The Financial Express

Growth and employment

| Updated: October 23, 2017 20:07:30

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Growth and employment

Economic growth and employment generation are considered to be inextricably linked. In Bangladesh particularly, the most recent experience relating to growth-employment nexus does not seem to hold good.  Again, within employment, there could be a sharp difference between productive and non-productive low-paid employment. That economic growth may not necessarily generate employment growth, especially productive employment, has long been tested empirically. The question is what kind of growth would generate more productive employment?
Possibly there are not many empirics on this count. The successive Five Year Plans in Bangladesh assumed almost a linear relationship between economic growth and employment generation. It is thus no wonder that half of the labour force is employed in agriculture that contributes to roughly one-fifths to the Gross Domestic Product (GDP).  Over time, labour has been transferred to urban areas but decent living for workers is yet out of reach. The famous Lewsian transformation is yet to take roots in Bangladesh. There are many other puzzles in the domain of growth and employment hardly resolved by available researches.
We shall draw on a research by Rizwanul Islam and Rushidan Islam Rahman dealing with the prevailing labour market and employment situation. Both of them are better known for their long experience in research relating to labour market and employment. Their  observations in the research paper,  'Bangladesh Employment and Labour Market Watch 2017', may help shape policies and programmes. 
The authors kicked off with clarifying a few conceptual confusions.  For example, they refer to 'productive employment' - enshrined in SDGs - which is opposed to the general use of the term. Employment per se cannot (and possibly should not) be the goal although it springs from growth itself. The target of SDG is to achieve, by 2030, 'full and productive employment and decent work for all women and men, including young people and persons with disabilities, and equal pay for work of equal value'. Second, the researchers appear to rekindle the old reckoning that high economic growth itself is a panacea for neither employment generation nor development. It is important but may not be sufficient for generating employment growth. 
"Economic growth is important for employment generation, but there is no automaticity in the relationship between the two variables. Policies and strategies are needed to make economic growth more employment friendly". They suggest that a monitoring device should be developed to see that economic growth invariably produces 'productive' employment.  Third, open unemployment is not an appropriate indicator of the labour market situation in Bangladesh although in developed countries it could be so. The reason is simple. In a developing country like Bangladesh where there is no unemployment benefit, poor people can hardly afford to remain unemployed. Further, the way employment is measured (i.e., working less than one hour during reference week), can hardly capture full employment condition in true sense. So, alternative indicators of measuring open unemployment are required.
The authors are of the view that on the whole, the performance of the labour market in Bangladesh, mapped into the above-mentioned measures, has been a mixed one with no clear trend in progress towards achieving full and productive employment. "It should be noted that productive employment is only one of the components of decent work. The other elements include social protection, rights of workers, and freedom to form associations and bargain collectively with their employers."
Then comes the question of chiming challenges looming large on the horizon. First, if the aim is to fully utilise the surplus labour available in the country within the next 15 years (by 2030), GDP growth rate must reach 8 per cent per annum. With the current level of growth at 6.5 per cent, absorption of surplus labour seems a forlorn hope. The GDP growth again is a necessary condition; it must be associated with high output growth, especially in the formal sector. Second, for high output growth to generate high growth of employment, manufacturing sector output should hover in the order of 10-12 per cent per annum with a desperate dive towards diversification leaned on labour-intensive technologies. For example, leather and leather products, sports shoes, furniture, electronics etc. should receive a neutral policy regime. Third, growth and employment in the construction sector need to be revived. The rise in per capita income and its concomitant rise in demand for housing should provide a boost to construction sector. 
Besides, with current initiatives in the area of infrastructure, demand for construction services are likely to pick up.  Fourth, more inclusive growth is needed to strengthen the demand for goods from labour-intensive industries like garments, shoes, furniture, housing etc. Finally, real wages of workers can play an important role in two ways - ensuring a decent living for workers and making economic growth more inclusive and employment- friendly. The former would generate more employment, income and demand for goods and services. Public policy has to keep an eye on what is happening to real wages, possibly, with a provision for adjustment in wages during inflation. By and large, a periodic review of wages should duly factor in improvement in productivity.  
The rationale for inclusive growth is also justified on the ground of generating more demand for goods and services.  An inclusive growth enables low and middle-income groups' demand for more labour-intensive non-food products as well as on domestic tourism as opposed to expenditures on international tourism by the rich. Therefore, a broad-based growth is a sine qua non of increased aggregate demand in the economy, a growth strategy that yields more employment.
The writer, a former Professor of Jahangirnagar University, is Chair, Department of Economics and Social Science (ESS), BRAC University. [email protected]/
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