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Lower growth rate of wage than the increase in inflation has negative effects on affordability: Dr Moazzem

Published in The Financial Express on Thursday, 9 June 2016

Rate of labour wage declines over three years: Report

Kamrun Nahar

The rate of labour wage has declined over the past three years compared to the increase in the wholesale rice price despite increased farm production while the rate of poverty decline is not consistent with the rising income inequality, a government report has revealed.

The ‘National Food Policy Plan of Action and Country Investment Plan Monitoring Report 2016′ published in June 2016 by Food Planning and Monitoring Unit (FPMU) of the ministry of food said change in national wage expressed in a kilogram of coarse rice of all sectors moderately decreased to 7.85 per cent in 2014/15 from 9.65 per cent in 2013/14 on a three-year moving average basis, because of lesser increase in the three years’ average of general wage index compared to the corresponding increase in the national wholesale rice price index.

The nominal agricultural labour wage increased more than three times over the last decade, from Tk 79 in 2004/05 to Tk 287 in 2014/15 for per day of work. Income poverty declined faster between 2000 and 2010 compared to the previous decade, however, the progress was uneven across regions, it said.

“The steady growth of per capita income and satisfactory decline in the rate of poverty has not been associated with any appreciable decline in income inequality,” said the report.

The report, however, recommended reducing income inequality; expanding rural non farm employment opportunities; enhancing initiatives for people’s Right to Food; expanding Social Safety Net (SSN) programmes to cover seasonal and regional exigencies; and expediting implementation of the National Social Security Strategy (NSSS) to ensure accessibility of food.

Dhaka University professor of economics Rashed Al Mahmud Titumir told the FE that in the overall production process the return to the worker has decreased compared to the return to the factors like land and capital.

“As the labour wage has declined compared to the return to the factors, the inequality has increased. As the labour wage has not increased equally with the wholesale price of rice, he is buying fewer commodities,” he said.

Professor Rashed said the growth process is not equal which is further constrained by lack of employment creation in formal sector having a dampening effect on labour wage and the large unemployed waiting to be absorbed in the labour market have not found employment due to investment depression and fewer economic activities.

The report said agricultural GDP (excluding forestry) growth registered a notable decline to 3.1 per cent in 2014/15 from 4.3 per cent in 2013/14 owing to decreased growth rate in crop sector. Increase in private imports from 0.4 million MT in 2013/14 to 1.5 million MT in 2014/15 was registered, mainly because of lower import parity price for Indian rice. Instability of rice production slightly increased to 3.1 per cent in 2014/15.

Release of new varieties increased in 2014/15, especially for rice, wheat, potato and vegetables. Rice production increased by 1.0 per cent in 2014/15, because of both area expansion and yield improvement.

Production of maize, wheat, potato, pulses, pumpkin, beans and edible oilseeds improved.

Fish production grew at 3.9 per cent in 2014/15. Shrimp production continued to accelerate, registering an increase of 3.3 per cent over 2013/14.

Meat production displayed a strong increasing trend with 29.3 per cent average growth over the reference period. Milk production registered an upward trend, averaging 16 per cent. While egg production declined by 17 per cent in 2008/09, it recovered sharply thereafter registering an 11 per cent average growth rate.

Additional research director of Centre for Policy Dialogue (CPD) Khondaker Golam Moazzem said the growth rate of wage has been lower than the increase in inflation which has a negative effect on affordability.

The increase in agricultural production is a positive thing in terms of increasing affordability and accessibility. But the use of chemical fertilisers, preservatives and pesticides during the production and marketing process has seriously hampered the quality of these produce.

Seeing the growth in agri production and its market, it is easily presumable that the affordability of the local consumers has increased but this affordability has not risen for the lower-income group. As the non-food inflation has risen more than food inflation, poor people have to spend most of their income for other products and services, Mr Moazzem added.


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