by Farzana Munshi, Professor of Economics at BRAC University and Professorial Research Fellow at GDI
Why has Bangladesh’s steady economic growth not translated into commensurate labour market outcomes, and what does this mean for the country’s future development? My new book, The Labour Market in Bangladesh: Emerging Challenges, Future of Work, and Policy Direction, published by Routledge, examines this question through an in-depth analysis of Bangladesh’s evolving labour market. Drawing primarily on successive Labour Force Surveys and other national and international datasets, the book examines women’s labour market participation, international migration, child labour, youth unemployment and preparedness for the Fourth Industrial Revolution, as well as the readymade garment (RMG) industry. While grounded in data and economic analysis, it is deliberately descriptive and non-technical, making it accessible to readers without specialised knowledge of economics or quantitative methods.
How did the book come about?
The book is the outcome of many years of my teaching and research in labour economics. An important motivation was the limited availability of a comprehensive reference bringing together Bangladesh’s major and emerging labour market challenges. Questions raised by my students—particularly about youth unemployment, skills mismatch, women’s employment and the relevance of education to labour market demand—also helped shape its themes. The ideas that eventually developed into the book were conceptualised during my sabbatical at the Global Development Institute where I spent a productive and enjoyable year in 2022-23. My time at GDI provided an invaluable opportunity to reflect systematically on Bangladesh’s changing labour market and its implications for future development.
Economic growth has not reduced informality
Bangladesh’s economic transformation over the past three decades has been remarkable. Since the early 1990s, the economy has grown at an average annual rate of around 5.6%, alongside substantial reductions in poverty and improvements in education, health and life expectancy. Yet these achievements conceal a more complicated labour market story. Employment growth has been largely concentrated in informal activities, accounting for 84.1% of total employment in 2023, while other significant labour market imperfections persist. This contrasts with the conventional expectation that structural transformation gradually shifts workers from low-productivity agriculture towards more productive industry and services. Agriculture’s contribution to GDP has fallen substantially over the years, yet it remains the country’s largest source of employment, much of which is informal and part-time. Formal employment increased only marginally in services, while both formal and informal employment declined in industry. The critical question, therefore, is not simply whether growth creates jobs, but what kinds of jobs it creates.
Women’s employment illustrates this problem particularly clearly. Female labour force participation increased from 15.8% in 1996 to 41.5% in 2023, but much of the recent increase has come from rural women entering agriculture, self-employment and other informal activities. By 2023, 95.7% of employed women were working informally, while urban female participation and female employment in several formal occupations declined. Female self-employment increased more than fivefold between 2013 and 2023, while male self-employment fell. Does this feminisation of self-employment reflect expanding entrepreneurial opportunities or limited access to suitable formal jobs? This question becomes even more important when unpaid household and care work, still disproportionately performed by women but largely remains outside conventional measures of economic activity, is taken into account.
The education-employment paradox
Another striking finding is the paradoxical relationship between education and employment: unemployment increases with educational attainment, particularly among women. In 2023, the unemployment rate was highest among tertiary graduates (13.11%) and lowest among those with primary or no education (2.61%). Moreover, unemployment among tertiary graduates has been rising, while it has continued to decline among the least educated, suggesting that employment growth is increasingly concentrated in low-skilled and informal activities. The RMG industry further illustrates this paradox: despite a growing supply of tertiary graduates, it faces persistent shortages of workers with technical and managerial skills and continues to rely on foreign workers. A recent survey of 2,421 university students and graduates analysed in this book reinforces this concern: many reported that their education and training inadequately prepared them for labour market demands, with deficiencies in both hard and soft skills.
The solution can not lie in expanding educational institutes alone. Universities need to develop technical, higher-order cognitive, and socio-behavioural skills, but stronger foundational learning at primary and secondary levels is essential for acquiring those specialized skills later. Reform is therefore needed throughout the education system, from early childhood and foundational learning to market-relevant tertiary education. These challenges are particularly urgent because around 2.4 million new entrants join Bangladesh’s workforce each year. Youth unemployment has remained persistently high, averaging around 8% over the past decade, while 18.9% of young people were not in education, employment or training (NEET) in 2023.
Child labour and ineffective migration policies remain longstanding problems
The incidence of child labour has increased despite steady economic growth. Children are working in major GDP-contributing sectors. Such work undermines their human capital formation, potentially constraining future productivity growth and slowing overall economic progress. Girls are disproportionately represented in unpaid work, while higher household income and parental education—particularly maternal education—are associated with lower levels of child labour.
International migration presents another policy challenge. Remittances make an enormous contribution to Bangladesh, but migration policy must move beyond maximizing remittance inflows alone. High recruitment costs, indebtedness, weak governance and fragmented reintegration policies reduce migration’s developmental benefits. Most Bangladeshi migrant workers are employed in routine occupations involving tasks susceptible to automation. A more effective strategy requires a life-cycle approach linking pre-departure preparation, migration, return and reintegration, while improving migrants’ skills and diversifying destination markets.
Growth alone is not enough
The book’s central message is that economic growth alone is not enough. Bangladesh needs growth that generates productive and decent employment, and workers must possess the skills required by a rapidly changing labour market. Achieving this requires recognising the interdependence of development strategies. Education reform affects youth employment, migration and RMG competitiveness; childcare and transport affect women’s formal employment; and skills policy increasingly intersects with technological and climate transitions. The RMG sector illustrates these interconnections. Its future competitiveness will depend not only on skill development and productivity but also on fair wages and a just transition towards greener production, supported by retraining, income support and inclusive policy design.
These findings have broader policy implications for developing countries, particularly in South Asia, where rapid economic growth and favourable demographics have often failed to generate sufficient decent employment, contributing to youth frustration and, in some countries, recent political unrest.
As Bangladesh’s demographic-dividend window narrows by the end of 2030s and technological change continue accelerating, tackling labour market challenges is not merely an employment-policy priority—it is fundamental to the inclusiveness and sustainability of Bangladesh’s future development.
Note: This article gives the views of the author/academic featured and does not necessarily represent the views of the Global Development Institute as a whole.
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