Over the last decade, a silent yet profound paradox has emerged within the Bangladeshi economy: while production and GDP are rising, employment generation is failing to keep pace.
Economists identify this trend as "jobless growth," where the manufacturing and service sectors—traditionally the engines of an economy—are actually seeing a decline in their share of employment.
This structural weakness poses a significant risk to long-term economic stability and inclusive development.
Disconnect Between growth and employment
Recent reports from the International Monetary Fund (IMF) highlight this structural fragility.
Over the past ten years, the manufacturing sector's contribution to GDP grew by approximately 5 percentage points, signaling industrial progress.
However, this growth did not translate to the labor market; instead, employment in manufacturing and services fell by 2.2 and 2.6 percentage points, respectively.
Consequently, the agricultural sector has acted as a "buffer," absorbing excess labor by increasing its employment share by 4.8 percentage points despite its diminishing contribution to GDP.
This shift threatens to weaken the economy by reducing overall productivity.
The crisis is centered on a significant stagnation in private investment.
According to the Bangladesh Bureau of Statistics (BBS), private investment fell to 22.03% of GDP in FY25, the lowest in a decade.
Total investment stood at Tk157,000 crore against a GDP of Tk5,515,000 crore.
This lack of capital has stifled the establishment of new industries and slowed GDP growth to 3.49%, the lowest since the pandemic.
Furthermore, labor productivity remains a major hurdle; at $8.70 per hour, Bangladesh lags significantly behind regional competitors like Vietnam ($12.40), India ($10.70), and Sri Lanka ($18.00).
This is largely because 84% of the workforce remains in the low-productivity informal sector.
Paradox of educated unemployment
The labor market crisis is most visible among the youth, where a stark mismatch exists between the education system and industrial demand.
While the national unemployment rate is a modest 3.69%, the rate among the highly educated is a staggering 25%.
This discrepancy is even more pronounced for women, with highly educated female unemployment reaching 16.66%—more than double that of men.
This "skills gap" means that while industries struggle with a shortage of skilled labor, thousands of graduates remain jobless.
Research by Rapid and FES indicates that Bangladesh’s growth is shifting from being labor-intensive to capital-intensive.
In the last decade, while industrial production grew by 10% annually, the sector lost nearly 1.4 million jobs.
The readymade garment (RMG) sector exemplifies this; despite exports surging from $12.5 billion to $40 billion, the workforce has remained stagnant at 4 million.
Due to automation, the number of workers required to produce $1 million in exports has plummeted from 545 to fewer than 90.
This technological shift has also contributed to a sharp decline in female participation in manufacturing.
Prof Mustafizur Rahman of CPD describes the current situation as a "four-pronged attack" driven by political uncertainty, high interest rates (currently 13–14%), rising business costs, and global trade volatility.
Mustafa K Mujeri emphasizes that the education system's failure to adapt to market needs is fueling the skills deficit.
Meanwhile, Hossain Zillur Rahman suggests that policymakers have become complacent due to past growth successes, noting the imbalance where 45% of the workforce is tied to agriculture, which contributes only 11% to the GDP.
The path forward
The primary challenge for Bangladesh is converting statistical growth into tangible jobs.
Addressing this requires creating a stable policy environment to restore investor confidence, diversifying the industrial base beyond garments, and strengthening the link between academia and industry through skill-based training.
Attracting foreign direct investment (FDI), which is currently at a five-year low, is also essential for technology transfer.
Ultimately, growth alone cannot solve the employment crisis; without structural reforms in the manufacturing and service sectors, the benefits of the economy will remain confined to statistics rather than reaching the people.
