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The Financial Express

Has Bangladesh entered a period of jobless growth?

| Updated: October 24, 2017 13:30:33


Has Bangladesh entered a period of jobless growth?

The much-awaited results of the Labour Force Survey (LFS) of 2015-16, released on  May 28, hardly provide any reason to cheer about. For the economy as a whole, a total of 1.4 million new jobs are reported to have been created during the two-year period between 2013 and 2015-16, i.e., 700,000 new jobs per year. Compare this with the figure of four million jobs during the three-year period of 2010-2013 - over 1.3 million per year. It's not that economic growth has faltered during the more recent years; if anything, there has been acceleration in the growth of gross domestic product (GDP) - from 6.2 per cent per annum during 2010-2013, to 6.8 per cent per annum during 2013-14 to 2015-16. Despite an acceleration in economic growth rate, employment growth has declined. So, what has happened? Has Bangladesh entered a period of jobless growth?
During 2010-2013, one percentage point GDP growth was able to produce an employment growth of 0.39 per cent. Between 2013 and 2015, this figure declined to 0.18 per cent. Table 1 shows that this statistic has been declining over time since 2005, but the decline is sharpest for the period 2013 to 2015-16. It may be noted in this context that the corresponding figure for Asia as a whole for the period 1999-2008 was 0.32. Even for a developed country like USA, the figure in recent years has been over 0.3. 
One could perhaps argue that the decline in employment growth rate relative to output growth should be welcome because it indicates a rise in labour productivity. But could labour productivity in the economy of Bangladesh increase so fast as to produce such a sharp decline in the employment growth per unit of GDP growth? And if that really happened, shouldn't that have led to a rise in real wage growth? (That is not, however, the subject of the present article. I have shown that real wages have not risen in recent years in another article published in The Financial Express, November 10, 2016; https://epaper.thefinancialexpress-bd.com/?archiev=yes&arch_date=10-11-2016#). 
If one goes into some details, more disturbing facts come to notice. Take manufacturing industries, for example. For an economy like that of Bangladesh which aspires to move into the ranks of upper middle-income countries soon, structural transformation through rapid growth of manufacturing industries has to be the key. And that transformation has to take place not simply in terms of the composition of output but also of employment. But that's where the economy seems to be faltering. Between 2013 and 2015-16, total number of  employment in manufacturing has declined - from 9.5 million to 8.5 million. As textiles and ready-made garments constitute the major industries, the spotlight has to fall on them. Total employment in these two industries together declined from 4.85 million in 2013 to 4.56 million in 2015-16 - a decline of nearly 3.0  per cent per annum. 
Since the RMG industry is the major employer of women in the country, it would be interesting to see what has happened on that front. Something unusual seems to be happening there. The total number of women employed in that industry has declined from 1.7 million to 1.44 million (during the period mentioned in the earlier paragraph). Taking the textile industry together, the number of women employed declined from 2.59 million to 2.02 million - a sharp decline of 11.78  per cent per annum. In fact, the stagnation of employment in the RMG industry as a whole has been in news for some time (reported in details in a recent report of the Centre for Development and Employment Research). Now, data from the labour force survey confirms that news. 
How does one reconcile the sharp decline in the rate of growth of employment with that of constant unemployment rate as shown by successive LFS data? There could be different ways of squaring the figures. One is overseas employment - whatever the risks involved and the plight of workers abroad. The yearly average overseas employment during 2014-2016 was 579,765 - much higher than the figure for the period 2010-13 (493,954). The external source of employment may have made up, to some extent at least, for the decline in the economy's ability to create employment.
Looking at the supply side, the labour force figures of the 2015-16 LFS imply a growth of only 1.15  per cent per annum compared to 2.3 per cent per annum for the 2010-13 period. This sharp decline in the growth of labour force over a short period of time is puzzling, especially if one remembers that those who were to enter the labour force in 2015-16 were already born around 2000; and the annual growth of population during 2000-2013 was 1.47 per cent per annum. It is possible that a good number of working age people are too discouraged to get into the labour force and to actively seek employment - a criterion that has to be met in order to be counted in the labour force. 
There is of course the standard definition of unemployment prescribed by the ILO which requires one to fail the test of at least one hour of work during the reference week and also to pass the test of actively seeking work. In the context of Bangladesh, it is not easy to meet both the criteria in order to be counted as unemployed. There are myriad ways of being employed through what is known as the informal sector, and in the absence of unemployment benefit, one simply has little choice other than doing so. Hence, it is not surprising that the sharp decline in overall employment as well as in the manufacturing sector exists simultaneously with a constant (and low) rate of unemployment. 
When the 2013 LFS showed that the growth of employment in manufacturing nearly doubled from 6.34 per cent per annum during 2005-06 to 2010 to 12.34 per cent per annum during 2010 to 2013, many of us thought that Bangladesh has finally entered into the take-off stage for export-oriented labour-intensive industrialisation through which the remaining surplus labour will be exhausted soon. But the negative growth of employment in the sector after 2013 all but dashes that hope. 
Of course, manufacturing does not have to be only for exports; in a country like Bangladesh, with a sizeable domestic market, other industries could also act as drivers of growth and employment. But the news is not encouraging on that front either. Employment in the food products industry, which was the third most important sector in terms of total employment in manufacturing in 2013, has also declined. A couple of bright spots within manufacturing seem to be the furniture and pharmaceuticals industries. Given the situation, it is extremely important to understand what has been going on within the manufacturing sector and why employment in major industries like RMG, textiles and food products are declining instead of growing. It may be noted in this context that the last survey of industries dates back to 2012; and without credible and detailed data, it is difficult to say what has been going on in the sector. Apart from large-scale surveys, it is important to carry out small-scale in-depth investigation for selected major sectors of the economy in order to understand their functioning and take appropriate policy measures. 
One might of course point out that a degree of mechanisation is inevitable in any industry, and more so in an export-oriented industry like RMG where competitiveness means cost-effectiveness which, in turn, often leads to mechanisation. However, what is important to see is that incentives are not distorted so as to produce premature mechanisation in any sector. This is particularly important for the RMG industry where the recent spotlight on working conditions and rights of workers may have induced them towards mechanisation as a way of reducing the dependence on labour. Given the variety of "incentives" that are granted to the industry from time to time, it is too easy to encourage the adoption of labour-saving technology even though real relative market prices may not still justify such response. 
The author, an economist, is former Special Adviser, Employment Sector, International Labour Office. He is Senior Visiting Fellow at the Centre for Development and Employment Research, Dhaka. [email protected]

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