Addressing underutilisation of labour

Bangladesh has been making steady economic progress over the past decades. But Bangladesh will not be able to achieve eight percent GDP growth rate by 2020 unless major concerns relating to its labour force and employment are adequately addressed. 

First, while the working age population increased between 2000 and 2013 from 74 million to 106 million, it remained unchanged at that level in 2015-16. The pattern is, by and large, similar in both rural and urban areas and among both males and females.

Second, between 2000 and 2013, labour force increased by about 1.54 million annually. However, between 2013 and 2015-16, it increased by only 1.4 million. This is in sharp contrast to the Seventh Plan's projected annual growth of around 2 million people in the labour force. Between 2013 and 2015-16, there was hardly any increase in urban areas, with a nominal increase of 1.3 million in rural areas. Why has there been such a dramatic decline in labour force between 2013 and 2015-16? This is despite the fact that the working age group increased by around 2.5 million persons annually during 2000-2013, which, however, remained unchanged during 2015-16. Is it because of the huge underutilisation (unemployment and underemployment) of the labour force, where many in the working age population are discouraged to enter the labour market? In 2015-16, about four-fifths of the discouraged workers were in the age group of 15-29 years. Or, is this due to lack of quality data of the 2015-16 Quarterly Labour Force Survey? 

Third, between 2000 and 2013 employment increased from 39 million to 58 million, i.e. an increase of 19 million, or around 1.47 million annually. However, between 2013 and 2015, it increased by only 1.4 million, or by only 0.47 million annually. This is in sharp contrast to the Seventh Plan's projected 2.3 million additional job creation in FY2015. What happened between 2013 and 2015-16 to slow down growth in employment to such low levels?  Is it because of the limited capacity of the economy to create enough jobs, let alone "decent jobs"?

Fourth, there has been no marked change in the structure of the labour force. While the relative importance of agriculture, forestry and fisheries, the dominant occupational category, has declined from over one-half in 2000 to about one-third of the total employed population in 2015-16, professionals, technical, administrative and managerial workers have registered a decline between 2013 and 2015-16. Likewise, there has been no marked change in the industrial structure of the employed population. Unlike the conventional wisdom that growth in the services sector will follow growth in agriculture and manufacturing, the employment structure in Bangladesh continues to become more service-sector-oriented, predominantly outside of the formal sector.

Fifth, there is a predominance of informality in the labour market. The increase in employment over time has largely been in the informal sector due to relatively limited number of jobs created in the formal sector. The informal sector accounted for 87 percent of all jobs in 2010 and it has remained unchanged in 2013 and 2015-16. The informal sector accounts for over two-fifths of GDP. The informal sector is considerably more dominant in rural areas, among females, and among the less educated. There are also informal workers (contractual and casual) in the formal sector, who get paid lower wages and do not have job security.

Sixth, vulnerable employment is pervasive. Between 2000 and 2015-16, the percentage of self-employed and unpaid family workers remained at around 58 percent. It is higher among females and in rural areas. Pervasive vulnerable employment is a major barrier to further reduction of poverty.

Seventh, skill level of the employed population remains at low levels, and has, indeed, worsened between 2013 and 2015-16. In 2013, one-fifth of the employed population had no schooling, which increased to about one-third in 2015-16. By contrast, those with higher secondary and tertiary level education declined from about one-fifth to only 11 percent. The relatively low skill level of the workers results in low labour productivity. The Seventh Plan has rightly noted that inadequate human capital will be a limiting factor towards the absorption of the projected 2 million plus workers each year.

Eighth, given the predominance of the informal sector, pervasive vulnerable employment, and low skill level of workers, the quality of jobs is extremely poor, especially among females and in rural areas.

Ninth, there is considerable underutilisation of the labour force and it is considerably higher in rural areas and among females. Furthermore, unemployment increases with level of education. The relatively high unemployment among the relatively more educated is due to limited absorptive capacity of the economy to utilise such a labour force, with adverse effects on the productive capacity of the economy.

Tenth, there are marked gender inequalities in the labour market in terms of labour force participation and employment.

Eleventh, there has been a decline in youth labour force since 2010. The proportion of employed youth in total employment has also declined. This decline is certainly due to lack of adequate job opportunities.

Given the need to address the above concerns, policies should include measures to: (i) raise overall productivity of the economy; (ii) address bottlenecks to increase investment, especially private investment, by improving the overall investment climate; (iii) attach greater focus on high-productivity manufacturing, especially export-oriented, and services sectors; (iv) make greater investments in human capital and ensure improved efficiency of the health and education sectors; (v) modernise and further expand the micro, small and medium enterprises (MSMEs); and (vi) improve the quality of jobs. These measures, if adequately implemented, will have positive effects on the overall employment situation in the country, and thereby, contribute to the growth of the economy.

The writer is Supernumerary Professor of Economics, University of Dhaka.