Reinvigorating The Workforce

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DESPITE THE COUNTRY’S TREMENDOUS GROWTH, WHY ARE BANGLADESH’S EMPLOYMENT FIGURES LAGGING?

Right after Bangladesh gained its independence in 1971, major investments were required to set up the RMG industry. It was hoped that this industry would bring some relief to the war-ravaged country. And since then the industry has done more than its share to add to the wealth of the nation. Fast forward to Fiscal Year (FY) 2014-15 and it accounted for 81% of the country’s export earnings and generated a revenue of $25.49 billion, in that period alone.

According to the Bangladesh Garments Manufacturer and Exports Association (BGMEA), there are at present 4328 garments factories who employ around 4 million workers. However, this employment number has started to stagnate in the last five years.

THE COUNTRY COULD ADD ONLY 14 LAC JOBS BETWEEN 2013 AND FY 2015-16, WHICH IS A STARK CONTRAST FROM THE 40 LAC JOBS THAT WERE ADDED BETWEEN 2010 AND 2013.

The table shows that the number of garment factories experienced a steady incline till 2012-13 where the number of factories stood at 5876. During FY of 2013-14, the numbers fell sharply to 4222. The Fiscal Years of 2014 onwards did see an upward trend in the number of factories, but the numbers have yet to reach that of 2013.
The employment numbers peaked in FY of 2011-12, reaching a record of 4 million workers. Nonetheless, this number has remained unchanged until the Fiscal Year of 2015-16. According to Zahirul Hussain, a leading economist of World Bank Bangladesh, the stagnant employment rates is the combination of structural and productivity changes.
This stalling of employment has been an anomaly that has many economists stumped.
‘A significant development in Bangladesh during the period was reformed to improve safety in the garment industry, the largest single employer in manufacturing, in the aftermath of two major industrial accidents. This led to the closing of many informal or quasi-formal garment factories with the consequent shedding of employment, Hussain said.’ (thedailystar.net, 2017).
Similar statements were made by Thomas Farole, the lead author of World Bank Jobs Diagnostic. He was quoted saying, “part of the answer is that productivity has increased which is by definition is we have more output without more workers then these workers are more productive. This is actually good news because higher productivity should lead to more competitiveness of Bangladeshi firms, which should lead to higher wages and more investment.”1
In fact, evidence suggests that recent entrants into the apparel industry are more capital intensive when compared to the older generation. Hence, while this adds to the competitiveness of the factories, it does little to add to the job rates in Bangladesh.
Bangladesh achieved a growth rate of 7.11% in 2016, and it’s expected that the economy will grow by 7.24% in 2017. This tremendous growth has still seen the employment levels lagging. The country could add only 14 lac jobs between 2013 and FY 2015-16, which is a stark contrast from the 40 lac jobs that were added between 2010 and 2013, according to Bangladesh Bureau of Statistics’ Labor Force Survey data.

The two figures show the recent trends of the number of RMG factories and the employment rate in Bangladesh over the last decade.
SOURCE: BGMEA

One possible explanation for this, according to ATM Nurul Amin (the Chairman of BRAC Universities Economics and Social Science Department) is that the benefits of economic growth are not reaching the masses through the trickle-down effect. Trickle-down economics, which was popularized in the 70’s, has long been labeled as obsolete. In a recent paper by IMF titled ‘Causes and Consequences of Income Inequality,’ data from 159 countries were studied between the periods of 1980-2012.
Researchers found that when the wealthiest 20% see their share of income rise by 1%, the economy grows 0.08% points slower over the next five years. When the poorest 20% increases their share of total income by 1%, the economy experiences 0.38% points faster growth. Translation: Bangladesh needs to update their tax structure to accommodate the poor in the community.
However, the country’s woes do not end with the industrial sector even though it is pigeon-holed as the main culprit. “Between 2013 and FY 2015-16, the industrial sector created only one lac additional jobs to take the total number of the employed in the sector to 1.22 crore.”2
The agriculture sector has been steadily losing jobs while the service industry has shown some promise in employment creation. The sector added 22 lac jobs which meant that a total of 2.2 crore workers were employed in the service sector. The problem with this was that most of these jobs were in the informal sector and thus, not considered to be productive.
The final possible reason for the languishing job rates is the weakening link between jobs and employment. According to Hossain Zillur Rahman, the Executive Chairman of Power and Participation Research Centre, this is a clear indication that the education system at present is unable to meet the market demands which raises doubts about the effectiveness of the ‘certificate-based education’ system.

EVEN THOUGH 4IR IS NOT AN IMMEDIATE THREAT, IT STILL RAISES THE QUESTION OF FINDING EMPLOYMENT FOR MILLIONS OF UNSKILLED WORKERS IN THE NEXT DECADE.

The movement towards automation can also be a significant threat to the employment levels in Bangladesh. Known as the ‘Fourth Industrial Revolution’ or 4IR, this development is focused on the digital revolution. Meaning, it is characterized by advancements in a number of fields, such as robotics, nanotechnology, artificial intelligence, biotechnology and so on. Even though 4IR is not an immediate threat, it still raises the question of finding employment for millions of unskilled workers in the next decade.
Nonetheless, Bangladesh is in dire need of diversifying its industries. This has attracted the attention of World Bank too, which has approved a $100 million financing to expand exports in labor and skills intensive industries. The credit from the World Bank’s International Development Association, which provides grants or zero-interest loans, has a 38-year term, including a six-year grace period, and a service charge of 0.75%.
The project is being focused on export-oriented industries such as leather, footwear, and light engineering and it is hoped that the cash influx will help create 90,000 jobs in these sectors.
“Bangladesh is the world’s second largest garments exporter after China, and it can boost growth by diversifying its exports, and repeat the garment sector’s success story in other sectors.” said Qimiao Fan, World Bank Country Director for Bangladesh, Bhutan, and Nepal.
This initiative is designed to help local firms gain access to foreign markets by enhancing their ability to comply with international trade standards. Efforts will be directed towards awareness building regarding marketing and branding efforts to create better linkages with existing and new markets. It will also focus on women skill development in the industrial sector as well as the infrastructure and technology sector.
“The project will enhance growth and competitiveness of selected sectors that have a demonstrated comparative advantage or that provide essential inputs in export-oriented manufacturing value chains,” said Michael Olavi Engman, World Bank Team Leader for the Export Competitiveness for Jobs Project. “The project will encourage training to improve skills and labor productivity, and thus help generate better-paid jobs. The average wage growth for firms benefitting from the project could rise by an estimated 34% by the end of the project.”
At a World Bank- ILO workshop on June 5th, 2017, it was suggested that Bangladesh should actively address the slowing pace of job creation. Moreover, a proper National Job Strategy needs to be put into place which would take measure to guarantee formal employment creation, raise the quality of employment and make it possible for vulnerable workers to find jobs.
“Addressing jobs requires policies that establish the macro and microeconomic frameworks to stimulate private sector investment, promote education and skills development, and support innovation, urbanization, and mobility,” said Rajashree Paralkar, Acting Country Director for Bangladesh, Bhutan, and Nepal of the World Bank. “We look forward to the development of a National Jobs Strategy – a comprehensive set of coordinated policy actions that are targeted explicitly toward addressing the jobs priorities.”
Generating quality jobs and eliminating gender disparity has been a test for our country. Only 1 in 5 workers are employed in wage work. Even more disappointing is that 1 in 3 working women, as opposed to 5% of working men, are engaged in unpaid work. International migration has been a way for many Bangladeshis to seek better-paying jobs in spite of costs and risks to worker safety.
Another panelist, Thomas Farole the lead author of the World Bank Jobs Diagnostic, said, “To deliver large-scale job creation, Bangladesh must accelerate productivity growth; diversify manufacturing and services sectors, with a focus on increasing exports and Foreign Direct Investment (FDI); and facilitate urbanization. Connecting vulnerable workers to jobs and reducing barriers to female labor force participation will also be critical for better job opportunities in the private sector.”
In conclusion, even though Bangladesh has been experiencing robust growth, conscious efforts must be made to increase the welfare of its citizens in the form of quality job availabilities, to include more of the female population in the workforce and to enhance the skill level of the workforce. Without these, we will be creating further disparity in an economy which already suffers from high income inequality.

1. bdnews24.com, 2017 2. thedailystar.net, 2017 

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