Raising labour productivity

The International Labour Organisation (ILO) in a report published this week has indicated that Bangladesh must increase its annual labour productivity by 1.5 per cent to achieve high-income status by 2050. Currently, the country's productivity growth is 4.1 per cent against an annual 6.0 per cent required to become a high-income country, says the report titled 'The Asia Pacific Employment and Social Outlook 2024.' The report highlights ongoing employment challenges and emphasises that Bangladesh, with its young labour force, has enough potential to benefit from demographic dividends. However, to capitalise on this potential, investments in modern skills and access to quality employment are essential. Furthermore, the report stresses the importance of investing in the core economy and social protection systems, including pension schemes, as critical steps for future development.
Labour productivity is defined as output per worker or per hour worked. Factors that can affect labour productivity include workers' skills, technological change, management practices and changes in other inputs (such as capital). It is a measure of economic performance that compares the amount of output with the amount of labour used to produce that output. To compare productivity estimates across products, factories, or industries, economists define labour productivity as the production value generated by each worker. The production value is generally measured as value-added, equal to the gross value of sales minus the value of purchased inputs. Labour productivity can thus be estimated at the national and aggregate level and for specific industries in an economy.
One of the highlights of the ILO report is the rapidly aging population of the Asia-Pacific region now adversely affecting labour productivity. Although Bangladesh is still blessed with its huge young population, failing to make the best of this demographic advantage in case of productivity negates the potential that could be had. While unemployment is mainly attributable to less than desired productivity in the country, low level of workers' skills also accounts for poor productivity. The ILO report, referring to the situation in the Asia-Pacific region says that unemployment in the region is projected to remain roughly unchanged in 2024 and 2025, at 4.2 per cent, which corresponds to 87.8 million people remaining out of work in 2024. The region's jobs gap, which shows the total unmet need for employment, amounted to 164 million in 2023. This figure includes women who would like to work but are unable to search for a job because of homecare obligations.
For Bangladesh, it is the lack of adequate investment, particularly in the manufacturing sector that largely accounts for productivity drag. Additionally, it is the low level of skills that stands in the way of enhancing labour productivity. Although the issue often finds space in public discourse, it is yet to figure as central to government policies and programmes. Addressing this challenge is inherently difficult due to the multifaceted nature of the problem. However, given the current situation and the pressing need to move forward, it is essential that efforts are in place in the form of short-to-medium term plans.