Employment Market in Bangladesh

 Introduction Economic growth, employment and wages are three fundamental factors that helped reducing poverty in Bangladesh. Government policy directed towards economic growth, creation of employment and improving wages play a crucial role in reducing poverty. Among these policies, government expenditures on education, health, infrastructure, and agricultural development have been most instrumental. Poverty reduction considerations may also lead the government to provide “private goods”- those which are disproportionately consumed by the poor – through transferring resources to a targeted group of people who are unable to make provisions by themselves due to market failure. Theoretically, a market-based economy can distribute income in a socially unacceptable ways, and in these cases the government often feels obligated to protect the poorest vulnerable segment of the society through interventions. Food and housing services are some of the main antipoverty program. But none or very few society has managed to reduce poverty through direct welfare transfers alone. Education and health expenditures which help reduce human poverty and increases employability and productivity are indirect but more sustained way of reducing poverty. Government spending is also needed to provide an enabling environment for the private sector. Much of the impact of public expenditure can be viewed as establishing infrastructure for economic growth in the broadest sense – social infrastructure like education and health and physical infrastructure like roads and highways, energy and power, and fertilizer. For the market to operate smoothly to create growth these infrastructures are needed and yet in most of the cases it is beyond the capacity of the private sector to provide for these. Hence, it is usually the government who provides for these infrastructures – here lies the crucial link between public expenditure and poverty reduction.

Growth and composition of labor force in Bangladesh

 Growth and composition of the labor force are the key links between economic growth and poverty making the major tool for poverty reduction in Bangladesh. Poverty reduction strategy would be sustainable if it is consistent with a well-articulated employment strategy that creates productive and decent employment opportunities so that workers of every level of skill, education, and training can get remunerative employment. Recent Development in the Labor Market A steady rise in GDP growth during the last five years i.e. 2003-2007 when it grew at an average annual rate of more than 6 percent compared with 5 percent over the previous five years. Higher growth, together with a fall in population growth to less than 1.5 percent in recent years, led to a rapid growth in per capita GDP. Higher economic growth, employment grew at a relatively slow rate of 1.6 percent per annum. At the aggregate level, agriculture is still the largest sector of employment providing jobs to 22.8 million compared with 6.9 million in the industry and 17.7 million in the service sector in 2006. Labor force growing faster than the employment potential, the number of unemployed persons 2 increased over time reaching 2.1 million in 2006. Although the „standard‟ unemployment rate is low at 4.2 percent in 2006. It does not provide a real picture of the supply-demand balance including the degree of inefficiency that prevails in the labor market. For instance, the underemployment rate, calculated on the basis of a number of hours worked per week, is high at 24.5% in 2006. At the aggregate level, several characteristics highlight the changes in the labor market between 2006 and 2006.

Source: Bangladesh Bureau of Statistics: Labor Force Survey 2005-06

 Labor force participation rate:

The labor force participation rate increased from 54.9% in 2000 to 58.5% in 2006. Gender difference in the participation rate. The female participation rate rose faster during the period from 23.9% to 29.2%, than that of the male participation rate from 84.0% to 86.8% Total labor force grew by 8.8 million during the period from 40.7 million in 2000 to 49.5 million in 2006. Average of nearly 1.5 million new entrants per year. Of the total new entrants, 3.5 million (rising from 8.6 million to 12.1 million) were females and 5.2 million (rising from 32.2 million to 37.4 million) were males. During the period, the rural labor force grew by 6.3 million (from 31.5 million to 37.8 million) of which 2.9 million were females (rising from 6.4 million to 9.3 million). The Urban labor force grew by 2.5 million (from 9.2 million to 11.7 million of which 0.6 million (rising from 2.2 million to 2.8 million) were females. The total Employed labor force increased by 8.4 million (from 39.0 million to 47.4 million of which 3.4 million (rising from 7.9 million to 11.3 million) were females and 5.0 million (rising 31.1 million to 36.1 million) were males. Rural employed labor force grew by 5.8 million (from 30.3 million to 36.1 million) of which 2.7 million (rising from 5.9 million to 8.6 million) were females; while urban employed labor grew by 2.6 million (from 8.7million to 11.3 million) of which 0.7 million were females.

Unemployed labor force:

The overall unemployment rate declined marginally from 4.3 percent in FY00 to 4.2 percent in FY06; the male unemployment rate remained unchanged at 3.4 percent while that for females declined from 7.8 percent to 7.0 percent. The underemployment rate, however, increased sharply from 16.6 percent to 24.5 percent. The male underemployment rate was 10.9 percent in 2006; while the underemployment rate for females was staggering at 68.3 percent.

Employment by sector:

In terms of sector of employment, agriculture provided employment to 22.8 million (48 percent), industry to 6.9 million (15 percent), and services sector to 17.7 million (37 percent) in 2006. This may be seen in the backdrop of the shares of the contribution of these sectors to 3 GDP in the same year, which were 22 percent for agriculture, 29 percent for industry, and 49 percent for the services sector.

Formal and informal sector employment:

Of the total employed labor, 10.2 million (22 percent) were employed in the formal sector while the remaining 78 percent were employed in the informal sector. Over the six-year period between 2000 and 2006, only 0.6 million new jobs were created in the formal sector. The share of females in the formal sector employment is low at around 16 percent. Of the total female employed labor, only 14 percent are employed in the formal sector compared with a similar share of nearly 24 percent for male labor.

Employment status:

 In terms of status in employment, self-employed workers form the largest category providing jobs to 42 percent of the total employed labor force in 2006 followed by 22 percent by unpaid family helpers, 18 percent by day laborers, 14 percent of employees, and 4 percent by the employer and other categories. Of the reported 8.4 million new jobs, unpaid family helper category contributed more than two-thirds of the new jobs while self-employed labor contributed another 20 percent during 2000-2006. The number of employers did not change while the contribution of employees to total additional job creation was only 1 percent. Female workers are especially disadvantaged in terms of quality of employment. Of the 10.3 million laborers who are employed as unpaid family workers, 6.8 million (66 percent) were female workers in 2006. This also shows that, of the 11.3 million female labor employed in 2006, 60 percent work as unpaid family workers while the similar share for male employed labor is less than 10 percent.

 Key Issues in the Labor Market:

In a „labor surplus‟ economy such as Bangladesh, the developments in the labor market are crucial to bringing about desirable changes in growth possibilities and meeting poverty reduction and other social goals. For ensuring such a process of growth, public policies and investments need to ensure more equitable income and asset distribution and economic growth needs to be inclusive such that it generates more income and employment for the poor. In particular, a key challenge is to expand decent employment opportunities through both wage and self-employment to absorb the growing labor force. For this, an important agenda is to address some key issues in the country’s labor market and adopt a consolidated and gender-sensitive strategy toward developing the labor market with the capacity of sustaining the rapid growth of productivity-enhancing employment in the economy.

Educational status of labor force:

The level of productivity and earnings and, hence the access to remunerative employment, of an individual is positively related to his/her level of education. With a significant increase in 4 enrollment rates in Bangladesh, the educational profile of the labor force has somewhat improved over the years creating a better potential for skill development. The available information on the level of education of the youth labor force shows that the share of the labor force with no education significantly declined since the 1980s (42 percent in 2003 compared with 62 percent in 1984) while the proportion of the labor force with basic schooling (grades 1-5) and secondary education (grades 6-10) increased: from 18 percent to 19 percent having primary education and from 12 percent to 25 percent with secondary education. The proportion of the labor force with no education, however, remains particularly high amongst rural and female workers. During 2003, 47 percent of the female workers had no education compared with 40 percent of the male labor. Moreover, only 5 percent of the employed labor was engaged in a professional and technical occupation in 2006. This shows the urgent need to give due importance, along with better access to education, to technical and vocational training for the labor force to increase productivity and ensure wider diffusion of better technologies.

Underemployment issues:

Conceptually, the notion of underemployment is related to a situation when a person’s employment is inadequate in terms of hours of work, income earnings, productivity and use of skills, and the person is looking for better or additional work in conformity with his/her education and skills. In practice, the measurement of underemployment faces a number of difficulties and the adopted methodology in Bangladesh is to estimate underemployment on the basis of hours worked alone. The adopted norm is to treat those who work less than 35 hours during the reference week of the survey as underemployed.

Youth unemployment:

 Youth employment has a special significance in Bangladesh since the nature and extent of employment of the youth is an important indicator of the additional employment generating a capacity of the economy. Alternatively, the extent of unemployment of youth labor indicates the failure of the growth process to create enough jobs for the new entrants to the labor force and, consequently, the loss of potential income and welfare.

Gender inequality:

A close view on some major indicators shows the existence of high gender difference in economically active population in Bangladesh. Out of a total labor force of 40.7 million in 2000, females constituted only 8.6 million (21 per cent) which rose to 12.1 million (24 percent) of a total labor force of 49.5 million in 2006. The share of female employed labor in total employed labor is very similar (20 percent and 24 percent for the two years respectively). This shows that 29.4 million out of 35.1 million persons (84 percent) who are not in the labor force are women. The figures also show that the sectoral pattern of employment of female workers is somewhat more diversified. Around 68 percent of the 5 female workers are employed in agriculture, forestry and fisheries sectors compared with 42 percent for the male workers

Employment Outlook:

The total number of employed labor was 47.4 million in 2006. Since no data on recent employment situation are available, this section provides estimated employment in FY07 and FY08 and projected employment in FY09 using sectorial employment coefficients. The employment coefficients of different sub-sectors in agriculture are still high relative to other sectors despite the adoption of modern and, in some cases, labor-saving technologies in different agricultural operations. The estimated employment coefficients show that in FY06, 36 jobs were created per million Taka of value addition in agriculture compared with 8 in industry and 12 in the services sector. Obviously, the employment coefficients differ among various sub-sectors showing the potential of increasing employment through a careful selection of sub-sectorial activities and production technologies.

Public Policy and Employment:

The participation of people at all levels and from all social, cultural and economic backgrounds is imperative for reducing poverty and hunger. However, peoples' participation cannot be restricted to implementing government or donor-led programmers. Instead, the people must have sufficient voice and power in shaping the country's development model and in deciding how the resources of the country will be used. Such crucial decisions must not remain the preserve of any select or elite group. Poverty and hunger cannot be eliminated without the democratization of policymaking. Public–private partnerships for transforming growing sub-sectors into creators of quality jobs through diversification and moving toward higher value-added products. Government policies in Bangladesh have traditionally emphasized the development of the rural economy as a means to alleviate poverty and contain the impact of natural calamities. In the 1970s the emphasis was on direct market interventions and large capital spending on flood control, irrigation and drainage projects. In the 1980s, most public expenditures focused on broad agricultural development, with relatively low emphasis on rural infrastructure. In the 1990s the development of physical infrastructures–including roads, bridges, culverts, and marketplaces–was singled out as the major element of the new rural development strategy which explains the dramatic rise in the priority of rural development sector in annual development (ADP) expenditure. The small and medium enterprises (SMEs) constitute an essential feature of growth-oriented sub-sectors with prospects of generating employment opportunities in formal and informal sectors through creating a new class of entrepreneurs. Flourishing of SMEs requires the creation of supportive policy and regulatory environments including easy access to the credit market. Implementation of policies, measures, and programs aimed at improving productivity and earnings in the informal economy. Greater importance to human capital covering higher education, core competencies, more relevant technical skills, health and nutrition, and similar other measures to match domestic as well as the global demand of the labor market. 6 Effective social dialogue as the cornerstone of creating facilitating work environment and ensure full participation of workers in creating and sharing the value in a growth-oriented economy. Local production and marketing system comprising numerous small entities facilitated through supportive mechanisms. Encouragements to growth of selected subsectors that can help improve job quality and generate employment not only in enterprises but also in the supply chain. Proper attention needs to be given to various social safety net programs for providing employment and other benefits especially to socially and physically vulnerable population by increasing their coverage and allocations. Looking for new destinations and new professions for the youth educated labor to meet the international labor market demand where necessary steps need to taken to beep up technical education for the youth population to match the international demand.

Conclusion:

In Bangladesh, labor force participation is growing at a faster pace than the current employment generating capacity of the economy making it difficult for the country to absorb the incremental labor force in productive and remunerative employment. As such, the country needs higher and more employment-intensive economic growth for which adoption of several complementary approaches could be useful, such as giving priority to more employment-friendly growth policies, widening micro-credit based and targeted employment generating programs and special schemes for new job creation especially in rural areas, and increasingly tapping overseas employment opportunities focusing on skill-intensive jobs in the global market. Employment opportunities in Bangladesh require measures along several directions, such as expanding both wage and self-employment, increasing productivity of and returns to employment, and ensuring a better term of exchange of the outputs of self-employed activities. In addition, there is a need for public action to improve the quality and capability of the labor force through acquiring education and market-relevant skills and providing better terms and conditions of employment to increase incomes and enhance the safety of the workforce. In this context, public action does not mean state action only. It includes not merely what is done for the public by the state, but also encompasses the role of NGOs and other social, political, and humanitarian institutions. While it is true that the need for state action partly arises from the failure of the market to provide required protection and promotion by generating adequate employment opportunities in the economy, it does not follow that state action for ensuring economic security must dispense altogether with reliance on the market. Insofar as the market mechanism contributes to economic expansion, provides effective means of matching supplies with demands, and yields widespread entitlement generation (through employment creation), it can be a significant ally in providing economic security through public action. Under the existing situation in Bangladesh, the need is for integration, that is, there should not be over-reliance on as well as neglect of markets in promoting the country’s employment generation and poverty reduction agendas.