2026 will be a watershed year for Bangladesh. This is when the country will graduate from the United Nations least developed countries list. In this endeavour, Bangladesh is focusing on socioeconomic policies as integral components of its development agenda. To address perennial issues of poverty, employment and inequality, Bangladesh has resorted to two key policy instruments.
The first of these is the Employment Policy, formulated in 2022. Bangladesh adopted this to overcome employment challenges and promote decent jobs across the economy. The second policy tool is the Action Plan for the National Social Security Strategy (NSSS). This ambitious agenda involves 39 ministries. These two policy documents will help shape the labour and socioeconomic outcomes of Bangladesh as it goes through structural transformation on the path to achieving the United Nations-designated Sustainable Development Goals (SDGs) by 2030.
This writeup presents two recommendations for Bangladesh to help in addressing the primary labour market challenges over the coming decade. The first is to smartly implement the NSSS, which is set till 2026. The second is to curate a wage policy with ‘wage-setting mechanisms’ for different sectors.
Labour market trends
Before going further, let’s take a glimpse of the key labour market indicators for Bangladesh. Bangladesh’s main periodical labour data comes from its Labour Force Survey, the latest provisional report of which was published in 2023. The country’s labour force is 73.4 million, of whom 47.5 million are male and 25.9 million are female. Employment has expanded. The rate of employment growth increased from 0.7% between 2010 and 2017 to 3% between 2017 and 2022.
Between 2017 and 2022, the number of employed persons increased by 10 million, almost the same number was added to the labour force. The number of ‘openly’ unemployed persons shrank from 2.7 million to 2.6 million. The unemployment rate was 3.6%. However, the proportion of the working-age population not participating in the labour force remained high, at 46.9 million people, of whom 75% were females. One crucial strength that Bangladesh has been enjoying since the early 2010s is a burgeoning youth presence in the labour force.
The gaps and challenges
The trends clearly show that two challenges for Bangladesh are to create more job opportunities and to give working-age people job search support. Unemployment benefits and job search assistance schemes can help a huge amount of people find good jobs in the labour market. In addition, having a wage policy will send the right signals to youth. It will also help them better pick sectors that match their capacity.
Bangladesh’s main social security policy, the NSSS, focuses on five major reforms:
- Establish a government to person payment system to transparently deliver cash-benefits;
- Operate a grievance redress system to address complaints in a timely manner;
- Establish a single registry system to collate data on potential beneficiaries;
- Establish credible monitoring and evaluation to evaluate services;
- Streamline existing social security schemes by merging different social programmes across government agencies.
Bangladesh has set an ambitious ‘no poverty’ target as part of its commitment to achieve SDG 1. This entails reducing the extreme poverty rate to 3% while reducing the poverty rate (defined using the national poverty line) to less than 10%. Despite this commitment, Bangladesh has no national target on social protection. This is despite the fact that SDG indicator 1.3 directs countries to enhance coverage of and budget allocations to social protection.
According to the International Labour Organization’s flagship World Social Protection Report, 28.4% of Bangladeshis are covered by at least one social protection benefit. This is better than the South Asian average of 22.8%. However, it is significantly lower than the Asia Pacific average of 44%. Bangladesh’s social security spending stands at 2.5% of its gross domestic product.
The coverage of different social protection branches is noteworthy:
- 29% of children are receiving some form of child or family benefit.
- 20.9% of women are getting maternity benefits.
- 12.5% of the labour force is receiving employment injury benefits.
- 18.3% of persons with disabilities are receiving social protection benefits.
There is no formal unemployment benefit to protect workers out of a job.
Linking the labour market with social security
It is highly encouraging that Bangladesh’s social security strategy acknowledges the interconnection between social security and economic development. Therefore, the existing paradigm, whereby social security is narrowly seen as supporting the vulnerable, needs urgently to be shifted. Social security has to be seen as an economic tool for development and resilience. Only if it is recognised as an integral part of a renewed socioeconomic model can social security obtain impactful fiscal support.
It is highly encouraging that Bangladesh’s social security strategy acknowledges the interconnection between social security and economic development.
Labour market institutions
Now, it’s time to reflect on labour market institutions (LMIs), to make it possible to establish a clear link between wages and the labour market. With the rise of LMIs in economic policy-making, their influence has come to the forefront in labour-related policy discourse. According to Gordon Betcherman’s 2012 report for the World Bank:
‘The laws, practices, policies, and conventions that fall under the umbrella of labour market institutions determine inter alia what kinds of employment contracts are permissible; set boundaries for wages and benefits, hours, and working conditions; define the rules for collective representation and bargaining; proscribe certain employment practices; and provide for social protection of workers.’
It is important to understand that government agencies, private organisations and active labour market policies are not LMIs.
LMIs play a critical role in Bangladesh’s broader development. Having a national wage policy could be the first step towards strengthening the LMIs in the country. It will positively affect all four pillars of the LMI regime. In Bangladesh, 85% of the workforce is in the informal sector, which comprises very small businesses. Job protection, working hours, contract processes and firing mechanisms are weak. Businesses in the informal sector simply do not follow any regulations.
The covid-19 pandemic of 2020 showed how vulnerable informal sector workers are. They have no job protection, unemployment benefits and job retention support. Globally, covid-19 has shown the need to transform informal businesses into formal entities. Such a transition is needed for resilient business growth along with safer employment. Employment protection legislation, the first LMI pillar, is the spark to transform Bangladesh into a formal economy.
Bangladesh will gradually proceed in the non-preferential trade regime, in which issues related to human rights, due diligence, supply chain sustainability and labour rights take centre table at trade negotiations. European due diligence in supply chains will set the new rules of the games for Bangladesh. In this context, the minimum wage, the second pillar of LMIs, will be an impactful tool. A minimum wage protects workers’ rights, improves their living standards, pulls them out of the poverty trap and improves productivity.
Bangladesh will gradually proceed in the non-preferential trade regime, in which issues related to human rights, due diligence, supply chain sustainability and labour rights take centre table at trade negotiations.
Wage policy now
It is high time for Bangladesh to adopt a gender-inclusive economy-wide wage policy with a minimum wage in different sectors. Moreover, a wage policy should guide the living wages scale, as part of a future policy option. Bangladesh has diligently set a minimum wage for the garments sector but left all other sectors unattended. It is thus time to set a minimum wage to ensure workers’ welfare in all sectors.
The International Labour Organization’s Global Wage Report for 2021 identified that, for 42 formal sectors identified by Bangladesh’s government, the average annual growth rate of the real wage had been negative for over two decades, at -5.9%. This suggests that policy-makers and development partners need to exert greater efforts to enhance wage policies in Bangladesh. Social dialogue among the three major stakeholders – government, employers and workers – will be the most effective tool in devising a wage policy.
Photo © Mahmud Hossain Opu