Unemployment in Bangladesh

Table of Contents
summary
Historical Context
Types of Unemployment
1. Frictional Unemployment
2. Structural Unemployment
3. Cyclical Unemployment
4. Seasonal Unemployment
5. Youth Unemployment
Causes of Unemployment
Economic Factors
Impact of COVID-19
Educational Mismatch
Labor Market Characteristics
Other Contributing Factors
Impact of Unemployment
Economic Growth and Employment Discrepancy
Unemployment Among Youth and Women
Structural and Policy Challenges
Role of Government and Future Prospects
Government Policies and Initiatives
Labour Sector Reforms
Technical Vocational Education and Training (TVET)
Support for Small and Medium Enterprises (SMEs)
Addressing Youth Unemployment
Challenges and Economic Factors
Current Situation
Impact of COVID-19
Labor Market Dynamics
Government Response and Policy Recommendations
Comparison with Other Countries
 Employment Trends in Developing Countries
Skills Development and Human Capital
Gender Inequality and Labor Market Participation
Progress Towards Sustainable Development Goals
Future Outlook

Check https://storm.genie.stanford.edu/article/221747 for more details

Stanford University Open Virtual Assistant Lab
The generated report can make mistakes.
Please consider checking important information.
The generated content does not represent the developer's viewpoint.

summary
Unemployment in Bangladesh refers to the condition of joblessness affecting a
significant portion of the nation's workforce. Despite notable economic growth, with
an average GDP increase of 6.83% from 2016 to 2021,[1] the unemployment rate has
remained persistently high, fluctuating around 4.5% to 5.21% in recent years.[2][3]
The phenomenon of unemployment in Bangladesh is particularly pronounced among
the youth, with rates as high as 15.7% for those aged 15-24,[4][5] revealing critical
challenges in the labor market and the urgent need for effective skill development
programs.
The labor market dynamics are complex, encompassing various types of unemploy-
ment including frictional, structural, cyclical, and seasonal unemployment. Structural
unemployment is notably significant due to the mismatch between available jobs
and the skills of the workforce, as approximately 87% of Bangladeshi workers
are engaged in the informal sector, which lacks formal educational and vocational
training.[4] Furthermore, the COVID-19 pandemic exacerbated these issues, leading
to increased job disruptions and further highlighting vulnerabilities in employment
sectors like ready-made garments.[6][7]
Prominent controversies surrounding unemployment in Bangladesh include critiques
of government policies that emphasize capital-intensive industries, which fail to
address the surplus labor issue in the economy. Additionally, educational mismatches
and rising business costs hinder job creation, resulting in a pressing call for compre-
hensive reforms that align educational outcomes with market demands.[7][2] As the
nation navigates these challenges, addressing youth unemployment and structural
barriers is vital for fostering a more inclusive and resilient labor market.

Historical Context
The unemployment landscape in Bangladesh has evolved significantly over the
decades, reflecting both economic growth and various structural challenges. In the
early 2000s, the country witnessed an unemployment rate of approximately 4.3%,
which remained relatively stable, hovering between 3% and 5% in subsequent
years[1][2]. However, this stability belied underlying complexities in the labor market,
particularly concerning youth unemployment, which accounted for a substantial
portion of the overall unemployment figures[1].
Throughout the period from 2000 to 2010, Bangladesh experienced varying elas-
ticities of employment to growth, with a notable decline during 2006-2010. This
decline was attributed to a governmental emphasis on capital-intensive industries,
which proved to be misaligned with the labor-endowed nature of the Bangladeshi
economy[8]. Despite an average GDP growth of 6.83% in the years leading up to
2023, the unemployment rate struggled to maintain a stable level below 4.5%[2][3].
The labor market faced new challenges following the COVID-19 pandemic, leading to
a brief revival of employment opportunities between April and August 2020, but with
significant uncertainty for employers[2]. The unemployment rate saw fluctuations,
eventually decreasing to 5.21% in 2021 before further projections suggested a drop
to 5.01% in 2022[2].
Recent data indicates that the unemployment rate in Bangladesh reached 4.70%
in 2023, showing a historical change as the economy continues to navigate global
economic pressures, such as those arising from geopolitical events and inflationary
trends[1][3]. The persistent challenge of youth unemployment and the need for
effective skill development programs remain critical as the country seeks to leverage
its human capital for future economic growth[9].

Types of Unemployment
Unemployment in Bangladesh can be categorized into various types based on the
causes and nature of joblessness. Understanding these types is crucial for address-
ing the challenges faced by the labor market.

1. Frictional Unemployment
Frictional unemployment refers to the short-term joblessness experienced by indi-
viduals who are transitioning between jobs or are entering the workforce for the
first time. This type of unemployment is often temporary and is a natural part of
a dynamic labor market, where people may voluntarily leave their jobs to pursue
better opportunities or relocate to different regions. In Bangladesh, this form of
unemployment is influenced by a significant portion of the workforce moving between
sectors or cities, contributing to an unemployment rate that seldom dips below 4-5%
even during economic upturns[3].

2. Structural Unemployment
Structural unemployment occurs when there is a mismatch between the skills of the
workforce and the requirements of available jobs. This issue is particularly pertinent
in Bangladesh, where the majority of the workforce is employed in the informal
sector. Approximately 87% of workers are engaged in non-formal employment,
lacking formal education and vocational training, which hampers their ability to secure
stable jobs in the formal economy[4]. Furthermore, the skills gap among recent
graduates, particularly in language and communication skills, exacerbates this type
of unemployment, leaving many young people unable to find suitable employment
despite a desire to work[1].

3. Cyclical Unemployment
Cyclical unemployment is linked to the fluctuations in the economic cycle. During
periods of economic recession, such as those experienced in the wake of the
COVID-19 pandemic, unemployment rates can rise significantly, sometimes reaching
double digits[3]. This type of unemployment reflects the overall health of the economy
and the demand for labor, with substantial increases noted in recent years[2].

4. Seasonal Unemployment
Seasonal unemployment arises in industries where demand for labor fluctuates
based on the time of year. In Bangladesh, sectors such as agriculture experience
significant seasonal employment patterns, with job opportunities peaking during
planting and harvest seasons. Those employed in these sectors may find themselves
unemployed during off-peak periods, contributing to overall unemployment rates[1].

5. Youth Unemployment
Youth unemployment is a significant concern in Bangladesh, with the youth unem-
ployment rate standing at around 10.6%[4]. This demographic, particularly those
aged 15-24, experiences higher rates of joblessness, often exacerbated by educa-
tional disparities and a lack of access to quality job training. As of 2023, youth unem-
ployment in Bangladesh was reported at 15.7%, surpassing the global average[5].
This high level of youth unemployment is not only an economic issue but also a
potential driver of social unrest in the country[5].

Causes of Unemployment
Unemployment in Bangladesh is influenced by a multitude of factors that encompass
economic, social, and educational dimensions. Understanding these causes is cru-
cial for addressing the persistent unemployment issues faced by the nation.

Economic Factors
One of the primary causes of unemployment in Bangladesh is the cyclical nature
of the economy. The unemployment rate can fluctuate significantly during economic
downturns, often rising into double digits during recessions[3]. Furthermore, the
impact of structural economic reforms implemented in the 1980s and 1990s has
led to job losses, particularly in the public sector. These reforms, which aimed at
liberalizing trade and reducing government spending, resulted in layoffs and created
an environment where formal employment opportunities became scarcer[10].
Impact of COVID-19
The COVID-19 pandemic exacerbated unemployment in Bangladesh by causing
widespread job disruptions. Many workers were left without jobs, highlighting the
urgent need for unemployment insurance and other protective measures. In re-
sponse, representatives from various sectors have called for the establishment of
an Unemployment Fund to mitigate the impact of such crises in the future[11].

Educational Mismatch
Another significant factor contributing to unemployment is the mismatch between
educational attainment and available job opportunities. Contrary to expectations,
higher levels of education have been associated with increased unemployment rates
among youth. Studies indicate that individuals with more years of formal education
often struggle to find suitable employment, as the growth of job opportunities does not
keep pace with the expanding youth population[2][1]. This phenomenon is particularly
pronounced among educated women, who experience higher unemployment rates
compared to their male counterparts[1].

Labor Market Characteristics

The labor market in Bangladesh is characterized by a high level of informality, with
many workers engaged in unregulated employment that lacks legal protections and
benefits. Informal employment can lead to vulnerability and low productivity, hindering
economic growth and exacerbating job insecurity among young workers[12]. The
youth population, in particular, is facing rising unemployment rates as they often
find themselves in precarious work situations or resorting to multiple informal jobs
to sustain themselves[10].

Other Contributing Factors

Additional factors affecting unemployment in Bangladesh include geographical labor
mobility, government policies, and economic conditions both domestically and glob-
ally. These factors can create barriers to employment opportunities, leading to higher
unemployment rates[2]. The overall economic landscape, including technological
advancements and changes in the global economy, also plays a crucial role in
shaping employment prospects in the country[2].
By addressing these multifaceted causes, Bangladesh can work towards reducing its
unemployment rate and fostering a more inclusive labor market.

Impact of Unemployment
Economic Growth and Employment Discrepancy
Despite significant economic growth, the relationship between GDP growth and
employment creation in Bangladesh has been tenuous. From 2016 to 2021,
Bangladesh's GDP grew at an average rate of 6.83%[8]. However, this growth has
not translated into proportional employment opportunities, as the unemployment rate
remained stubbornly high. In 2021, the unemployment rate was reported at 5.21%,
with expectations to drop to 5.01% in 2022[2]. The persistent gap between economic
growth and job creation raises concerns about the effectiveness of current economic
policies.

Unemployment Among Youth and Women

Youth unemployment presents a particularly pressing challenge. Research indicates
that higher education levels correlate with increased unemployment among young
adults, particularly for those with 11 years or more of formal education[1]. Additionally,
women with over nine years of education experience higher unemployment rates,
highlighting a troubling trend where educational attainment does not guarantee
job security[1]. This phenomenon can be attributed to various factors, including
insufficient job creation in relation to the growing educated workforce.

Structural and Policy Challenges

The structural factors contributing to unemployment include poor governance and
income inequality, which exacerbate job scarcity and limit opportunities for margin-
alized groups[7]. The Gini coefficient, a measure of income inequality, rose from
0.458 in 2010 to 0.483 in 2016, indicating widening disparities in economic gains[7].
Furthermore, challenges such as the disruption of supply chains due to global
events, including the COVID-19 pandemic, have adversely affected the job market,
particularly in vulnerable sectors like garments, which form a significant part of the
economy[13].

Role of Government and Future Prospects

To address these issues, government intervention is essential. Strategies focused
on job-oriented economic policies rather than solely growth-centric measures are
recommended[7]. The government has set ambitious targets for reducing unemploy-
ment rates among males and females by 2025[8]. However, achieving these targets
will require a commitment to effective implementation of policies aimed at fostering
job creation and addressing structural challenges in the economy[11].

Government Policies and Initiatives

The government of Bangladesh has implemented several policies and initiatives
aimed at addressing the challenges of unemployment, particularly in the context of
ongoing economic and labor market shifts.

Labour Sector Reforms

In recent years, Bangladesh has focused on labor sector reforms to improve labor
rights and workplace safety. Following the national elections on January 7, 2023,
the government resumed the amendment process of labor laws, culminating in the
finalization of an amendment bill on January 23, 2023. This bill awaits approval from
the National Tripartite Consultative Council (NTCC) and the cabinet[14]. The Inter-
national Labour Organization (ILO) has praised these reforms as timely initiatives in
maintaining international standards in labor rights and safety[14]. The government
is committed to furthering these reforms by ensuring constructive tripartite consulta-
tions among stakeholders[14].

Technical Vocational Education and Training (TVET)

The government prioritizes Technical Vocational Education and Training (TVET) as
a crucial element for economic growth and sustainable development. As outlined in
the 8th Five-Year Plan (2021-2025), the government aims to enhance the quality of
TVET to meet national and global employment needs. Initiatives include operational-
izing competency-based skills qualifications to align with job market demands[4].
However, challenges remain, such as rapid enrollment expansion that may not be
matched by adequate resources, impacting institutional management and teaching
quality[4]. Recommendations from experts suggest the need for a separate workers’
employment act to facilitate better collaboration between industries and educational
institutes[4].

Support for Small and Medium Enterprises (SMEs)

The government is also focusing on policies that promote small, medium, and cottage
industries to create employment opportunities. Initiatives to enhance competitive-
ness in traditional sectors like handloom and jute, along with special programs for
blacksmiths and potters, have been introduced[15]. These efforts aim to diversify the
economy and foster entrepreneurial ventures, with an emphasis on labor welfare
and adherence to ILO conventions to improve working conditions, especially for
women[15].

Addressing Youth Unemployment

Youth unemployment remains a pressing issue, significantly higher than the national
average[8]. Experts indicate that challenges such as skill mismatches and a prefer-
ence for government jobs among young people contribute to this problem[16]. The
government has acknowledged the need for enhancing communication skills and
ensuring women’s empowerment to better align the labor market with educational
outputs[16].

Challenges and Economic Factors

Despite these initiatives, employment generation is being hindered by various factors,
including rising business costs and decreased consumer demand due to global
economic disruptions[8]. The government’s focus on capital-intensive industries has
also raised concerns, as it does not address the surplus of labor in the country[8].
Addressing these complexities is critical for the effective implementation of employ-
ment policies and initiatives aimed at reducing unemployment in Bangladesh.

Current Situation
The unemployment landscape in Bangladesh has been significantly impacted by
various factors, including the ongoing effects of the COVID-19 pandemic. Recent
analyses indicate that youth unemployment is particularly concerning, accounting
for about 80% of the overall unemployment rate, which currently stands at 3.6%[1].
However, the measurement methods for unemployment have faced criticism; some
experts argue that the conventional definitions may not accurately reflect the realities
of the job market in Bangladesh, where short-term employment is less common and
many individuals are engaged in informal work[1].

Impact of COVID-19
The global pandemic has exacerbated existing vulnerabilities in the labor market.
Employment in the ready-made garment (RMG) sector, a major contributor to the
Bangladeshi economy, has suffered due to reduced demand and longer payment
terms from manufacturers, which increased from 14% to 22% for payment delays
exceeding 91 days[6]. A survey by the Bangladesh Garment Manufacturers and
Exporters Association (BGMEA) revealed that 79% of buyers have not increased
prices, while a significant number of suppliers are operating well below capacity due
to falling orders, leading to a stark decline in employment opportunities[6].

Labor Market Dynamics

The labor market in Bangladesh has exhibited notable segmentation, particularly
affecting youth entering the workforce. Research suggests that those entering vul-
nerable employment positions, such as contributing family work or self-employment,
may become trapped in these roles, making it difficult to transition to more stable and
formal employment[12][7]. The issue of labor market participation remains acute, with
the rate below 60% and significant gender disparities evident—only 26.9% of those
employed are female[12].
Moreover, the entry point into the labor market significantly influences future career
trajectories. The literature highlights several hypotheses regarding the consequences
of initial employment positions, suggesting that non-optimal entry may lead to
long-term disadvantages in career development[12].

Government Response and Policy Recommendations

In light of these challenges, experts have urged the government to integrate employ-
ment issues with stimulus measures aimed at providing sustainable solutions to the
worsened job situation due to the pandemic[7]. Prior to COVID-19, unemployment
was already a pressing concern, with a notable percentage of educated youths facing
joblessness. Therefore, addressing the vulnerabilities exposed by the pandemic is
crucial for developing a more resilient labor market in Bangladesh[7][1].

Comparison with Other Countries

Employment Trends in Developing Countries
Unemployment and underemployment in Bangladesh reflect broader trends seen in
many developing countries. A significant portion of the workforce is engaged in infor-
mal employment, with over half of all workers globally in such conditions by 2024. This
lack of formal contracts often leads to precarious work situations and is exacerbated
by the structural economic reforms imposed during the 1980s and 1990s, which
focused on liberalizing trade and reducing government spending. These reforms have
resulted in job losses, particularly in the public sector, leading to a relatively high
percentage of skilled yet unemployed individuals in Bangladesh[10][17].

Skills Development and Human Capital

In contrast to Bangladesh, other nations recognized as global economic powers
have prioritized skills development as a key strategy for human capital development.
Despite a lack of natural resources, these countries have successfully transformed
their citizens into skilled labor through educational programs and investments in
technology. This shift from physical to information-based capital has led to significant
global transformations that impact skill supply and demand. In Bangladesh, however,
the transition towards effective Technical and Vocational Education and Training
(TVET) programs has been slower, as the importance of enhancing the informal
sector through education and training has not been fully appreciated[9][17].

Gender Inequality and Labor Market Participation

Gender inequality remains a persistent issue in Bangladesh, affecting labor market
participation rates. As of 2020, Bangladesh ranked 133 out of 162 countries on
the UNDP Gender Inequality Index, highlighting the challenges faced by women in
the workforce[18]. In comparison, some neighboring South Asian countries have
made strides toward closing the gender gap. For instance, the World Economic
Forum’s 2021 Global Gender Gap Report ranked Bangladesh relatively high for
political empowerment but indicated significant gaps in economic participation and
opportunities[4]. The challenges in achieving gender parity in employment highlight
the need for targeted policies that align with global best practices.

Progress Towards Sustainable Development Goals

Bangladesh has shown commitment to the United Nations Sustainable Development
Goals (SDGs), particularly in targeting full employment and decent work for all.
While the country has made progress in certain areas, such as affordable energy
and quality education, it continues to grapple with stagnant or regressing indicators
across various metrics. This uneven progress reflects broader trends in developing
countries, where the pursuit of sustainable economic growth often clashes with
entrenched structural challenges[19][20]. Addressing these issues will require com-
prehensive policy frameworks that not only focus on economic growth but also
emphasize social equity and job creation.

Future Outlook
The future of employment in Bangladesh is shaped by a confluence of challenges
and opportunities, particularly in the context of the Fourth Industrial Revolution (4IR).
As automation and advanced technologies gain traction, significant portions of the
workforce face potential job displacement. A study by a2i predicts that by 2041,
approximately 47% of jobs in Bangladesh could be at risk, especially in sectors such
as readymade garments, which currently account for 81% of the nation's exports.[21]
This situation underscores the urgent need for reskilling, with the World Economic
Forum estimating that 50% of global employees will require new skills by 2025.[21]
In light of these challenges, the Bangladesh government is urged to adopt job-ori-
ented economic strategies rather than relying on traditional growth-centric policies.
Achieving Sustainable Development Goals (SDGs) by 2030, transitioning from Least
Developed Country (LDC) status by 2026, and attaining Upper Middle-Income
Country (UMIC) status by 2031 will necessitate accelerated actions and reforms in
education and employment policies.[19]
Furthermore, as the global labor market grapples with rising unemployment—pro-
jected to increase by approximately 3 million in 2023—Bangladesh must focus on
improving job quality and creating decent work opportunities to combat widening
inequalities exacerbated by recent economic slowdowns.[22][7] Reports indicate that
the unemployment rate in Bangladesh, which stood at 4.2% in 2016-17, has risen
significantly, reflecting broader economic challenges and the impact of the COVID-19
crisis.[8]
To effectively address these impending challenges, there is a pressing need for
comprehensive reforms in the education sector, particularly within higher education
institutions (HEIs). Stakeholders advocate for a moratorium on new private univer-
sities and a rigorous review of existing programs to align educational outcomes
with market needs. This recalibration is essential for equipping graduates with the
requisite skills to thrive in an evolving labor market.[23]

References
[1]: More unemployment among youth with higher education: Fahmida Khatun ...
[2]: The Unemployment rate of Bangladesh (2020 - GlobalData
[3]: Unemployment hits all-time high at 6.91% in Nov
[4]: Bangladesh Unemployment rate - data, chart | TheGlobalEconomy.com
[5]: Skills development for sustainable career planning in Bangladesh: the ...
[6]: Reframing Governance for Improving Quality of Technical Vocational ...
[7]: Chart: Youth Unemployment High in South Asia | Statista
[8]: Unrest in Bangladesh reflects young people’s struggle to find decent ...
[9]: EU/ILO present preliminary feasibility assessment on Unemployment ...
[10]: Does the first job affect current youth working status in Bangladesh ...
[11]: New Age | Job creation main challenge for Bangladesh in 2021 - newagebd.net
[12]: What the Pandemic Reveals: Workers’ Rights in Bangladesh and Garment ...
[13]: Tripartite talks on labour law reform stressed
[14]: Protecting labour rights in Bangladesh: Enduring commitment and ...
[15]: Youth need appropriate skills to be employed in the labour market
[16]: For Bangladesh's Garment Sector, the 'Spotlight Moves' But Struggles ...
[17]: Technical and Vocational Education and Training (TVET) in Bangladesh ...
[18]: Gender inequality in Bangladesh: Engaging men and boys to close the gap
[19]: Toward 2030: Strategies for SDG success in Bangladesh
[20]: Innovative Strategies in Technical and Vocational Education and ...
[21]: Future of Work – a2i
[22]: 3.5m Bangladeshis to remain jobless in 2023: Report
[23]: Lack of Jobs for University Graduates in Bangladesh | How to reduce the ...