Unemployment hits all-time high at 6.91% in Nov

Bangladesh's unemployment rate hit an all-time high of 6.91% in November, indicating that high economic growth has not been enough to create jobs for the youth.

The rate of unemployment hit 6.47% in June, the last month of the fiscal 2021-22, and it accelerated to this new high in November.

The rise comes after comparatively tamer ranges of 4.2% to 4.5% in the previous two decades.

The Ministry of Finance revealed the new unemployment rate through a presentation titled "Economic Situation Review and Possible Strategies", citing the Bangladesh Bureau of Statistics (BBS).

Officials of the BBS told The Business Standard that the BBS last conducted the Labour Force Survey in 2016-17.

Kabir Uddin Ahmed, director of the BBS Industry and Labour Wing, said they currently had unemployment data of the four quarters of last year.

"We have a tradition of providing unprocessed data to other government agencies as needed prior to official publication," he said, adding that the preliminary report of the survey will be published soon.

The BBS found a 4.2% unemployment rate in the last survey in 2016-17, but the rate increased by 2.71 percentage points in November last year.

In 2000, the rate was 4.3% and had not exceeded 4.5% in the last couple of decades.

Although 3%-5% unemployment rate is considered ideal by some experts – there is no single consensus – with most believing that the rate isn't a static goal but a dynamic goal, which changes according to economic goals.

Experts and economists said employment generation is being hampered due to disruption in industrialisation caused by a shortage of raw materials, increase in business costs due to the price hike of gas, electricity and fuel, and decrease in consumer demand following the adverse impact of rising inflation due to the war between Ukraine and Russia prior to the recovery from the impact of Covid-19.

They said a significant number of people, especially those engaged in the non-formal sector, lost their jobs in the Covid-19 lockdown.

The crisis in employment has intensified due to the new global crisis, a double blow as some people who lost their jobs due to Covid-19 were yet to return to work.

They also found a weakness in the government's policy as the capital-intensive industries were being prioritised amid a huge surplus of labour in the country.

Who are the unemployed

The BBS results show that youth unemployment is much higher than the national unemployment level in the country.

Of about 12.28 million youth aged 15-29 years, roughly 30% are not in education, employment or training (NEET), according to the last LFS conducted by the BBS in 2016-17.

The total number of NEET was 37.1 million among working-aged groups, aged over 15 years.

The BBS excluded the NEETs, about 34% of the working-age people, following the standard of the International Labor Organization (ILO).

Many people who are not engaged in any economic activity were excluded from the number of unemployed.

Currently, a person is considered as an employee if they performed any economic activity for just an hour in the last seven days.

A person would be identified as unemployed if he had no job in the last seven days and was seeking a job.

People who are out of work are not considered unemployed even if they are not looking for a job in the last week.

Impact of Covid-19

The lockdown imposed to tackle the spread of Covid-19 hampered three jobs out of four, according to the major think tanks of the country.

A joint study of the Citizen's Platform for SDGs, Bangladesh and the Center for Policy Dialogue (CPD) revealed that some 61.57% of the employed population lost their jobs at some point, mostly in April and May 2020 when the general holiday or lockdown was in place.

Around 85% of those employed in the pre-Covid period who had lost their jobs became unemployed for more than one month.

A rapid telephonic survey of the BBS recorded a 22.39% unemployment rate in July 2020, which was 10 times higher than the 2.3% in March of the same year prior to imposing the first lockdown.

The eighth five-year plan of the government set a target of creating 2.13 million employment with a breakdown of 1.52 million at home and 0.61 million abroad. Achieving the target would help 0.60 million of excess employment to accommodate 1.53 million entrances in the labour market.

Shock prior to recovery

The unemployment rate reduced to 4% in September 2020 with a rapid recovery within six months of the first lockdown, according to the BBS rapid survey data.

But the employment sector faced several challenges due to complexities arising from the war between Ukraine and Russia, industrialists said.

AKM Fahim Mashroor, CEO of BDJOBS.COM, the largest job portal in the country, said the war impacted the employment market quite a bit.

The rate of new recruitment dropped by 30% in the last three months compared to the previous three months, he said citing data from bdjobs.com.

The trend is continuing in January and some of the companies are releasing workers.

About 90% of employment in Bangladesh is generated from the SME sector and recruitment in the sector is almost abundant.

Khondaker Golam Moazzem, research director of the CPD, said while the export sector performed well in June, the SMEs and domestic market-dependent sectors are going through many challenges during the post-Covid period.

The import of raw materials and capital equipment is being hindered due to the war between Ukraine and Russia. 

The aggregate demand also fell recently to respond to huge inflationary pressure. The negative impact of industrialisation reduced employment amid a better performance of the agricultural sector.

Economic growth fails to ensure employment

The gross domestic product (GDP) in Bangladesh grew 6.83% on average in the last five years according to data from the BBS. This was significantly higher than the average growth of 6.04% in the 2000-2016 period.

An increase in the average growth of GDP, however, failed to maintain the unemployment rate at a flat rate of below 4.5%.

The Asian Development Bank (ADB) and the International Labour Organization (ILO) found 6.5% of GDP growth sufficient in Bangladesh to accommodate 1.81 million entrances in the job market each year, in a study compiled in 2016.

Despite achieving higher growth than this target, the rate of employment creation has not increased.

Dr Zahid Hussain, former lead economist of the World Bank Dhaka office, said the relationship between economic growth and employment was weakened even before the infection of Covid-19.

"The manufacturing sector played a vital role in growing the economy, but most of the employment in Bangladesh is centred on service and non-formal sectors. That is why the manufacturing-driven growth failed to ensure adequate employment," he said.

The General Economic Division (GED) of the planning commission found an employment elasticity rate of 0.54 in the 1995-2000 period which indicates that 1% additional GDP growth was capable of ensuring the increase of employment by 0.54%.

The elastic rate increased to 0.59% in the period of 2000-2006. The rate reduced to 55 in the 2006-2010 period and further downgraded to 0.38 in the period of 2010-2013.

Economist Zahid Hussain anticipated that the elasticity of employment to growth would decline further. For this, he blamed the wrong trade policy of the government. He said that the government emphasised capital-intensive industries in the last couple of decades, which is not an appropriate policy for a labour-endowed country like Bangladesh.

A boom in overseas employment

The latest data from the Bureau of Manpower Employment and Training (Bmet) revealed about 1.14 million foreign employment in the last fiscal.

The domestic industry failed to create even 0.38 million jobs in the last year considering the number of entrances and supply of labour abroad.

The government set a target in the eight-five years for the down unemployment rate for males at 0.8% and for females at 2.1% in FY25 from 3.1 and 6.7% respectively in FY17.

The entire plan aims for 11.33 million jobs, including 8.08 million at home and 3.25 million abroad.

Proper implementation of the plan would help to create 3.52 million of excess employment meeting the demand of 7.81 million entrances.