Labour market in a low gear

Bangladesh has delivered decent economic growth relative to the rest of the globe braving the coronavirus pandemic, supply chain disruptions, successive wars and macroeconomic stress. However, labour market recovery since the pandemic has been anemic. There are lingering concerns about growth lacking the shine of good jobs.

Last week, the Bangladesh Bureau of Statistics published data on some key labour market indicators in 2023. These suggest meagre job growth in labour markets. Sluggish job creation came with a noteworthy structural change: employment outside agriculture rose more than employment in agriculture fell.

The size of the working-age population increased by 1.26 million, equivalent to 1.1 percent of the working-age population at the beginning of the year. Including the 1.2 million workers who migrated abroad raises the growth rate of the working age population to about 2.1 percent in 2023.

Marginally better labour allocation

How did we utilise the increments to the working-age population? Nearly half of them went abroad. The other half comprises the labour force (LF) and the not in labour force (NLF) categories.

The LF increased by 0.55 million. The remaining 0.71 million went into the NLF category. The economy created 0.54 million additional jobs, about 0.01 million lower than the increase in the size of the LF. Yet the number of unemployed declined as the unemployed exited the labour force.

Services and industry, respectively, created 0.7 million and 0.3 million jobs while agriculture shed 0.46 million. The sum of the increase in the number employed by the sector exceeds by 3 lakh the total increase in the number reported employed, a statistical discrepancy the BBS must pay attention to.

Job creation in services is likely to have benefited from the expansion of the gig economy, including the participation of Bangladeshi workers in the global online market for labour services. Bangladesh has the second highest presence in this market next to India.

The creation of 3 million jobs in industry where investment and capacity utilisation is severely constrained by energy and foreign exchange shortages looks remarkable. Yet, the 2.5 percent industrial employment growth is certainly weak relative to the 11 percent increase in the index of all manufacturing enterprises in September 2023 relative to September 2022, as reported by the Bangladesh Bank.

Job losses in agriculture probably reflect overseas migration of severely underemployed agricultural labour and perhaps some labour displacing mechanisation. The number of employed does not in itself measure gainful employment. Agriculture still employs a disproportionately large share of employment relative to its share in GDP, indicating low labour productivity.

Large and increasing slack

A supposedly significant fraction of the employed in agriculture and informal services work fewer days in a year and fewer hours in a day than they prefer. Low-earning families on farms and family enterprises give everyone something to do even though they add little value. These are the vast number of the hard-to-measure underemployed.

Changes in the size of the NLF population reflect the dynamics of labour utilisation better than the number unemployed. As many as 9.6 million out of 26.8 million youth in the labour force were not in employment, education or training in 2022. This number, not available for 2023, has surely grown. Educated youths queuing for premium jobs in the public and private sectors, skills mismatch, between jobs transition, and discouraged workers most likely explain why this category is so large (equivalent to 39 percent of the working-age population and 64 percent of the labour force) and increasing at a rate (about 1.9 percent) higher than the (1.1 percent) growth of the population potentially available for work in the domestic labour market.

Such a large and growing slack in the labour market underpins the decline in real wages in all sectors in 2023. The bargaining power is buried in such large numbers. Notwithstanding a record migration overseas, domestic labour supply growth exceeded growth in labour demand. When production is constrained by macroeconomic imbalances, as experienced from day one in 2023, the demand for labour runs out of oxygen.

Regression on gender parity

Female participation in the labour force declined. The number of females in the labour force and the number of employed females decreased by 0.41 million and 0.35 million, respectively, in 2023 relative to 2022.

Female presence in the NLF increased by 0.11 million. Females constituted two-thirds of youth not in employment, education or training in 2022.

The dynamics for males were exactly the opposite. The number of men employed increased 0.86 million, their number in the labour force increased 0.91 million and male NLF decreased 0.28 million. The 0.56 million increase in the number of males employed came predominantly from increases in working-age males. Males' transit to employment more easily than females as they enter working age.

The author is an economist