will be essential. Achieving that balance will not only strengthen the export sector but also ensure that the benefits of economic growth are shared more equitably across society.
References
- ILO. 2024. “Global Wage Report Is Wage Inequality Decreasing Globally? ILO Flagship Report.” https://www.ilo.org/sites/default/files/2024-11/GWR-2024_Layout_E_RGB_Web.pdf
- Labour Reform Commission Report. 2024. “Labour Reform Commission Report.” Government of Bangladesh. 2024.
- Raihan, S. (2026). Aligning Trade and Industrial Policies for Sustainable Export Growth in Bangladesh. SANEM & Australian High Commission Policy Paper Series. SANEM Publications, Dhaka, Bangladesh.
- The Daily Star. 2026. “‘The interim has failed to curb inflation and unemployment’: A rebuttal”. https://www.thedailystar.net/opinion/views/news/interim-has-failed-curb-inflation-and-unemployment-rebuttal-4072336.
- UN Women. n.d. “Empowering Female Ready-Made Garments (RMG) Workers.” UN Women – Asia-Pacific. https://asiapacific.unwomen.org/en/countries/bangladesh/income-security/empowering-female.
Anika Tasnim is Research Officer, DataSense at iSocial.
