Bangladesh has made remarkable progress toward ending poverty and sharing prosperity with more of its people. As recently as 2000, about one in three Bangladeshis lived in extreme poverty based on the national poverty line; today, this has fallen to 13 percent. The poorest 40 percent of the population also saw positive per person consumption growth. Like in most countries, a key reason was broad-based growth in earnings. With more than 20 million people still living in extreme poverty and many workers with insecure jobs, Bangladesh cannot be complacent. It needs faster economic growth that can deliver more and better jobs for everyone.
The economy has been good for jobs over the past decade. Between 2003 and 2015, jobs growth outpaced the growth of the working age population. This not only cut unemployment rates but also brought millions of new workers into the labor market. With urbanization, workers have shifted from agriculture to industry and services. A large share of this new job growth came in formal waged employment, accompanied by strong productivity and wage growth. Large-scale expansion of employment in manufacturing, driven by the Ready Made Garment (RMG) sector, has contributed to this transformation, changing the lives of many for the better.
Despite robust economic growth, the pace of job creation has slowed in recent years, as confirmed by the 2015 Labor Force Survey recently released by the Bangladesh Bureau of Statistics. The slowdown was particularly sharp in the RMG sector. These developments put at risk many of the labor market gains made over the last decade, placing particular pressure on women and young workers. Unemployment rates among youth, particularly females, have already seen an increase in recent years.
There is still much that is wrong with Bangladesh’s labor market. The biggest challenge is job quality, which remains poor with substantial numbers of workers employed in informal, unpaid, or agricultural work. Only 1 in 5 workers are in wage work, less than 40 percent of whom have a written contract. This puts the vast majority of workers in jobs they could lose at short notice. There is a big gap in the quality of jobs between men and women: compared to only 5 percent of working men, one in three working women are not paid for their work.
So what can Bangladesh do? First, to create jobs on a large scale to absorb a growing labor force, Bangladesh must accelerate productivity growth and diversify manufacturing and services sectors, with a focus on expanding exports and Foreign Direct Investment (FDI). Unlocking this potential will require addressing the rapidly rising congestion costs that restrict growth and hinder the efficiency of firms operating in and around the mega-city of Dhaka. Investing in the economic and social infrastructure to make secondary cities additional engines of growth would be also needed.
Raising the quality of jobs will require increasing productivity and exploiting the growth potential of Bangladesh’s vast array of small-sized firms. Microenterprises, as well as Small and Medium Enterprises (SMEs), which account for 98 percent of all firms and account for half of all jobs, are older and less dynamic than their peers in other countries. Improving the investment climate and increasing firm capabilities, both in the formal and informal sectors, can encourage growth in the micro and SME sectors. This will increase their ability to create more jobs.
Finally, Bangladesh must place a priority on ensuring access to good jobs by vulnerable people. Targeted labor market programs that address their problems in finding work offer a reasonable approach. Examples include removing barriers to women getting jobs, supporting school to work transitions for youth, and lowering the costs of international migration for lower income and workers located in areas far from job markets.
Addressing these challenges must be a priority for Bangladesh now. This is not an easy task. Concerted efforts are required in a range of government policies. It is encouraging that key policymakers, academia and think tank researchers, development partners as well as private sector partners are thinking deeply about these challenges. And the availability of jobs – stable, safe, and well-paid – is ultimately how ordinary Bangladeshis will judge the country’s development progress.
This article originally appeared in The Daily Star.