Labor Market and the Real Wage in Bangladesh

Abstract

This paper provides an outline of Bangladesh’s labor market and its real-wage patterns. The labor market of any developing country like Bangladesh remains in peak of the concern. Real wage reflects the purchasing power of consumers. Hence it is an essential tool for policy formulation. This paper mainly focusses on the three major sectors of Bangladesh- agriculture, manufacturing, and construction. To observe the trend, the real wages of these three major sectors have been determined. A time-series data was taken from 1995 to 2018 of nominal wage data and was deflated by CPI, retaining a common base year using the backward linking method. It was found that, over time, both real and nominal wages have increased. The real wage data showed an acceleration of manufacturing wage from 1995-1996 to 2009-2010. Later it slowed down, whereas agriculture wages boosted after that period. The reason behind such a pattern was analyzed throughout the paper. Using STATA software, I have examined the trends of real wages and tried to show what implications it does have on poverty. The real wage is a good indicator of poverty. An increase in real wage reduces poverty. The paper also discusses the labor market challenges of underemployment, income inequality, and gender disparity in Bangladesh.