Growth with employment

Bangladesh economy is growing by about 7.0 per cent per annum. It is apparently an achievement in the present-day context. But, the scenario of employment generation seems to be slow. About 2.0 million people enter the labour force every year.

The Quarterly Labour Force Survey 2015-16 reports that, of the 106 million persons aged 15 years or older, about  60 million or 56 per cent were in employment or engaged in economic activity, while about 18 million or 33 per cent were females.  Almost one-thirds of the employed were in the younger age group of 15-29 years.  The said survey shows that about 43 per cent of the employed were engaged in agriculture, one-fifth in industry and 37 per cent in services. Further, 86 per cent of the employed were in informal sector. Thus neither from quantity nor from quality aspects, the situation seems soothing, as still a large portion is employed in agriculture, and most of the employed persons are in the informal sector where the jobs are generally low-paid and have low productivity.

Economic growth and employment generation are considered to be invariably linked and intertwined, implying that economic growth will automatically translate into employment.  This is not happening in the case of Bangladesh. It is said that the country is passing through a period of 'jobless growth'. Again, within employment, there could be a sharp difference between productive and non-productive low-paid employment. That economic growth may not necessarily generate employment growth, especially productive employment, has long been tested empirically. The question is: what kind of growth would generate more productive employment?

We may refer to 'productive employment' as enshrined in Sustainable Development Goals (SDGs). This is opposed to the general use of the term. Experts view that employment per se cannot (and possibly should not) be the goal, although it springs from growth itself. The target of SDG is to achieve, by 2030, "full and productive employment and decent work for all women and men, including young people and persons with disabilities, and equal pay for work of equal value".

Second, the researchers appear to rekindle the old reckoning that high economic growth in itself is not a panacea either for employment generation or for development. It is important but may not be sufficient for generating employment growth. "Economic growth is important for employment generation, but there is no automaticity in the relationship between the two variables. Policies and strategies are needed to make economic growth more employment friendly". It is therefore suggested that a monitoring device should be developed to see that economic growth invariably produces 'productive' employment. 

Third, experts in the field of employment also opine that open unemployment is not an appropriate indicator of the labour market situation in Bangladesh, although it could be so in developed countries. The reason is simple. In a developing country like Bangladesh, where there is no unemployment benefit, poor people can hardly afford to remain unemployed. Further, the way unemployment is measured (i.e. working less than one hour during reference week), it can hardly capture full employment condition in true sense. So, alternative indicators for measuring open unemployment are required.

The current research findings on unemployment hold the view that, on the whole, the performance of the labour market in Bangladesh, mapped by the above-mentioned measures, has been a mixed one with no clear trend regarding the progress towards achieving full and productive employment. "It should be noted that productive employment is only one of the components of decent work. The other elements include social protection, rights of workers, freedom to form associations and bargain collectively with the employers."

Then comes the question of potential challenges looming large on the horizon. First, if the aim is to fully utilise the surplus labour available in the country within next 12 years (by 2030), GDP (gross domestic product) growth rate must be raised to 8.0 per cent per annum. With the current level of growth at about 7.0 per cent or so, absorption of surplus labour seems a forlorn hope. GDP growth again is a necessary condition; it must be associated with high output growth especially in the formal sector.

Second, for high output growth to generate high growth in employment, manufacturing sector output should record a double-digit growth rate per annum. This could only come with a desperate dive towards diversification by leaning on labour-intensive technologies. For example, leather and leather products, sports shoes, furniture, electronics etc. should be accorded a neutral policy regime.  In fact, Bangladesh should gradually move away from RMG towards other products.

Third, growth and employment in the construction sector need to be revived. The rise in per capita income and the concomitant rise in demand for housing should provide a boost to the construction sector. Besides, with current initiatives in the area of infrastructure, demand for construction services are likely to pick up. 

Fourth, more inclusive growth is needed to strengthen the demand for goods from labour-intensive industries like garments, shoes, furniture, housing etc.

Finally, real wages of workers can play an important role in two ways - ensuring a decent living for workers and making economic growth more inclusive and employment-friendly. The former would generate more employment, income and demand for goods and services. Public policy has to keep an eye on what is happening to real wages, and there should be a provision for adjustment in wages during inflation. 

An inclusive growth enables low and middle income groups to demand more labour intensive non-food products as well as domestic tourism, as opposed to that spent on international tourism by the rich. Therefore, a broad-based growth is a sine-qua-non for increased aggregate demand in the economy - a growth strategy that generates more employment.

Abdul Bayes is a former Professor of Jahangirnagar University.

[email protected]/ [email protected]