Theoretical debate on minimum wage policy: a review landscape of garment manufacturing industry in Bangladesh

Abstract

The purpose of this research is to adapt to the monopsony theory and disregard the neoclassical economic theory with regard to minimum wage policy. The other purposes of this study are to analyze the present minimum wage policy in Bangladesh. Is minimum wage system really effective? If so, what should be the standard for effective application of minimum wage legislation? The methodology of this study is qualitative. I have created a theoretical debate and developed hypotheses in this scholarship. The hypothesis developed from the debate of neoclassical theory clarified that the minimum wage law might not have an adverse effect. Instead, a standard minimum wage law, along with an appropriate implementation process, may have a positive effect on society. This study finds inadequate mechanisms to implement minimum wage provisions under the Bangladesh labor legislation. Therefore, the present minimum wage policy has not been implemented to its fullest as required to protect workers’ right in Bangladesh. This paper also shows that a minimum wage policy will have an effect if strict adherence to the standard of ILO Conventions is complied with. This study also creates a balancing test between neoclassical theory and monopsony theory on the application of the minimum wage system. Finally, this manuscript has taken a stanch with monopsony theory favoring the application of minimum wage law in the garment manufacturing industry. It is an original research paper. The strength of this type of research is that it benefits the practitioner and the pertinent stakeholder to gain new insight.