Labour market: A ticking time bomb

Bangladesh has an oversupply of tertiary graduates and the unemployment rate among the educated youth has grown 2.5 times since 2010 as they are ‘incompatible’ with the structure of the industries and the economy, according to the white paper on the state of the economy.
Not only that, despite having a tertiary-level education, these graduates are ill-prepared for the market owing to low technical knowledge, the paper added.
Over the past 12 years, the number of tertiary graduates spiked by about 2.5-fold, accounting for about 9 percent of the total labour force in 2022. Hand in hand, the unemployment rate of this group increased from 4.9 percent in 2010 to 12 percent in 2022.
“This group consists of university and college graduates, including from the Madrasah stream, who are incompatible with the structure of industry and service sectors of the country. The graduates are not only oversupplied, they are ill-prepared for the market and have little skills, both hard and soft, to offer,” according to the report.
About 60 percent of public university students are studying arts and social sciences, 24 percent commerce, and only 12 percent science, technology, engineering and mathematics (STEM).
However, enrolment in STEM fields is much lower in tertiary colleges.
The fact that the share of STEM graduates is low can merely reflect the structure of the economy with low demand for them, the paper read.
“That is, unless the economic growth is propelled by high tech industries and services including ICT, the demand for STEM graduates will remain low,” it said. “It is a catch-22 situation, which is why integration of education policy with industrial policy is critical.”
The 12-member white paper panel, led by economist Debapriya Bhattacharya, submitted the paper to Chief Adviser Professor Muhammad Yunus on Sunday.
The white paper panel also termed the employability and labour market dynamics as a “ticking time bomb”.
In the face of rising youth unemployment, there was a widespread student movement in July this year demanding reforms to the quota policy for government jobs.
This frustration ultimately boiled over after a series of retaliatory measures from the government, eventually climaxing in the ouster of the Awami League government and Prime Minister Sheikh Hasina, who fled to India.
The service and industry sector mostly rely more on professionals and technicians who have completed secondary or higher secondary education, i.e. technical graduates than university graduates, it observed.
White-collar jobs make up about 9 percent of employment opportunities in industries and 23 percent in the service sectors, according to the Labour Force Survey 2022.
Currently, about 10.5 lakh students, or about 68 percent of students, are studying in 55 public universities while the rest are enrolled in 116 private universities.
Additionally, there are about 1,941 tertiary-level colleges that award honours and master’s degrees. These colleges have about 41.8 lakh enrolled students.
The white paper also estimated that the manufacturing sector had disproportionately absorbed labour from the agriculture sector compared to the service sector.
Just over half of the labour force was employed in agriculture at the turn of the millennium while 36 percent was in the service sector and 12 percent in manufacturing.
However, by 2022, agriculture’s share dropped by about five percentage points to 45 percent while that of the manufacturing sector increased by the same magnitude to 17 percent.
It also estimated that about 85 per cent of the employment is created in the informal sector. This number is even higher in rural areas, where it hovers around 88 percent.
“The transition from informal to formal has been very sluggish. The share of informal jobs has been reduced by only 2.6 percentage points over the years since 2010,” the paper read.
The white paper panel identified three major problems in the labour market.
First, the employability of the labour force is low due to poor foundational training in schools and a lack of training for job readiness.
Second, the labour market is subject to various kinds of mismatches. The education system is producing more graduates than the market can absorb and more arts and social science graduates than the market demands.
The imbalances in supply and demand in skill levels have plagued the labour market, a frequent complaint among employers.
Third, there are not enough jobs created by the public and private sectors to absorb new entrants to the market. Given the structure of the industry, opportunities for tertiary graduates are very limited. In fact, there are no statistics on how many decent jobs are created every year, the report found.
To combat these issues, the white paper committee recommended strengthening public investment in technical sectors.
“Although technical and vocational education and training (TVET) has a reputation for its high employability and decent payment, it fails to attract good students. The image and social recognition of TVET graduates should be enhanced through learning from well-designed pilot experiments.”
Aligning policies and strategies is critical for minimising mismatches.
“There is no labour market strategy commensurate with the growth strategy of the country. In fact, the long-term plan, including growth strategy, are not consistent with sectoral plans,” the paper said.