Why GDP growth does not translate to job creation

Though the Bangladesh economy is apparently moving on a path of rapid and sustained growth, job creation has been disappointingly slow in the last some years, particularly since 2010. Only 1.4m jobs were created in the country between 2013 and the FY2015-16, whereas the figure was 4m between 2010 and 2013, according to survey data recently released by the Bangladesh Bureau of Statistics (BBS), which also shows that the country registered its highest employment generation of 6.7m between the FY2005-2006 and 2010. Economists and experts identified that technological upgradation in manufacturing units and sluggish private and public investments in developing infrastructures were contributing to the reduced job creation. Earlier, they had urged the government to take measures for generating more employment opportunities through encouraging private investments, but Finance Minister AMA Muhith did not announce any measure or plan in this regard when delivering his budget speech  in the House earlier this month. In the first 10 months of the current fiscal year, investment share in GDP stood at 30.3%, and private investment’s share was 23% and public investment 7.3%, the data reveals. And, for the next fiscal the government has set a target to increase the investment share in GDP to 31.9%, and private investment’s share is expected to be 23.2% and public investment 8.7%. The minister in his speech said: “We are taking special steps to generate employment opportunities for new entrants to the job market. We will take effective steps to divert the increased workforce to emerging industry and service sectors. “Slow adaptation to changing technologies and production techniques often contributes to unemployment. In this regard, we will impart necessary training among workers to improve their skills.” He, however, did not elucidate the government’s policy for reducing unemployment and how new employment opportunities would be created. The government has set the GDP growth rate for the next fiscal at 7.4%, and private investment as a share of GDP is expected to rise by only 0.25%. The Centre for Policy Dialogue (CPD), a local think tank, in its budget analysis highlighted the need for an additional investment of Tk6,000 crore in the private sector in order to  reach the GDP growth target. Speaking to the Dhaka Tribune, CPD Research Fellow Towfiqul Islam Khan said: “We did not see any reflection of the BBS data regarding labour force and employment in the finance minister’s budget speech. He talked about the GDP growth but did not clarify how the employment opportunities will be generated in pace with the GDP growth. “Moreover, net employment creation in the manufacturing sector has fallen by 9% between 2013 and the FY2015-16, which indicates changes in investment scenario.” He suggested reconstructing production and payment structures for generating new employment opportunities. ABM Azizul Islam, former advisor to a caretaker government, said: “In line with changes in the economy, there have been many changes in economic structure as well. People are moving from low-tech, labour-intensive industries to hi-tech and more capital-intensive ones, and they are increasingly entering manufacturing industries from agriculture and other sectors, where manual labour is principally required. “As a result, job creation slows down despite a sound GDP growth rate.” Participation of self-employed people and small and medium enterprises (SMEs) industries will have to increase in parallel with the value chain of big industries. It will help create employment opportunities, he suggested. Azizul added that the government must ensure a favourable environment for both private and public investors. Abdus Salam Murshedy, former president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said the country’s RMG sector had undergone a safety reforms in recent years that also contributed to the reduced job growth. “On the other hand, a good number of factories have been closed down due to relocation and safety risks, while new investment has been stagnant,” Salam added. In order to bring new investment from home and abroad, he suggested implementing energy projects, upgrading highways into four lane ones and establishing special economic zones on a priority basis. Asked, Biru Paksha Paul, former chief economist of Bangladesh Bank, said: “Employers tend to produce more products with a small workforce, forcing their existing employees to work additional hours. This contributes to shrinking job opportunities. New jobs will not be created unless the share of private investment is GDP increase, he said, emphasising imparting vocational training among workers.