The ongoing Covid-19 pandemic is having adverse impacts on the global economy from multidimensional perspectives. Bangladesh is no exception in this regard. The country has experienced a slowdown of economic activities on account of the pandemic, with consequent repercussions for employment, wages, incomes and overall well-being of the people. There is no denying the fact that the life and livelihood of the left behind people have been particularly affected by the pandemic. This will no doubt have ramifications in terms of attaining the Sustainable Development Goals (SDGs) in Bangladesh. Issues of decent employment (as is conceptualised in SDG 8) has emerged as a critical concern in Bangladesh, alongside the health issues, in the backdrop of the pandemic.
A recent survey conducted by the Centre for Policy Dialogue (CPD) has attempted to shed light on the pandemic's impact on income and labour market scenario through the lens of dynamics of changes and the underlying factors driving the changes. The nationally representative survey covered 16 districts and 2600 households from both urban and rural areas. The survey was conducted in late January and early February 2021. As such, it was able to capture the household level adjustments and impacts and strategies pursued in response to the first wave of the covid (but not the second wave). The objective of the study was to offer a set of recommendations to the policymakers to help address the challenges concerning the country's labour market.
EMPLOYMENT SCENARIO DURING THE PANDEMIC: According to the survey, 61.5 per cent of the employed population had lost their jobs at the onset of the pandemic. Most of these people became unemployed during the initial lockdown period of April and May in 2020 when the 'general holiday' was in place, and the national economy came to a standstill for the most part. The worrying point was that almost 85 per cent of these out of work people were not able to find a job quickly and had to remain unemployed for more than a month. On average, workers had to wait for almost two months for their next jobs, which took a toll on their savings and assets.
REALIGNMENT OF JOB OPPORTUNITIES: While a majority of those who lost jobs were able to find employment at the beginning of 2021, when the economic activities began to recover, there were important changes in the labour market compared to the pre-pandemic time. As in many other developing countries, a large part of the workforce in Bangladesh is employed in the service industry. As the impact of the pandemic began to make itself felt, the household's disposable income took a hit. Indeed, there was a significant loss of jobs in the services sector, both for the employee and the self-employed. Employment in the industrial sector picked up when the economy started to open, but many had to move to the agricultural sector, where they experienced income erosion. Employment in the agricultural sector increased by 18.2 per cent on average.
Another aspect of the adjustment concerned change of occupation. More than 90 per cent of incremental labour either became self-employed, day labourer or contributing family members. Even though self-employment traditionally tended to provide a large part of employment opportunities in Bangladesh, many of these, about 52 per cent, either became day labourers or had started to be involved in household works. This resulted in a shift from formal work to the informal sector for some. According to the 2016 labour force survey, 87 per cent workforce in Bangladesh found employment in the informal sector. The share appears to have increased during the pandemic. The informal sector is often labour intensive but with lower productivity. This shift may pose a threat to the overall economic potential of the economy in the long run.
CHANGE IN WORKING HOURS: Even though the employment scenario appears to be recovering, the survey found a significant decline in work hours. The national average working hour came down by 4 per cent. Although a large part of the workforce previously employed in the service industry had to leave their jobs, no reduction in work hours in this sector was discernible. On the other hand, the two sectors that had created jobs for the newly unemployed people, agriculture and industry, had seen a reduction in the working hours. Agriculture, which created the most number of jobs, has seen a decline in working hours which led to a national average reduction of more than 8 per cent while working hours in the industrial sector came down by almost 4 per cent. This means that even though the sector had absorbed the highest number of jobs, workers in the agricultural sector have seen a significant reduction in their average income. Evidence of 'hidden unemployment' was also quite evident. This is caused when people are underemployed, but they do not appear to be so in the official figures since technically they have jobs.
RESTORATION OF INCOME: The change in income scenario was in tandem with the decline in working hours. The average national monthly income declined by almost 12 per cent. The largest decline in income could be seen in the agricultural and wholesale sectors, by 16.5 per cent and above 14 per cent, respectively. Earnings have also declined in the manufacturing sector, by 12.7 per cent. On average, 45 per cent of the surveyed households have seen a decline in their income compared to the pre-Covid-19 time. Even though this was initially believed to be a distinctly urban phenomenon, rural households have also experienced a reduction in their income, by 11.3 per cent, while urban households had their income cut by almost 13 per cent. Overall, women workers had to bear the brunt disproportionately. Their income declined by 11.5 per cent, while their male counterparts had seen an 11 per cent reduction in their wages. This was found in case of both urban and rural households.
JOB SATISFACTION IN THE RESHAPED LABOUR MARKET: Predictably, more people are now dissatisfied with their jobs than was the case in the pre-pandemic period. More than 40 per cent of the employed population had confirmed that they were in a worse employment situation than they were before the epidemic, including almost 5 per cent whose conditions have worsened significantly. Only 8 per cent of the surveyed households reported that they were in a better position than before. Almost 86 per cent of individuals were not making enough to meet their day to day needs.
COMBATING THE DECLINE IN INCOME: The reduction in earnings has created a significant change in the labour market scenario. More people are now looking for work; 53 per cent of whom are women with the majority living in rural areas. Young male members of the households have also been forced to join the workforce. The incremental contribution of the females and youths to respective households income bears this proof. However, majority of these workers are participating in low-income roles in the agriculture sector; these jobs are labour intensive and not productive. 78 per cent of the households were forced to reduce their expenditure to combat the adverse effects of the pandemic and in view of income erosion. 58 per cent of these were compelled to change their diets involuntarily. About half of the households have experienced a decline in their savings. Consequently, more than half were forced to take loans, which resulted in a doubling of the average amount of loan per household in the span of just one year.
The limited support from the government was not able to compensate for the income losses. Only 20 per cent of these households received government aid. Most, finding no other options, had to resort to other sources such as friends, family members, neighbours and charity organisations. About 13 per cent of these families had to reduce their spending on healthcare and education, and 5.4 per cent had to sell assets as a strategy for adjustment and survival. Only 7.7 per cent of the surveyed households reported that they did not require any assistance.
IMPACT OF THE PANDEMIC ON INCOME INEQUALITY: The deterioration in employment condition has clearly affected income inequality in the economy. The number of lower-income individuals has increased. The number of people who earn 0-2500 BDT has increased by 26.7 per cent, while the number of individuals earning 2600-5000 BDT has increased by 28.7 per cent. Consequently, the number of people in the high paying brackets has decreased significantly. The number of individuals who earn more than 50,000 BDT has declined by almost 84 per cent; almost all individuals in this income bracket living in rural areas have experienced this decline. This reduction indicates a rise in the poverty rate in the country. Subsequently, the income of the lowest 40 per cent of households has decreased, widening the prevailing large economic inequality.
IMPACTS ON SDG GOALS: The impact of Covid-19 on the labour market will without doubt undermine the achievement of several SDGs, including the ones concerning poverty, health, nutrition, income inequality, and decent job. A significant majority of the workforce lost their jobs during the beginning of the pandemic and were not able to find work for almost three months. During this time, they were forced to take loans, borrow from friends and families, and rely on support from government and non-state organisations. Even when they found jobs, they worked for less hours and received lower wages resulting in significant changes in their expenditure pattern. This had pushed many people below the poverty line, raised income inequality and lowered the level of daily nutritional intake. Many households were unable to spend more on healthcare and education. These will have a significant impact on five of the 17 SDGs at a crucial period in their implementation.
POLICY SUGGESTIONS: We propose a three-pronged policy to combat the adverse impacts of the pandemic on the labour market. We suggest a transfer of cash to lower-income households on an urgent basis as not only a short term income augmenting solution but also a short to medium term employment augmenting opportunity through income - aggregate demand-supply response - employment creation positive means. We also argue for significantly higher allocations for social safety net programmes in the budget. Increased public investment will be necessary to stimulate the labour market particularly through higher allocations for labour-intensive projects. Private investment must be supported through fiscal initiatives since the private sector is the major employer in Bangladesh. It is evident that the effects of the economic downturn are almost as devastating in the rural areas as they are in the urban and peri-urban areas. A higher number of rural development programmes should be implemented, particularly by investing in labour-intensive rural infrastructural development projects. This, however, should not be a temporary measure. Wider social safety net and public investments can create disposable income, which will, in turn, lead to higher expenditure and strengthen the recovery process.
As seen from the survey, the amount of average household loans has doubled; there is every possibility that these high-interest borrowings could put households deeper into the debt trap. Stimulus packages offered by the government were welcome initiatives, but they will need to be continued and made more accessible for people who need them the most. Distributing those through formal banking channels may not be enough. Microfinance institutions and NGOs should also be engaged to this end.
A focus on just creating jobs may not be effective and enough. We need to put emphasis on creating quality employment with decent income. We need to 'build back better' by investing in infrastructure that stimulates private sector investment and attracts FDI. Labour market institutions must be strengthened to ensure compliance and ensure workers' right. Medium-term issues and reforms such as unemployment benefit, registration of unemployment, introduction of apprenticeship programmes and change in curricula to match the demands of the changing dynamics of the labour market ought to be prioritised. Skills upgradation, particularly in view of the demands of the new economy, must be given priority.
[This op-ed provides a summary of the keynote paper titled "Income and Employment in COVID Times: How the People are Coping - Findings from a Household Survey", presented at a dialogue organised by the Centre for Policy Dialogue (CPD) and Oxfam in Bangladesh, in association with Citizen's Platform for SDGs, Bangladesh and supported by the European Union on May 5, 20201 in Dhaka.]
Professor Mustafizur Rahman, Distinguished Fellow, CPD
Towfiqul Islam Khan, Senior Research Fellow, CPD
Muntaseer Kamal, Senior Research Associate, CPD Nawshin Nawar, Research Associate, CPD
Marfia Alam, Programme Associate, CPD
Md Sabbir Hossain, Programme Associate, CPD.