Labor laws and industrial relations have an important bearing on industrial growth and labor welfare. While there has been much concem with fiscal and financial incentives to small and large industries in Bangladesh, very little economic analysis of the nature and consequences of labor laws and labor practices has been done. This paper addresses that issue.

The paper sets up the stage by a historical survey of labor legislation in Bangladesh. From that, it selects three major areas—each an admixture of laws, institutions, and practices—for in-depth analysis from the viewpoint of their impacts on employment, wages, and industrial growth : (a) a theoretic-empirical analysis of Bangladesh’s minimum wage policy; (b) the nature and causes of industrial disputes in recent years; and (c) an empirical analysis of the country’s labor unions.

Most findings are consistent with theoretical predictions. An implication is that some reform in all the three areas is due. The survey of the labor code suggests that Bangladesh has kept up with its neighboring countries in labor legislation relating to work injury, maternity benefits, and labor welfare in general, but that in the progress towards social security Bangladesh has fallen somewhat behind its sister countries of South Asia. A policy implication of the analysis of the existing minimum wage law is a possible substitution of a national, an urban, or a few regional minimum wages for the regard to industrial disputes, political factors have become a dominant cause of them. The prospects for a congenial climate of industrial relations will advance with an improvement in labor productivity and political accountability. Finally, the paper measured small negative effects of unions on the employment of skilled labor but detected no wage increases resulting from union activity. Firms may be avoiding the potentially negative employment effects of having unionized labor by substituting more contract labor for wage labor in unionized firms. Their ability to substitute in this way reduces the negative employment effects, but corrodes the effectiveness of unions.