Factory wage digitisation trend in RMG sector steps backward

Results of a survey of Bangladesh's garment workers have shown a massive shift towards paying workers digitally in May, followed by a slow decline in the share of digital payments in subsequent months. 

SANEM, a non-profit research organisation, in collaboration with Microfinance Opportunities, has been conducting a series of surveys on the garment workers of Bangladesh.

The surveys are part of the Garment Worker Diaries Project, which has been ground-breaking in its approach to improve transparency in global supply chains and in its attempts to help people better understand the impact of the COVID-19 pandemic on the lives of garment workers, said a press release.

The project is aimed at collecting data on the working conditions, income, expenditure, and financial tool usage of workers in the global apparel and textile supply chain. 

The main objective of this 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. 

The latest developments of the project are regularly published through blogs and reports on its website. An analysis of monthly data collected from April 2020 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: Chattogram, Dhaka city, Gazipur, Narayanganj, and Savar. 

The interviewees were asked to report the name of the factory that currently employs them, 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 categorised as brand-facing if it is listed on a 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 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 is a source map for identifying apparel factories and their affiliations.

The analysis also showed that there was a considerable difference in the behaviour of factories on an individual level: some were digitised before May, some digitised temporarily while others never digitised. 

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 2020, a total of 20% of not brand-facing factories and 37% of brand-facing factories were paying workers digitally; while in May 2020, the percentages increased sharply to 57% and 85% of 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. 

Meanwhile, 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. 

The data suggests that the government stimulus package that had been announced to support temporarily laid-off workers through digital payments in response to the Covid-19 lockdown initially stirred the digitisation process in factories. 

However, despite the high benefits of digitisation – 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 digitisation 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. Most workers are not comfortable with receiving their payments digitally because of the high transaction costs associated with mobile banking and having insufficient knowledge regarding mobile financial and banking services. 

Moreover, since women are more likely to use their husband's bank account, receiving payments digitally reduces their decision-making power in household expenditures.