labor markets and employment challenges in bangladesh in ... · labor markets and employment...

Labor Markets and Employment Challenges in Bangladesh in the

Context of SDGsSelim Raihan

Professor, Department of Economics, University of Dhaka, Bangladesh, and Executive Director, SANEM

Presented at the 60th Annual Indian Society of Labour Economics Conference 19‐21 December 2018, IGIDR, Mumbai, India

What are the challenges?

1. Job creation (Quantity) 2. Decent job (Quality)3. Economic growth, FDI and diversification4. Female labor force participation5. Youth employment6. Productivity

Slow job creation in recent years

•Between 2013 and 2016‐17: • Average annual GDP growth was 6.6%, but average annual jobs growth was 0.9%•Manufacturing jobs declined by 0.77 million • Female manufacturing jobs declined by 0.92 million

Industry’s employment share declined in recent years!

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2000 2005 2010 2013 2016‐17Agriculture 51.3 48.1 47.5 45.1 40.6Industry 13.1 14.6 17.2 20.8 20.4

Manufacturing 9.5 11 12.4 16.4 14.4

Service 35.6 37.3 35.3 34.1 39Total 100 100 100 100 100

Data source: BBS

Share of broad economic sectors in total employment (%)

Declining employment elasticity

Sectors 1995‐2000 2000‐2005 2005‐2010 2010‐2018

Agriculture 0.73 0.82 0.71 ‐0.09

Manufacturing 0.26 0.78 0.87 0.65

Construction 0.27 0.63 2.22 0.55

Services 0.21 0.69 0.27 0.40

Total 0.54 0.59 0.55 0.25

Data source: BBS and SANEM

2010 2018

Share of Informal

employment

Data source: LFS and SANEM

2010 2018

Wage employment

Self employment

Share of decent job

Source: Raihan and Uddin (2018) and SANEM

Real GDP growth rate in Bangladesh

Source: World Bank, World Development Indicator10

GDP growth rate and volatility

Source: Raihan (2018)11

GDP growth rate and volatility

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Bangladesh’s real GDP growth rate over the past 10 years (2007‐2016) was also one of the least volatile

growth rates among the 30 countries in the world to have registered an annual average GDP growth rate of 6 percent or more during that period.

Source: Raihan (2018)

How did Bangladesh grow?

PC GDP in 1985 (US$)

PC GDP in 2017 (US$)

2017 over 1985

Bangladesh $239 = 1.00 $1517 = 1.00 6.35

China $294 = 1.23 $8827 = 5.82 30

India $293 = 1.23 $1940 = 1.28 6.62

Vietnam $231 = 0.97 $2343 = 1.55 10.14Source: Raihan (2018)Data Source: World Bank, WDI

Investment‐GDP ratio in Bangladesh

Source: World Bank, World Development Indicator14

Source: World Bank, World Development Indicator

Investment‐GDP ratio in Bangladesh

Even under the very optimistic scenario (ICOR = 4.2), between

2017‐18 and 2029‐30, to achieve 9% GDP growth rate, investment‐GDP ratio has to be

increased annually by 0.7 percentage points which is 1.75 times higher than the current (2013‐2017) annual percentage

points rise (0.4).

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Poor FDI orientation!

1983‐1987 2012‐2016Bangladesh 0.01China 0.55 2.42India 0.04 1.71Lao PDR 0.33 5.90Vietnam 0.01

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FDI as % of GDP

Poor FDI orientation!

1983‐1987 2012‐2016Bangladesh 0.01 1.37China 0.55 2.42India 0.04 1.71Lao PDR 0.33 5.90Vietnam 0.01 5.55

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FDI as % of GDP

How was Bangladesh’s export growth?

Source: Raihan (2018)Data Source: World Bank, WDI



1986 2017BGD 1.1VTM 1.7

Exports in billion US$



1986 2017BGD 1.1 37.5VTM 1.7 227.3




1986 2016BGD 1.1 36.8VTM 1.7 192.1


IMF’ Overall index of export diversification. Measured by Theil lndex

Trend in female LFP

• Labour force participation rate of female increased.

• However, despite some progress, labour force participation rate of female is stagnant around 33%‐36% during 2010 and 2016‐17.

• Females’ participation rate is much lower than that of males.

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Data: LFS, BBS

Supply side factors affecting female labour force participation

• We estimate standard supply function using probit model while categorizing the potential determinants of female labour force participation (FLFP) into certain broad categories:• Individual factors• Household factors• Gender norm variables

• Geographical variables

• The data source is the QLFS of 2016‐17.

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Demand side factors affecting firms’ demand for female labour: Role of innovation and technology

• We use firm‐level data from the World Bank’s Enterprise Survey of 2007 and 2013.

• The survey questionnaire focuses on questions reflecting the business and investment environment of a country.

• The number of firms surveyed was 1230 in 2007 and 1442 in 2013.

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Sector‐wise average percentage share of female workers in 2007 and 2013

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Female employment intensity declined in major manufacturing and services sectors.

Data: World Bank

Female employment intensity of firms surveyed in 2007 and 2013

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The percent shares of female employment intensive firms declined.

The overall female employment intensity also declined from an average of 20.35% in 2007 to 17.67% in 2013.

Data: World Bank

2SLS econometric estimates

• In the questionnaire of 2013 World Bank’s Enterprise Survey, there was a specific section on the ‘innovation’ of firms. There were nine questions related to innovation.

• 2SLS estimates show that out of the nine innovation variables, six turn out to be statistically significant with negative sign, suggesting the negative impact of innovation on firms’ female employment intensity.

• Innovation appears to have differential impacts on female and male labour.

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Youth employment challenges

Between 2013 and 2016‐17: • Share of youth NEET increased from 25.4% to 29.8%• 87% of the NEET youth are female• Youth unemployment rate increased from 8.1% to 10.6%

Youth NEET

Where do we stand in terms of good health and well‐being?

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Data Source: World Bank, WDI

Where do we stand in terms of quality education?

Bangladesh India Pakistan Sri Lanka Malaysia Thailand Vietnam

Public Expenditure on Education (as % of GDP)

2.1 3.7 2.4 1.8 5.4 4.3 5.3

Average Years of Schooling 5.1 5.8 4.9 10.9 10.1 7.7 7.8Trained teachers in primary education (% of total teachers)

52.7 77.2 83.7 79.1 97.2 100 10034

Data Source: World Bank, WDI

How do education and skill development affect the transition from ‘good‐enough’ job to ‘decent’ job?• LFS 2010 data is used. To see the impacts of education and training on the quality of job we use multinomial logistic regression involving three categories of job with good‐enough job as the base category.

• Primary education is found to be insignificant in changing the quality of job.

• Persons with secondary and higher secondary education have almost 20 percentage points higher probability to be in a decent job compared to persons with no‐education

• Being educated in a university increases the probability to be in a good job by 18 percentage points.

• Being educated in a university increases the probability to be in a decent job by 26 percentage points compared to the persons with no‐education.

Turning challenges into opportunities

1. Policy‐induced challenges• Economic diversification: ‘Meaningful’ structural transformations of the economy

• Promotion of labor‐intensive sectors

2. Supply‐side constraints in the form of weak infrastructure and the high cost of doing business. • Quick and effective implementation of SEZs

3. Emphasis on human capital4. Institutional development

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