The Financial Express

A snap-shot of industry's job creation capacity

| Updated: April 21, 2021 20:57:50

A snap-shot of industry's job creation capacity

The manufacturing industry's share to Gross Domestic Product (GDP) in Bangladesh is more than 24 per cent. Such contribution has been on the persistent rise since 2005-06. During the  period of  15 years,  annual  industrial GDP growth rates were positive  but  the continuity of  gradual  up-trends  was  broken with fluctuations. However,  the  question is :  how many jobs  have been  created  in the same period  against  a specific  unit of  total assets or investment ? Of course, we know the total number of jobs created, but how far employment generation is proportionate to investment growth matters a lot.

If we explain actual job creation capacity, we can be aware of the real scenario of the poor rate of employment generation. Industrial contribution to GDP is the highest among all other sectors, but employment elasticity is awfully disappointing. As planner, we have substantially curtailed  the desired rate of  the elasticity to 0.30  in the 8th 5-year plan while we  achieved 0.57 in 2010.We cannot  understand why the government  maintains a concessional attitude towards the private sector   for   determination  as well as realisation of planned targets  relating to employment .

Conceptually inter-industry and even intra-industry variations in employment-investment  ratio suggest that  it is possible  for an  enterprise  to raise employment per unit of investment in many cases. Undeniably, job creation capacity virtually depends on investment  productivity, profitability, legal obligation, and after all, on the sense of responsibility of entrepreneurs. It is, however, one of the most important stakeholder responsibilities for an industry to create as many jobs as possible to satisfy the people's expectations since businesses require active cooperation from the people.

Job creation capacity of a firm may be expressed in terms of the quantum of investment deployed for creation of one job. This capacity varies from enterprise to enterprise even in the same industry. So there arises a question as to the level at which optimum or normative capacity should be set. It is highly  desirable that  a firm creating  a job against  the lowest  size of its investment ( or whose  EIR is the lowest) as compared to  peer firms of the same industry would be  termed as one with  optimum job creation capacity level.

The mysteries  of slow  growth of   jobs   can be  preliminarily  unveiled  by looking  at the  investment- employment ratio ( i.e., the size of investment of an enterprise  that creates one job) and its  variations  within and across the  industry. The ongoing discussion aims to present   micro-level  evidence  of job creation rates  in different  industries  and firms of the country. Overall data on employment and investment are not available in suitable formats. Bangladesh Economic Review 2020 (particularly the chapter on industry) reveals some data on in

Table-1  shows that there  are  four pharmaceutical  companies  and   their  investment against one job  ranges from Tk.3.0 million to Tk10.06 million. Accordingly, varying levels of investment to employment (one job) are observed in other industries selected and presented in the table. If some firms of the same industry employ workforce irrationally and irresponsibly, we cannot expect employment generation in desired proportion. Degree of automation appears to be the most dominant determinant as evidenced by the significant variation in the employment to Investment ratio (EIR) in peer firms of the same industry.

It is seen from the Table-2 that industrial enterprises located in BSCIC industrial estates   generated every job against Tk.3.36 lac. Job creation capacity seems to be much higher than elsewhere. This information on low EIR provides an opportunity  for  an empirical analysis of employment  generation  endeavour.

It is  indicated by  Table 3  that  the lowest amount  of investment  for creating  one job in EPZs was Tk.4.86 lac (specifically in Uttara  EPZ) while the  highest   investment against one job was Tk.13.69 in Dhaka EPZ. Investment size variation  in EPZS   may be   due to several factors (mainly  varying degree of automation and  industry  category ). It is necessary to  have an insight  into the  EPZs' data  on EIR to explore  the possibility of  higher rate of employment generation.

Table-4  presents   very important information  regarding  actual  rates of  industry-category based employment generation   relative to investment. EIR  varies from 5.66 lac to 590.56 lac. Automation level  is  probably the underlying   cause  of  poor   job creation capacity in several  industries.

Tabulated information gives a snapshot of poor employment generation capacity in the country. Greater the size of investment for one job, lower the job creation capacity and vice versa. The above information is indicative and useful but not conclusive. We need to undertake surveys and engage in dialogues and negotiations with the representatives of businesses to develop employment generation criteria. Each category of industry / firm / enterprise must be contractually issued a prescriptive rule to create jobs. 'How much investment of a particular type of business should provide how many jobs' would be the rule. Until and unless we fix up the normative standard for creating one job, we cannot get our targets fulfilled.

Would the government create jobs? No, it is the private sector that will do the task. Private entrepreneurs would, of course, decide and act independently to carry on their business, but they are also legally and ethically bound to respond to the call of the government for the greater interest of the public. Unforgettably, the government is the   mouthpiece of the people and a segment of the people has no right to disregard the rights of the whole people of a country. Harmonious business-government relation is very essential and can amicably resolve any problem including slower  pace of employment generation .

Haradhan Sarker, PhD, is ex-Financial Analyst, Sonali Bank & retired Professor of Management. [email protected]


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