Covid-19 and employment challenges

Employment generation has been a problem for the past decade. Employment elasticity of growth has been declining and remained low. If we look at the sectoral allocation of labour in the country, employment in agricultural declined but remained high. Manufacturing employment grew with RMG, but in recent years, it is falling. Services sector jobs are mostly informal and low paid. Also, there is a very high degree of informality in the labour market. We have seen low job creation even in the informal sector. Furthermore, working conditions and lack of decent jobs are important issues. We have seen growing rural-urban migration and international migration, which are important contributors to poverty reduction and growth.

Covid-19 has put additional pressure on the labour market in Bangladesh. Due to shutdown or slowdown of economic activities, many have lost their jobs. Many have shifted to inferior jobs. We see that the major hit on employment is in the urban area. I can mention two of SANEM's ongoing works. One is 'Garments workers Dairy' which we collect weekly with MFO and Gates Foundation. It shows some deeper impacts on the garments workers. We have also taken an initiative, in collaboration with Asia Foundation on Business Confidence Index by surveying firms nationwide. The preliminary findings showing some grave impacts on employment and wage. In the rural area, the crop sector may not be that hit, but non-crop agriculture and nonfarm employment are badly hit.

All these are resulting in a rise in poverty, inequality and reverse migration from urban to the rural area. The reverse migration will add additional pressure on the rural labour market. As non-crop and nonfarm economic activities and related employment opportunities are limited in the rural areas, unless major economic reforms take place in the rural areas in terms of infrastructural and financing supports, many of these returnee people will not be in a position to do something productive in the rural areas. The situation may get worsen with the likely influx of returning migrants from overseas.

In the short to mid-term, the future looks bleak. The depressing effects on employment and wages may continue. Many self-employed in the Micro, Small and Medium Enterprises (MSMEs) lost their capital which can never be recovered. Also, wage employment is suffering as economic activities are suppressed. Therefore, the revival of economic activities is extremely critical to counter this situation.

People are trying to cope up with the situation mostly on their own. But, the adjustment cost is appearing to be very high, even at the household level - including the way households allocate resources on food and essential non-food (education and health).

Government policy response related to the current labour market challenges has been weak and inadequate. One major challenge is the lack of information and lack of up to date data on the labour market. These jobless people are not included in most of the social safety net programmes. Also, the existing social safety net programmes are unable to address these growing challenges.

It is also true that the fiscal space of the government is not conducive for expanding the social safety net programmes. However, under the current crisis, the government should go for an enlarged deficit budget to spend high on social safety net programmes in general, and labour market-related programmes in particular.

Now, if we look at the management of Covid-19 crisis, this primarily involves three aspects: management of health hazard, management of the economic crisis, and management of social crisis (poverty and job-loss). We are observing major institutional challenges in all these three aspects.

Lack of coordination in the crisis management (failure in lockdown measure is an example), corruption, clientelism, problem in targeting, problem in priorities, and weak state capacity all are visible in managing these three crises. There is a need for improvement in these areas.

Finally, I suggest the following three things:

(i) The government should form a Labour and Employment Commission which will assess the current unprecedented situation and suggest necessary measures. The Bangladesh Bureau of Statistics (BBS) should be entrusted to collect data and information on the current situation.

(2)The government should also introduce new social safety net programmes targeting the labour market. In this context, the employment guarantee scheme for the next six months for vulnerable people can be seriously considered. The modalities can be sorted out.

(3) The revival of economic activities is a must, which is closely linked to the management of the on-going health and economic crisis. High priority should be attached to solve the institutional challenges in the health sector and implementation of the stimulus packages.

Dr Selim Raihan is Professor of Economics, University of Dhaka and Chairman, South Asian Network on Economic Modeling. (SANEM). [email protected]