Skills mismatch in new industrial frontier

Globally, there is an ongoing discussion that skills and education do not reflect the demand of the job sector in the economies of developing countries. In an era of technological revolution, the nature of jobs is oriented towards an increasingly high-tech, service-oriented, and skilled labour force participation in the workplace (Bresnahan et al, 2002). 

Bangladesh being a labour-abundant country is no exception to this growing demand for a transition of required skills for different industries. According to the Labour Force Survey 2016-17, the country has a 109.1 million working-age population, from which 63.5 million participates in the labour force and 60.8 million are employed. Although the unemployment rate of 4.2% is not so alarming for an economy, a big bulge of inactive/discouraged workers totalling 45.6 million is a matter of rising concern. In addition, the number of youths in the labour force is 20.1 million, but there are 20.2 million inactive or discouraged youths in the working age population.

Moreover, the recent figures of job creation show a declining trend. According to the Labour Force Survey, in the face of a decline in jobs by 1.5 million in agriculture over the past five years, the industries sector contributed only 0.3 million jobs. Between 2013 and 2016-17, jobs in agriculture declined by 1.1 percent annually against output growth of 3.2 percent; jobs in the industries sector grew by only 0.5 percent while the output growth was a robust 9.8 percent. But jobs in the services sector grew by around 4 percent against output growth of around 6 percent. This declining trend of job creation gives rise to three major concerns. Firstly, a slow growth of the manufacturing sector is yielding less job opportunities for the people. During the last three decades, the average value addition of the manufacturing sector as a percentage of GDP was slightly over 16%, which was not so high. Secondly, the manufacturing sector has been highly dependent on the Ready Made Garments (RMG) industry for a long time. No other alternative industries have come up till date approaching the RMG in terms of contribution to the economy and employment generation. Finally, the higher growth rate of jobs in the services sector compared to its output growth rate indicates a lack of efficiency in the sector due to dearth of skills.

Furthermore, there are gaps in required skills for performing optimally amid the new technological waves in firms. Although data on skills mismatch in Bangladesh are limited, one important source of information is the School-to-Work Transition Survey of 2012-2013. As per this study, about two-thirds of young managers, 62% of young professionals, and 92% of young technicians and associate professionals had not received the education expected for their jobs. Poor quality of general education and structural constraints of technical cum vocational education and training (TVET) have been frequently identified as the principal reasons behind this skills mismatch.  Limited statistical evidence indicates that the skills imparted by much of the TVET system are not what the market requires. One tracer study conducted by World Bank (2007) suggested that 47% of graduates from formal TVET programs reported being unemployed when surveyed at least 2 years after their graduation.

In order to address this skills mismatch and strengthen linkages between industry and the national training system, 12 Industry Skills Councils (ISCs) have been established under the collaboration of Government, ILO, and respective industries. Twelve major industries including RMG, agro-food sector, leather sector, light engineering, transport equipment, construction, tourism and some other promising sectors have their industrial skills councils. All these industries have significant potential to grow and contribute robustly to the economy in the future if the demand for skilled workers is met. For instance, electrical goods are manufactured by the Light Engineering Sector (LES). It is now meeting 48% to 52% of the country's requirements, which were earlier met through imports. A recent study conducted by International Finance Corporation (IFC) shows that the LES sector has employed 6, 00,000 people in 50,000 micro enterprises and 10,000 SMEs.

Therefore, from the aforementioned discussions and pieces of evidence, it is clearly evident that Bangladesh has a potential to grow faster and create more jobs through diversified industrialisation. However, skills mismatch and demands of the industries need to be addressed effectively. Integration of automation has been curtailing a significant number of low-skilled jobs in the RMG industry during past two decades. TVET reform, quality education, industrial orientation of training programs can assist in meeting the demand for the new avenues in the job market. Since the government has initiated the establishment of 100 new SEZs with a view to promoting diverse industries and generation of employment, availability of skills for future jobs will determine the success of this effort.

The writer is a Senior Research Associate, SANEM, presently studying Applied Labour Economics at ITC-ILO.

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