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Opting for labour-intensive growth strategy

Shahiduzzaman Khan | Published: September 30, 2017 21:12:06 | Updated: October 25, 2017 05:29:16


Unemployment situation still poses a daunting challenge to the government. The country has failed to create adequate jobs despite higher economic growth - at about 7.0 per cent - in recent years.

A large number of the country's potential labour force is unutilised or underutilised as nearly one-third of its youths are either unemployed or underemployed. The situation is worse in case of female youths having a higher rate of unemployment than their male counterparts, in spite of their educational performances.

It is now evident that the gross domestic product (GDP) growth sans enough job creation does not benefit the greater section of society. Although growth rate has increased, private investment has fallen considerably over the years. The rate of productivity has also declined although various factors such as inflation, bank interest rate on loans, balance of payments position and exchange rates remain favourable for economic growth, according to a study.

In early 2000s, the country's economic performance was rather impressive.  It was due to the strong growth in labour force up to 2013. But such trend is currently showing signs of stagnation. It has been witnessed that of all groups in the labour force, youths aged 15-19 years have the highest rate of unemployment, more than four times the rate of unemployed people aged 35 and over. Mostly school dropouts remained unemployed.

Now the question is how to solve this problem. The unemployment situation can better be addressed through investment in public-private partnership (PPP) projects and in collaboration with prospective employers, who generate demand. Such investment in skills training can be made targeting young people who aspire to get jobs overseas.

According to a recent World Bank (WB) study, Bangladesh government should move to formulate a national employment strategy to address the problem of slow job growth despite ongoing economic expansion. Such a strategy should aim at increasing the pace of formal job creation, raising the quality of jobs in both formal and informal sectors.

When domestic job growth is at a slower pace, overseas migration is increasing, especially for women. Such migration is concentrated to a small number of destination markets and selected occupations. On the other hand, while domestic manufacturing is emerging, exports remain highly undiversified. Employment is increasingly concentrated to a few locations.

Against this backdrop, there is a need for developing an employment strategy for the country based on evidence, drawing on existing policies, programmes and strategies as well as extensive consultations. This strategy can be centrally coordinated by the Ministry of Planning in close coordination with Ministry of Labour and other key ministries while the WB and International Labour Organisation (ILO) can also support this initiative.

Such initiative can act as a framework defining key policy objectives and policies while it should be actionable with clear and measurable indicators or roles and rules of the institutions. The strategy should be developed through necessary consultations among the stakeholders.

It is worthwhile to mention that the country's growth is the slowest in two decades although its economy has been registering faster growth for the last several years. The country could add only 1.4 million jobs between 2013 and fiscal 2015-16, down from 4.0 million jobs it had added between 2010 and 2013, claims a Bangladesh Bureau of Statistics (BBS) Labour Force survey.

The sluggish job creation has raised questions about the high economic growth figures being recorded, with some economists terming the phenomenon 'jobless growth.' Some others raised questions about the accuracy of official economic growth figures. The latest figure on employment generation comes after the BBS estimated the GDP growth this fiscal year to be a record 7.24 per cent, up from 7.11 per cent a year earlier.

A significant development in Bangladesh during the period was reform to improve safety in the garment industry, the largest single employer in manufacturing, in the aftermath of two major industrial accidents. This led to closing of many non-compliant garment factories with consequent shedding of employment.

Along with efforts to increase the pace of economic growth, the government needs to identify the causes of slow job growth in the private and NGO sectors. The country's labour force stood at 62.1 million at the end of fiscal 2015-16, of which 59.5 million are gainfully employed. Between fiscal years 2012-2013 and 2015-16, the industrial sector created only 0.1million additional jobs to take the total number of the employed in the sector to 12.2 million.

Jobs grew mainly in the services sector, while the agriculture sector shedding jobs. The services sector added 0.22 million to take the tally of the employed in the sector to 220 million. Most of the jobs grew in the informal sector, while 0.8 million came out of the farm sector during the period.

BBS data shows that Bangladesh registered its highest employment generation -- of 0.67 million -- between fiscal years 2005-06 and 2010. Since then, employment generation has been slowing. This should be seen as a wake-up call to come out of 'unreal' discussion based on official growth rate.

The truth is that about 30-31 per cent less employment is being generated in a year now than a decade ago. A large number of jobs are being created in informal sector, which is less productive.

Also, the link between jobs and education is weakening. Foreign nationals are being appointed in many jobs in the industrial sector at a time when unemployment and underemployment among the educated remain high. It means the existing education system is unable to meet the demands.

Labour-intensive growth and creation of decent jobs are vitally needed for a labour-abundant country like Bangladesh. Net employment in the manufacturing sector declined in fiscal 2015-16 compared to 2012-2013, although the manufacturing sector is registering double-digit growth.

Employment cannot, in fact, grow fast enough when private investment is stagnating. Private investment in the country has been hovering at 22-23 per cent of GDP for many years now. Reforms to improve the domestic investment climate and further liberalise the trade policy regime are critically important to rejuvenate the employment growth.

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