Survey: Garment factory wage digitisation trends turn back

High transaction costs associated with mobile banking and insufficient knowledge regarding Mobile Financial and Banking Services are discouraging most garment workers from receiving their payments digitally, a survey has found.

The findings suggest that the government’s stimulus package that had been announced to support the temporarily laid-off workers through digital payments in response to the Covid-19 lockdown initially stirred the digitization process in factories.

South Asian Network of Economic Modeling (SANEM), in collaboration with Microfinance Opportunities, has been conducting a series of surveys on the garment workers of Bangladesh.

The survey is part of the “Garment Worker Diaries Project” aimed at collecting data on the working conditions, income, expenditure, and financial tool usage of workers in the global apparel and textile supply chain.

According to a press release, the project is to aid informed policy-making and brand initiatives, with regular and credible data collection and analysis, which can have a positive impact on the lives of garment workers.

Also read: Bangladesh garment workers pray for orders as pandemic shreds exports

It has been ground-breaking in its approach to improve transparency in the global supply chains and its attempts in helping people to better understand the impact of Covid-19 pandemic on the lives of garment workers, SANEM said.

An analysis of monthly data collected from April to October 2020 was conducted to study the “Factory Wage digitization Trends” in Bangladesh.

Phone interviews were conducted with a pool of 1,377 workers, over three quarters of whom were women, from factories in the five main industrial areas of Bangladesh (Chittagong, Dhaka City, Gazipur, Narayanganj, and Savar).

The interviewees were asked to report the name of the factory in which they are currently employed, the payments they received, and whether they were paid in cash or digitally.

The study divided the factories into two categories: “Brand-facing” and “Not Brand-facing”.

A factory is categorized as “Brand-facing” if it is listed on any brand’s supplier list or is listed as a supplier to a brand on the “Mapped in Bangladesh” or “Open Apparel Registry” websites.

Mapped in Bangladesh (MiB) is a digital map of the RMG industry that provides a detailed database of export-oriented RMG factories all over Bangladesh that have core RMG processes and are listed as members of major associations. Similarly, the Open Apparel Registry (OAR) is a source map for identifying apparel factories and their affiliations.

RMG workers returning home after a day of work in Dhaka. REUTERS

A common trend that was noticed in the analysis was a massive shift towards paying workers digitally in May, followed by a slow decline in the share of digital payments in the subsequent months.

However, there was a considerable difference in the behaviour of factories on an individual level: some were digitized before May, some digitized temporarily while others never digitized. Another important conclusion that can be derived from the analysis is that factories that are “Brand-Facing” were more likely to have been paying their workers digitally before May 2020.

Furthermore, “Brand-facing” factories that had been paying workers in cash before April were more likely to switch from cash to digital payment methods between April and May.

In April, 20% of “Not Brand-Facing” factories and 37% of “Brand-Facing” factories were paying workers digitally while in May, the percentages increased sharply to 57% and 85% in “Not Brand-facing” and “Brand-Facing” factories respectively.

For “Not Brand-Facing” factories, the proportion of factories paying digitally reached its peak of 60% in June and started to decline thereafter.

The proportion declined from 60% in June to 54% in July and went further down to 45% in August.

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On the other hand, for “Brand-Facing” factories, the highest proportion of factories paying digitally was recorded at 87% in the month of July which declined to 76% in August. By September 2020, only 40% of Not Brand-Facing factories and 73% of Brand-Facing factories were still paying workers digitally.

However, despite the high benefits of digitization such as decreased payroll processing costs and lost worker production time and enhanced security associated with digital payments, factories are reverting back to cash payments.

One possible explanation cited in the study was that the benefits of the digitization were not readily apparent to the factories, particularly because they had not completely replaced cash payments with digital payments.

For instance, some workers reported to have received their regular salaries digitally, but Eid bonus payments in cash.

Another reason that may have caused factories to shift back to in-cash payments is the unwillingness of workers to receive digital payments.

The survey also mentioned that since women are more likely to use their husbands’ bank accounts, receiving payments digitally reduce their decision-making power in household expenditure.