The Effects of International Scrutiny on Manufacturing Workers: Evidence from the Rana Plaza Collapse in Bangladesh

Abstract

After the tragic factory collapse of Rana Plaza in 2013, the direct reforms and indirect responses of retailers have both plausibly affected workers in the ready-made garment sector in Bangladesh. These reforms include 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 other manufacturing industries and other plausible control groups. Although employers appear to have increased sick leave and some measures of safety at work, they simultaneously have reduced job security in the form of written contracts. The study also finds that, a few years after Rana Plaza, average hourly wages have fallen significantly for female workers. The results suggest that regulations that are initially aimed at helping workers can have unintended adverse effects on several dimensions of workers' outcomes.