Bangladesh’s labor market is facing a profound crisis, marked by rising unemployment, declining labor force participation, and increasing gender disparities. According to the World Bank, the overall employment rate has decreased by approximately 2 percentage points, with significant job losses across all sectors. The service sector has experienced the largest decline at 2.6%, followed by agriculture at 2.3%, and industry at 0.8%. This downturn has led to over 60,000 job losses in the past nine months alone, with more than 4% of the workforce losing their jobs in the second half of 2024. Wages have also been affected, with low-skilled workers seeing a 2% decrease and high-skilled workers a 0.5% decrease.
Factors contributing to the Crisis: Several factors have contributed to the current labor market crisis:Weak Law and Order Situation: Ongoing political instability and security concerns have created an environment where businesses are reluctant to invest and expand, leading to job cuts and hiring freezes.
Deteriorating Business Environment: Economic uncertainties, including high inflation and energy shortages, have increased operational costs for businesses, prompting them to reduce their workforce.
Lack of Employment Opportunities: The closure of over 100 garment factories between January 2024 and March 2025 resulted in the loss of 96,000 jobs in the sector. While 128 new factories opened, they created only 74,081 jobs, leading to a net loss in employment opportunities. Additionally, the manufacturing sector has seen a 9.6% decline in jobs despite a 9.1% growth in output over seven years.
Impact on Women and Youth: Women and youth have been disproportionately affected by the labor market downturn:Female Unemployment: The unemployment rate for women surged to 7.16% in the July-September quarter of 2024, up from 6.15% the previous year. In contrast, men’s unemployment rate increased slightly to 3.81% from 3.46%. Youth Unemployment: Youth unemployment remains high, with young women aged 15-24 facing the highest unemployment rate at 16.5%, double that of their male counterparts.
These disparities are attributed to factors such as gender discrimination, limited access to education and training, and societal norms that restrict women’s participation in the workforce.
Economic Implications: The labor market crisis has broader economic implications:Increased Poverty: The national poverty rate is projected to rise to 22.9% in 2025, up from 18.7% in 2022. The share of people living in extreme poverty is expected to nearly double to 9.3%, potentially pushing an additional 3 million people into this category.
Income Inequality: The Gini index, a measure of income inequality, is projected to rise to 36.1 in 2025 from 33.4 in 2022, indicating widening income disparities.
Depletion of Savings: Three in five households are reported to have faced increased financial stress by depleting their savings, driven largely by deteriorating labor market conditions between 2023 and 2024.
Policy Recommendations: To address the labor market crisis, experts suggest the following policy measures:Enhancing Job Creation: The government, employers, and workers should prioritize job creation and economic diversification. This includes reviewing the National Employment Policy 2022 to strengthen the link between skills development and active job creation.
Promoting Female Employment: Implementing policies that address gender discrimination, provide equal access to education and training, and support women’s participation in the workforce are essential.
Supporting Youth Employment: Developing programs that provide skills training and employment opportunities for youth, particularly young women, can help reduce unemployment rates in this demographic.
Improving the Business Environment: Addressing issues such as political instability, security concerns, and high operational costs can encourage businesses to invest and expand, leading to job creation.
Looking Ahead: Bangladesh’s labor market is facing significant challenges, with rising unemployment, declining labor force participation, and increasing gender disparities. Addressing these issues requires comprehensive policy reforms that promote job creation, support women’s and youth employment, and improve the overall business environment. Without urgent action, the country risks further economic decline and increased poverty.
The World Bank emphasizes the need for bold and timely reforms to help Bangladesh return to a strong, inclusive, and sustainable growth path. By focusing on job creation and economic diversification, the country can overcome the current labor market crisis and build a more resilient economy. While the current labor market crisis presents significant challenges, it also offers an opportunity for Bangladesh to implement necessary reforms that can lead to long-term economic stability and growth. By prioritizing job creation, supporting vulnerable populations, and improving the business environment, Bangladesh can navigate this crisis and emerge stronger.