Labour and Employment Commission needed to overcome Covid-19’s impacts on jobs

Employment generation has been a problem in Bangladesh for the past decade. Despite high economic growth, the pace of employment generation was low throughout the 2010s and has been declining.

If we look at the sectoral allocation of labour, employment in agriculture declined over time but still remained high. Manufacturing employment grew with the expansion of the ready-made garments industry in the past; but in recent years, it has been on a declining trend. While services sector jobs increased, they remained mostly informal and low-paid.

Overall, there is a high degree of informality in the labour market. Furthermore, working conditions and a lack of decent jobs are important challenges in the labour market in Bangladesh. Over the years, we have seen growing rural-urban migration and international migration – which have been important contributors to poverty reduction and growth in Bangladesh.

Covid-19 has put additional pressure on the labour market in Bangladesh. Due to the shutdown or slowdown of economic activities, many have lost their jobs. Many have also shifted to inferior jobs.

The major hit on employment is in the urban area. In the rural area, the crop sector has not been badly affected, but non-crop agriculture and non-farm sectors are badly hit. All these are resulting in a rise in poverty, inequality and reverse migration from urban to rural areas. The reverse migration will place additional pressure on the rural labour market.

As non-crop and nonfarm economic activities and related employment opportunities are limited in the rural areas, unless major economic reforms take place in the rural areas – in terms of infrastructure and financing support – many of these returnees will not be in a position to do something productive in the rural areas. The situation may worsen with the likely influx of returning migrants from overseas.

In the short to mid-term, the future looks bleak. The depressing effects on employment and wages may continue. Many self-employed in the micro-small and medium enterprises lost their capital – which might never be recovered.

Also, wage employment is suffering as economic activities are suppressed. Therefore, the revival of economic activities is extremely critical to counter this adverse situation. People are mostly trying to cope with the situation on their own. However, the adjustment cost appears to be high, even at the household level – including the way households allocate resources for food and essential non-food items like education and health.

The government's policy response related to current labour market challenges has been weak and inadequate. One major challenge is the lack of information and lack of up-to-date data on the labour market. These jobless people are not included in most of the social safety net programmes.

Further, the existing social safety net programmes are unable to address these growing challenges. It is also true that the fiscal space of the government is not conducive for expanding social safety net programmes. However, under the current crisis, the government should go for an enlarged deficit budget to spend more on social safety net programmes in general, and labour market-related programmes in particular.

If we look at the management of the Covid-19 crisis in Bangladesh, it primarily involves three aspects, the: management of health hazards, management of the economic crisis, and management of the social crisis – including poverty and job-losses.

From the very beginning, we have been observing major institutional challenges to all these three aspects. The three crises have exposed: a lack of coordination in crisis management – for example failures in lockdown measures, corruption, clientelism, problems in targeting, problems with priorities, and weak state capacity. There is a need for major improvement in these areas.

Finally, in order to counter the employment challenges of Covid-19, I suggest the following three steps: first, the government should form a Labour and Employment Commission that assesses the current unprecedented situation and suggests necessary measures. The BBS should be entrusted to collect data and information about the current situation.

Second, new social safety net programmes should be introduced, targeting the labour market. In this context, the employment guarantee scheme for the next six months for vulnerable people should seriously be considered.

Last, economic activities must be revived – this is closely linked to the management of the on-going health and economic crisis. Solving the institutional challenges in the health sector and implementation of the stimulus packages should be prioritised.

The author is a professor of economics at University of Dhaka, and the Executive Director at South Asian Network on Economic Modeling (Sanem). He can be reached at selim.raihan@gmail.com