Growth fails to match jobs
Bangladesh’s economic growth is increasingly failing to translate into employment, with a structural shift in job creation raising concerns over the country’s ability to generate enough quality work for its expanding labour force, according to a new World Bank study.
The study, Structural Shift in Job Creation: Evidence from Bangladesh, finds only weak evidence of a conventional link between economic growth and employment in Bangladesh.
While the economy recorded average annual real GDP growth of 6.4 per cent between 2010 and 2023, much of the recent employment expansion has shifted towards agriculture rather than the higher-productivity industrial and service sectors.
The report identifies accommodation and food services, transportation and storage, and construction among the sectors with significant potential to generate employment, while manufacturing – despite strong output growth – has struggled to absorb additional workers.
The findings come at a critical juncture for Bangladesh as it seeks to sustain growth, create productive employment and move towards upper-middle-income status.
Between 2017 and 2022, industry and services grew by 9.0 per cent and 5.9 per cent annually respectively, yet their shares of total employment fell by 3.4 and 1.4 percentage points to 17.0 per cent and 37.6 per cent.
Manufacturing output grew by 9.1 per cent annually over the period, but its share of employment dropped from 14.4 per cent in 2017 to 11.3 per cent.
The study says this divergence indicates that economic expansion alone may not be sufficient to generate broad-based employment.
Its sectoral analysis shows a marked change in employment elasticity – the relationship between changes in sectoral output and employment.
During 2003-10, industry had an employment elasticity of 0.84, while services stood at 0.47 and agriculture at 0.29. By 2017-24, industry’s elasticity had fallen to -0.04, while services stood at 0.23. Agriculture, meanwhile, rose sharply to 0.98.
The shift towards agriculture, however, does not necessarily represent sustainable or high-quality job creation.
The study cautions that the rise could partly reflect workers moving into low-paid subsistence or informal agricultural activities because they cannot find better opportunities elsewhere.
Among individual sectors, accommodation and food services recorded the strongest employment elasticity at 0.99 during 2017-24, followed by transportation and storage at 0.59 and financial and insurance activities at 0.37.
Construction recorded 0.11, while wholesale and retail trade stood at only 0.04. Manufacturing recorded negative elasticity of -0.10.
The findings point to a potentially important role for tourism, hospitality, logistics and infrastructure development in future job creation.
The World Bank study specifically suggests that expanding tourism and infrastructure could generate substantial employment, particularly through sectors such as accommodation, food services, transportation and construction.
The manufacturing sector remains a particular concern. Bangladesh’s industrialisation and export growth have historically been closely associated with manufacturing employment, especially through the ready-made garment sector.
But the study finds that manufacturing output growth in recent years has coincided with declining employment, indicating a weakening capacity to absorb workers.
The broader labour market is also dominated by informality. About 84.9 per cent of employment is informal, while frontier ready-made garment firms generate nearly half of firm-level revenue but account for only around one in twelve formal private-sector jobs.
Limited access to finance, high business costs, energy constraints and customs and trade regulations are among the obstacles affecting employment-generating businesses.
The employment challenge is particularly acute for educated young people. The share of unemployed youth with tertiary education has risen to 27.8 per cent, with women holding tertiary qualifications facing particularly high unemployment, the study says.
The report argues that Bangladesh needs to place employment-led growth at the centre of economic policy rather than relying on GDP expansion alone.
Incentives, it suggests, should increasingly be aligned with employment outcomes and directed towards sectors capable of generating larger numbers of productive jobs.
For Bangladesh, the central challenge is therefore not simply to maintain economic growth, but to ensure that growth creates enough productive, formal and higher-quality employment.
Without such a shift, the study warns, the weakening relationship between growth and jobs could undermine the country’s ability to fully benefit from its demographic dividend and sustain long-term economic progress.
