Reducing unemployment through the private sector

Illustration: TBS

"Quota or merit? Merit, merit!" It was the first slogan of the July Uprising, back when it was still a quota reform movement. At the heart of the movement that toppled the 15-year-long autocratic regime was a fairer shot at getting a decent government job. 

Why government jobs? Because it is the most secure and the most prestigious way for a better life and a better chance at upward social mobility. In a country where being a highly educated person means a greater chance of a student's unemployment, it is hardly desirable. Yet, it is due to the lack of employment generation by the private sector. 

The latest Labour Force Survey by the Bangladesh Bureau of Statistics (BBS) shows that unemployment is rising in the country.  Ensuring jobs for the country's educated youth cannot rest on the government alone. With the private sector stagnant for years, the question looms large: what must be done to create meaningful opportunities for this generation?

The unemployment crisis in Bangladesh 

The number of unemployed in Bangladesh has increased by 1.7 lakh within a year, as the number of people engaged in work or participating in the labour force has decreased. 

The survey found 27 lakh unemployed people in the country at the end of September, compared to 25 lakh during the same period in 2023. The number of unemployed increased by 20,000 over the last three months.

A World Bank report revealed a decline in labour force participation, from 61.2% in 2022 to 59.9% in the first half of 2024. Employment also dropped by 1.2% in 2024, while the unemployment rate remained stagnant at around 3.5%.

According to the Labour Force Survey 2023 by the Bangladesh Bureau of Statistics (BBS), 7.2% of 2 crore 67 lakh youth labour force are unemployed. 78.9% of the total unemployed population are youths, aged 15-29 years.

31.5% of unemployed youths have completed university education, 21.3% secondary education and 14.9% higher secondary education.

Is political instability fueling unemployment in the short run?

Bangladesh is yet to stabilise after the July Uprising. Such unrest disrupts economic activities and dampens investor confidence. Businesses have not got back on track, the people are still uncertain about the economic outlook. 

According to the International Labour Organisation (ILO), declining investment and reduced private-sector credit flows have slowed job creation across key sectors, including agriculture, services, and industry. Furthermore, austerity measures and delays in public sector recruitment have left many qualified candidates in limbo.

Dr Syed Akhtar Mahmood, economist and former lead private sector specialist at the World Bank Group, explained how the current political uncertainty is hampering job creation.

"Political uncertainty can affect employment in at least three ways. First, it can reduce economic activities. For example, there may be contractions in manufacturing activity. This, in turn, will have spillover effects on other sectors, such as the distribution and marketing of the manufactured products," he said.

Political uncertainty also discourages investment, which may affect employment in the future. 

Finally, in times of political uncertainty, the government sometimes loses its focus and economic policymaking suffers.

He remarked, "All this may lead to job losses, especially those with weak job security. Some people may not become fully unemployed, but their hours worked may be reduced, or their wages may go down."

"The investment climate needs to be improved to increase private investment. To translate that investment into jobs, we need to expand the supply of skills. People acquire skills through education and employment."

Dr Syed Akhtar Mahmood

Why is the private sector lagging?

While the private sector is vital to Bangladesh's economy, it struggles to create sufficient employment opportunities for the growing youth population. Several factors contribute to this shortfall. The economy remains heavily reliant on the ready-made garments (RMG) sector, while other industries lag in growth.

Automation and technological advancements in manufacturing have further reduced the demand for low-skilled labour.

Dr Akhtar Mahmood pointed out, "In many sectors, such as garments, investors are opting for more capital-intensive or automated technologies. They may be doing this to become more competitive, but it also means that where investment and output are increasing, we are not necessarily seeing a proportionate increase in jobs. The phenomenon of jobless growth is now very real."

Small and medium enterprises (SMEs) face barriers to obtaining affordable credit, limiting their capacity to expand and absorb more workers. Also, the lack of foreign investment has been a constant issue.

Dr Akhtar Mahmood said, "Our private investment/GDP ratio has hovered between 20-25% over the past few decades. The reasons for this have been much discussed. Investment climate deficiencies are widespread – these include regulatory hassles and uncertainty, issues with tax administration, infrastructural deficiencies, energy shortages and poor access to credit."

"In recent years, foreign exchange shortages have added another dimension. All these factors are discouraging investment," he added.

The overall labour force participation rate dropped from 61.2% in 2022 to 59.9% in 2024. This disengagement reflects both structural weaknesses in the economy and disillusionment among youth regarding meaningful employment opportunities.

How to increase jobs in the private sector 

With increased time, enhanced facilities, and robust government support—through effective policies and a conducive ecosystem—the private sector has the potential to significantly boost innovation. This, in turn, can drive the country's export ambitions while meeting growing domestic demand. Moreover, as the private sector thrives, it will generate a ripple effect, creating more employment opportunities across its value chain.

Dr Akhtar Mahmood said, "The investment climate needs to be improved to increase private investment. I have mentioned the factors above. To translate that investment into jobs, we need to expand the supply of skills. People acquire skills through education and employment."

Better collaboration will help ensure that colleges and universities will produce graduates with the right skills that industry and other businesses need.

Dr Mahmood said, "Of course, businesses can teach skills to people on the job, but they must have the minimum skills (including soft skills) to be employed in the first place."

He recommended, "I think it is important the government carefully monitors whether job losses are happening due to political uncertainty or other reasons, and if so to what extent. It should then think of ways to address this issue."

Fahim Mashroor thinks that publishing accurate data by regularly releasing detailed information on educated unemployment, categorised by subject and institution, and providing sector-specific forecasting with a demand forecast for labour markets in specific sectors for the next five years will guide higher education institutions accordingly.

"Make vocational training mandatory in all 2,200 colleges under the National University, allowing colleges that lack resources to partner with private technical institutes. Provide financial incentives such as subsidies for training and covering 50% of the first-year salary for companies hiring fresh graduates, or offer tax credits," he added.

The UGC should publish data on employment and higher education rates for each university annually, verified by third parties, encouraging universities to focus on ensuring graduate employment.

Fahim Mashroor also emphasises establishing foreign language centres in universities offering training in languages besides English, with free programs for enrolled students and fee-based options for outsiders.

Another complicating factor is the informal economy, which absorbs many individuals excluded from formal statistics. While the informal sector offers temporary relief for unemployed youth, it lacks stability, benefits, and career progression.

"Recognise freelancing and gig economy initiatives as MSME businesses, ensuring they receive the same government benefits, including affordable bank loans," he proposed.