For the last three years, our government has somehow managed to keep its unemployment rate on a declining trend, though at a very insignificant amount of progression. However, with the ongoing COVID situation, the country is once again fighting an increasing trend of unemployment, as the labour market has been seriously affected by the lockdown, interrupted business cycles, job losses, and temporary absences.
In this situation, one might wonder if now is a good time to reconsider reforming our existing social security facilities, and if that policy can be useful not only for this pandemic period, but also for long-term policymaking.
With the surging amount of covid cases, many private companies have already taken a cost-cutting strategy, laying off workers, cutting down salary, or downsizing office spaces as employees are instructed to work from home to curb the spread of the virus.
The last two solutions may not appear to be serious, as companies may return to their regular operational mode in the long run, but the first cost-cutting method should receive the most attention.
As per the Bangladesh Labour Act, 2006, employers need to provide a termination benefit, a retrenchment and layoff benefit, and a benefit for discharge from service for ill health to workers in commerce and industry.
However, in a country like Bangladesh, where labour laws are one of the most neglected legislations, and where trade unionism and minimum wage legislation are lacking in many sectors, it is difficult to believe that companies are strictly adhering to this law.
A recent study shows that about 16.38 million people became newly poor amid the pandemic, whereas workers' wages declined by 42 percent in Dhaka. Furthermore, while urban industries and SMEs have seen a sharp decline in revenue, it is primarily the informal sector laborers such as rickshaw pullers, bus helpers, self-employed people such as street vendors, hawkers, tea sellers, food stall owners, and repairmen such as plumbers, carpenters, and others like them who have suffered the most.
When the government imposes a month-long lockdown with no proper effective method of distributing the money from stimulus packages to these sectors, the task of keeping these people at home during the lockdown becomes daunting. Because of this, the currently imposed lockdown cannot be called a success as people of this low-earning class are more interested to earn their livelihood at risk to their lives, rather than choosing to die from starvation.
Now, with these many problems already prevailing in the economy, can the government of this country think about introducing unemployment allowance in Bangladesh like many other first world countries?
A recent study in this context provides a discouraging result. To elaborate, in a country like Bangladesh, where the job market is so volatile and vulnerable, and proper data collection is nearly impossible, introducing allowances may backfire for two reasons: first, people receiving unemployment benefits may remain in voluntary unemployment for longer periods, and second, those who do not need allowances may take this benefit.
Bangladesh, in this situation, may follow other strategies to solve the issue. First, for the informal class, who are already aged and cannot be trained with better skills, they can be taken under a social security programme for the next one year, by including this sector of people into a different method of financial inclusion programme like microcredit financing, poultry business or farming. As women from this sector are most vulnerable, the Bangladesh Bank should come forward by especially focusing on this segment to provide loans with flexible facilities.
Second, for the youth, the government should open up more tertiary training opportunities or should introduce facilities for them like - if they upgrade themselves with better professional skills, the government may help this group to find a suitable job that provides them a respectable amount of allowance once they join the workforce again. In this scenario, it may not only encourage the youth to learn and renovate, but also may raise healthy competition in the labour market by encouraging the employers to recruit again.
Third, it will be more convenient for the NRBs if the government can come forward with stronger negotiations to send back the expatriates who lost their jobs due to the pandemic. Expatriates in this situation can also be provided with health insurance coverage so that their families can be financially secure in the future in the event of an unavoidable incident.
Of course, there are uncountable policies that can be followed, instructed, and utilised. Not only the government, but a collaborative approach from everyone can help to improve the labour market's current volatile situation. As the pandemic continues, taking small steps toward alternative solutions to these larger problems can help us fortify our labour market and return it to its pre-pandemic state.
The author is a graduate of economics and a banker by profession.
Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the opinions and views of The Business Standard.