Abstract
After the tragic factory collapse of Rana Plaza in 2013, both the direct reforms and indirect responses of retailers have plausibly affected workers in the Ready Made Garment (RMG) sector in Bangladesh. These responses included a minimum wage increase, high profile but voluntary audits, and an increased reluctance to subcontract to smaller factories. This paper uses six rounds of the Labor Force Survey and adopts a difference-in-difference approach to evaluate the net effects of these changes on garment workers, compared with workers in plausible control groups. Although employers have improved working conditions as intended by the reforms, the authors evidence adverse effects on several dimensions workers'outcomes in the years following Rana Plaza. While the reforms initially increased female workers'wages and the likelihood to hold a formal contract in the months that immediately followed Rana Plaza, they then declined in the following years. In contrast, no adverse effect is detected for male workers. The results suggest that regulations initially aimed at helping workers can have unintended adverse effects on some dimensions of workers'outcomes.
Highlights
The collapse of the Rana Plaza factory building in Bangladesh in April 2013 killed over a thousand workers and injured about 2,500 others
Females wages fell by less post-Rana Plaza, and if anything, rose: in the synthetic control estimate matched on all outcomes in column 1, they rose by 11 percent (P = 0.110)
This paper studies the effects of the post-Rana Plaza reforms on labor market outcomes of garment workers compared to synthetic control groups of workers who exhibited similar evolution of labor outcomes, pre Rana Plaza
Summary
The collapse of the Rana Plaza factory building in Bangladesh in April 2013 killed over a thousand workers and injured about 2,500 others. It is widely considered the worst accident in the history of the global garment industry, and the world’s worst industrial disaster since the 1984 Bhopal gas tragedy in India (Reuters, 2017). Retailers may have pressured factories to improve working conditions or have become hesitant to buy from factories that subcontract or that appear to be skirting labor regulations. While the intended goal was to improve working conditions and raise wages, a concern arose that reforms which raise costs among garment factories could hurt workers
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