Youth unemployment and labour market mismatch in Bangladesh

Despite having impressive performance in a number of socio-economic indicators, Bangladesh is faced with challenges of providing decent employment to its labour force. The country stands at a critical demographic juncture, with its large youth workforce holding significant potential for accelerated growth and structural transformation.

Though the country is going through such a demographic transition with the youth (15-29 years old) constituting as high as 34.62% of our labour force, in terms of skill formation and employment generation the progress is not that optimistic. From the supply side, every year on top of the existing unemployed population as high as roughly 1.4 million people enter the labour market.

However, the rate of unemployment among the youth is found to be much higher than the national average reflecting challenges in utilizing their potential (Labour Force Survey LFS 2024). In addition, for many educated youth, the transition from education to employment has become increasingly uncertain. The labour market is failing to provide sufficient, decent, and suitable jobs, leaving years of schooling and rising aspirations unmet. 

While the national unemployment rate, reflecting the overall employment situation of the country, stood at 3.66% in 2024, among those aged 15–29, rate of unemployment exceeds 8 percent. Educated youth face even harsher realities: unemployment among tertiary graduates is found to be 13.5% with as high as 20% for women (LFS 2024). This inversion, where higher education coincides with higher joblessness, signals a profound mismatch between the education system and the demand side of the labour market.

A crucial challenge of the youth is the fact that as high as 8.5 million youths are not in employment, education, or training where the situation is especially critical for young women, who make up nearly two-thirds of NEET youth. Photo: Collected

In addition, if we look at the sectoral employment patterns, we observe that, despite contributing a smaller share to GDP, employment in the agriculture sector continues to account for nearly 45% of the workforce with industry constituting only 17% of employment, while services cover 38%. Manufacturing, traditionally a driver of employment-led structural transformation, employs around 12% of workers, a decline from a decade ago. The slow transition from agriculture to higher-productive sectors demonstrates that economic growth is not generating adequate, high-quality jobs. 

Building on these structural challenges, informality further compounds the problem. In 2024, 84 percent of all employment was informal, with female informality being as high as 96%. Even in urban areas, where opportunities are generally better, only one in four workers holds a formal job. Therefore, for the youth in particular, even when jobs are available, they often lack contracts, social protection, and opportunities for skill development, restricting both career progression and economic security. Labour Force Survey data highlights that though youths constitute about 35% of total employment, they account for over 76% of the unemployed, indicating that the economy is struggling to generate enough absorptive capacity for new entrants. From a labour market perspective, this reflects a classic structural mismatch: while labour supply has expanded rapidly due to rising educational attainment, the demand for skilled workers has not kept pace, particularly in sectors capable of offering formal, productive employment. Another crucial challenge of the youth is the fact that as high as 8.5 million youths are not in employment, education, or training where the situation is especially critical for young women, who make up nearly two-thirds of NEET youth. Urban areas, often considered as the hub of economic opportunity, paradoxically exhibit the highest female NEET rates, highlighting how safety concerns, lack of child care support and labour market barriers intersect to constrain female participation. 

While understanding the issue of employability, it is important to analyze the labour market scenario in past years. Between 2010 and 2016, though employment broadly kept pace with output growth, particularly in agriculture and manufacturing, from 2016 to 2022, labour force participation continued to rise but was absorbed disproportionately by agriculture and rural employment, with urban and industrial sectors lagging behind. This uneven absorption meant that labour market failed to generate sufficient jobs in manufacturing and services, leaving urban youth and educated entrants underutilized. Estimates from the Labour Force Surveys show that employment elasticity—which measures the responsiveness of job creation to GDP growth declined sharply over this period: it was positive (0.57) between 2000 and 2010, stood at 0.34 during 2016/17–2022, and fell to –0.09 by 2022–2024, indicating that output growth no longer translated into proportional employment gains. Agriculture, despite being the main absorber of labour, offered mostly informal, low-productivity work, while urban employment, crucial for the youth, got almost stagnated. This structural decoupling highlights why youth, especially educated and urban segments, remain disproportionately unemployed and underemployed, signaling a persistent misalignment between labour supply and the types of jobs being created. Against this backdrop, for the educated youth, public sector employment continues to be the  prime target with government jobs offering stability, predictable wage structure with social security, and social prestige. In a labour market characterized by informality, low job security, and limited opportunities for skill development, pursuing a public sector role becomes a rational strategy for many young people. The intense competition for these positions reflects not just individual preference but also broader structural shortcomings in the labour market, where high-quality alternatives are insufficient.

At the same time, self-employment and entrepreneurship, often promoted as solutions to youth unemployment, face substantial barriers. Limited access to affordable finance, weak market linkages, inadequate infrastructure restricts the ability of young entrepreneurs to scale their ventures. Consequently, self-employment frequently serves as a survival strategy rather than a pathway to innovation, or upward mobility. These constraints underscore the importance of revisiting the relevance of tertiary education: should more emphasis be placed on market-relevant diplomas, or technical and vocational education and training (TVET) that equip youth with skills directly demanded by employers?

Addressing these challenges therefore requires coordinated strategies. Firstly, the quality and relevance of education must be enhanced. Aligning curricula with labour market needs, strengthening industry–academia linkages, expanding TVET and technical training, and fostering soft skills such as communication and digital literacy are crucial for preparing youth to succeed in high-skilled jobs. Early-stage education should emphasize analytical reasoning and computational skills, reducing structural mismatches and enhancing employability. In order to deal with the complex challenge of skill mis-match, well-coordinated effort is needed through updated and market-based curricula, internships etc. Special emphasis should be given to develop soft skills, communication skills etc. while considering the market demand structure and in coordination with the industry. 

Secondly, expanding formal, productive employment opportunities while expanding high-productive and labour intensive manufacturing and modern service sectors, should be the prime agenda for future policies. 

Thirdly, to maximize human capital utilization and productivity, it is crucial to concentrate on the quality of jobs and thereby to ensure basic facilities of formal employment including minimum wage, job contracts, working hour specified by international labour laws. With a view to encourage female employment, it is crucial to implement gender-sensitive policies at work places including flexible work arrangements, parental leave, and childcare support. Day care facilities should be materialized not only at work place, but also at an affordable manner at community levels. Besides, it is crucial to ensure safe and secured transportation facilities and affordable accommodation at urban areas- the government should prioritize such issues in policy agenda.

Fourthly, fostering youth entrepreneurship requires building an enabling ecosystem. Facilitating access to affordable credit, digital infrastructure, market linkages, and simplified regulatory processes can transform self-employment from a coping mechanism into a sustainable pathway towards upward mobility. Promoting specialized, market-relevant skills and reducing social stigma around TVET can broaden employment options beyond the public sector, creating diversified pathways for educated youth to contribute productively. For the rural based youth, on one hand agro-based industrialization at divisional level needs to be strengthened, while on the other hand aspiring entrepreneurs should be supported by connecting them to the supply chain. 

In conclusion, we must keep in mind that, persistent informality, low absorption in high-productive sectors, skill mismatch, and limited high-quality opportunities threaten to squander the potential of the youth population of the country. Without structural reforms, aligning education with market demand, creating formal employment, strengthening skills development, promoting gender inclusivity, and supporting entrepreneurship, the country risks leaving a generation educated, yet underutilized. Harnessing this demographic advantage demands not just economic growth, but growth that produces decent, inclusive, and productive employment, turning the promise of a youthful workforce into a driver of sustained economic transformation.

The authors, Professor Dr Sayema Haque Bidisha and Lecturer Mahmudul Hasan, are educators of Economics at the University of Dhaka.