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How should we address our core labour market challenges?
In the recent decade, despite high economic growth, job creation has slowed down. This is especially in the manufacturing and services sectors, where it remains a big challenge due to increased automation. The high degree of informal employment in Bangladesh, where its share in total employment remains well above 85 percent, is an immense challenge to ensuring decent jobs.
The female labour force participation rate, over the past decade, has remained stagnant at around 35 percent. And despite the demographic dividend, the share of youth who are not in education, economic activities and training is high, and the youth unemployment rate is excessive. The labour market is characterised by a vicious cycle of low pay, low skill and low productivity.
Quality health and education services are essential for labour productivity, but Bangladesh falls behind other countries in providing universal access to these services, with extremely low public spending on health and education relative to GDP. Poor working conditions, high rates of rural-urban migration with a significant concentration of migrant labour in urban informal services sectors, skill mismatches in the labour market, and the outward migration of a sizeable proportion of low-skilled labour are other significant employment challenges.
Five sets of policies and strategies could address these labour market challenges.
First, the government should promote pro-employment policies that provide adequate jobs for an expanding workforce. Macroeconomic, sectoral and labour policies should be used together for resolving macroeconomic imbalances, targeting sectors that can sustain employment in the long run as well as benefit marginalised groups, and introducing labour market regulations that ensure human capital development and labour conditions that meet the ILO’s Decent Work Agenda.
Second, long-term investments in job creation should be promoted by creating an environment that supports a robust private sector. For this, the government should enhance legal and financial institutions. Infrastructure improvement and increased interconnectivity will cut business costs, while efforts to combat corruption may boost investor confidence. Efforts for the formalisation of business enterprises need to be backed up by policies that promote worker’s rights, private sector development, and social cohesion. Government should engage closely with banks to find ways to offer financial services to micro, small and medium-sized enterprises and informal businesses that cannot access financing as they are not registered.
Third, short-term training should be used to assist informal workers in developing market-relevant skills. Entrepreneurship, financial literacy and managerial skills could all be beneficial; however, realistic economic opportunities for micro-enterprises and self-employment must first be identified. Youth and women’s inequalities must be addressed. Unemployment among youth, particularly young women, is high. They should be assisted in upgrading their skill sets through high-quality technical and vocational education and training. Self-employment opportunities should be aided through entrepreneurial training and improved credit and savings access. Women’s rights in the workplace should be protected by law.
Skills training must satisfy the needs of today’s workforce, while also preparing for the challenges of tomorrow. Green jobs can be found in the construction of climate-resilient infrastructure as well as the manufacturing of environmentally conscious goods and services. Similarly, the same technology that makes certain low-skill jobs obsolete may also create new jobs that need further training and abilities. Policymakers must anticipate future trends and ensure that the country’s education and training systems are aligned with the needs of the future economy.
Next, strengthening labour market institutions and leveraging data for better job matching will be critical. There is no trade-off between worker protection and economic growth when it comes to labour market reforms, which should be managed through dialogue between employers, employees and the government, with the aim of safeguarding workers without sacrificing growth. Any efforts to loosen labour market restrictions should be complemented by actions to mitigate the negative consequences. Policymakers should be able to increase overall labour law enforcement and extend protections to the country’s huge informal businesses.
Reliable and timely labour market data is required for evidence-based policy. The government could explore setting up labour market information systems through comprehensive surveys of formal and informal employment, annual surveys of higher education graduates, and regular industry surveys of business needs. More efforts are also required to assist disadvantaged job-seekers.
Finally, Bangladesh should advocate for migration policies that provide possibilities for more skilled workers. Beyond the main destination countries, additional options should be explored for facilitated migration schemes. Improving the quality and accreditation of education will enable migrants to take advantage of their skills while working abroad. A basic legal framework should be defined to broaden the scope of migration programmes. This system should make visas, seasonal jobs and qualification recognition easier. In the long run, Bangladesh can benefit from migration not only through remittances, but through transfers of skills and knowledge, and networks that can lead to entrepreneurship and new markets.
Dr Selim Raihan
is Professor, Department of Economics, University of Dhaka, Bangladesh, and Executive Director, South Asian Network on Economic Modeling (SANEM). Email: selim.raihan@gmail.com