Unemployment and the role of government

Sustained and impressive economic growth is a matter of pride for Bangladesh. What is not is the lacklustre growth of employment, recently experienced by the manufacturing sector especially. The momentum has slowed to a crawl compared to past trends and the services sector. This is bad news for the more than a million young people who join the labour force each year. Employment data for Bangladesh comes from the quarterly Labour Force Survey (LFS) conducted by the BBS.

In the US, employment figures (an important lagging indicator) are generated monthly by combining the following-random surveys of 60,000 households and 144,000 business establishments. There are differences between the two that are beyond the scope of this article. What's more, the definitions of unemployment and underemployment followed by the Bureau of Labor Statistics (BLS) of the US are more stringent than those of International Labour Organisation (ILO), followed by Bangladesh. It is time Bangladesh followed international best practices to improve data quality.

In Bangladesh, the unemployment rate among the literate, at 5.3 per cent, is higher than the less-educated - a source of frustration among the educated youth. The country's unemployment rate is shown to be around 4.4 per cent. Such a rate, if authentic, is considered near full employment because some amount of frictional and structural unemployment is inevitable.

However, the apparently tight labour market condition masks higher unemployment rates among the youth (more than 12 per cent) and women (about 7.0 per cent). At 16.8 per cent, unemployment among educated women is alarming. Unemployment in rural areas is less pressing, helped, no doubt, by seasonality and migration to cities and foreign countries.

Note also that the labour force participation rate (the percentage of working age people either in a job or looking for one) in Bangladesh is less than 57 per cent. In terms of absolute numbers, it is 63.5 million. Had this figure been higher, the rate of unemployment certainly would have gone up.

Research suggests that the participation of women in the workforce is a spur to economic growth. As an example, during World War II when able-bodied males went off to the front, women replaced them in droves. Wartime production and significant numbers of women joining the workforce contributed to prosperity America enjoyed starting in the mid-forties and cresting in the early-seventies.  Although the expansion of micro-credit and education have taken Bangladeshi women forward restrictive social norms and the lack of a safe and healthy environment have kept them from seeking and continuing their vocations. Just the provision of childcare in the workplace will bring about a huge change.

Informal employment, 86.2 per cent of the total, far exceeds employment in the formal sector. We know what that entails for people at the receiving end - unpaid sick days, absence of contracts and employment at will. A recent slowdown in industrial investment has made matters worse. Automation and the relentless march toward capital-intensive production techniques are the other two damaging factors.

It is not possible for the government of Bangladesh to provide employment to thousands of people. What it can and should do is ensure the paramountcy of the rule of law and a business-friendly environment. On these two counts Singapore's example is instructive; year after year it comes out on top of international rankings of competitiveness and business climate. Singapore does not complain about the presence of so many foreign nationals in their midst. Demand for talent is such there is ample scope for nationals and foreigners to be absorbed.  

The indicators of good governance mentioned above are two fundamental pre-conditions of all-round development. The political environment of a country is another angle taken seriously by the business community. Compare the reputation of Indonesia to The Philippines, both large members of the Association of Southeast Asian Nation (ASEAN). Investment dollars are flighty. But once it trickles in, a virtuous cycle starts; look no further than Vietnam. Formal employment increases more a particular country dovetails to the international value chain, resulting in a satisfied and forward-looking workforce; less prone to agitation.

The government should keep its ear to the ground and be transparent and fair when taking a major decision or changing one. It must involve those who may be affected this way or that. When an opponent gets an opportunity to vent his opinion he is effectively defanged. Lastly, in a democracy, the government not only has to be accountable but also seen to be such.  

Raihan Amin is Part-time Faculty at the United International University

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