Creating productive employment for everyone

During the past few decades, Bangladesh has made notable progress in both economic and social fields. On the one hand, there has been continuity in economic growth, and on the other, the country can boast of its achievements in social development. Since the 1990s, there has been a gradual acceleration in economic growth, and for more than a decade, GDP (gross domestic product) growth has remained over 6.0 per cent per annum. Not many countries in the world have been able to achieve this growth on a continuous basis for such a considerable period. Progress in education and health has also been quite impressive. And the latest piece of good news is that the country has graduated from its 'basket case' image to the category of lower middle-income. Its economic potential is being recognised by the world. As a nation, we are now much more confident, and we have developed a sense of self-respect. Quite naturally, there is a growing feeling of "we are fine" and "we are doing well".

But are all of us fine and are all of us doing well? If that is the case, then why are our youths trying to leave the country even risking their lives? Why do we see so much of destitution around and why does the number of destitute people in the large cities climb like we see during the month of Ramadan? Why are they risking their lives merely for a piece of clothing and a little amount of zakat? When the time of festivals comes, news of unpaid wages at factories and workplaces makes headlines. Were all the workers able to join the Eid celebrations this year with a full payment of their wages, allowances and bonus? These questions imply that all of us are not really doing fine, and all are not being able to participate equally in the process of doing well. It seems that common statements like "we are doing fine" mask important weaknesses that lie in the details.  

An important question is: how are the poor segments and the middle class of the country doing? In terms of numbers, the incidence of poverty (according to income measure) has declined considerably, and the Millennium Development Goal (MDG) in this area has already been attained. But questions may be raised in that respect as well. Given the manner in which income poverty is measured, one can climb above the poverty line even by ensuring one's living through borrowing. Second, remittances sent by hard working children and relatives may also help one get out of poverty. But in that case, the development becomes dependent on the situation in another country. Third, there is very little protection against vulnerability to natural disasters (like floods, cyclones and drought) and man-made crises like sharp increases in food prices and the economic crises that we have witnessed in recent years. If one remembers what happened in Argentina, Indonesia, Thailand, etc. during periods of economic crises, one can imagine the adverse effects that may be suffered by the poor and vulnerable even in middle-income countries. Does one keep track of what happens to the vulnerable (all of whom may not be poor) when they suffer from some shocks?

How are the lower-middle and middle income earners in Bangladesh doing? Of course, it is not easy to define such groups. For the sake of a general discussion and in broad terms, if one defines the poor as the bottom 20 per cent of the population (in terms of income measure) as 'poor', the next 20 per cent as 'lower middle class' and the next 20 per cent as 'middle class', and if one looks at their share in total income, the picture that emerges does not appear to be very bright. The share of the poor in total income declined from 6.52 per cent in 1991-92 to 5.22 per cent in 2010, while that of the lower middle class declined from 10.89 per cent to 9.10 per cent and of the middle income group declined from 15.53 per cent to 13.32 per cent. On the other hand, the share of the top 10 per cent increased from 29.23 per cent in 1991-92 to 35.84 per cent in 2010.

It is clear from the data presented above (which are based on household surveys conducted by the Bangladesh Bureau of Statistics) that during the last couple of decades, the situation of the poor, the lower-middle income group and the middle income group deteriorated. The upper income groups, on the other hand, have climbed further up in the income ladder. Similar conclusions have been reached in a research undertaken recently by Pew Research, a US-based organisation.

Income inequality is only one aspect of economic inequality which is a multidimensional phenomenon that includes inequality in access to education and health services, gender-based inequality, and inequality between rural and urban areas. If one focuses on education, one may cite the notable achievements made in that field, especially with regard to enrolment in primary and secondary education and gender equality at those levels. Policies to lower the cost of education in public schools at these levels have greatly facilitated the enrolment of all classes. But an important question is whether mere enrolment in schools is good enough to narrow down the gap in opportunities between various income groups. Some indication of persisting inequalities can be obtained from differences in the kind of education that is provided in schools, where the poor and the lower income groups send their children and that available in schools where children of upper income groups go. Actually, differences in the quality of education can be an important factor contributing to inequality. And the same can be said about differences in the quality of health care that is received.

One might ask why we are raising these questions regarding inequality when we should be celebrating our successes in various fields. Of course, we have good reasons to feel satisfied, but at the same time we should not forget the underlying weaknesses of the economy. And the growing inequality is only one of them. Apart from the ethical aspect, a rise in inequality is undesirable for several reasons. First, even from the point of view of economic growth, high degree of inequality is not good. In a country like Bangladesh, domestic demand can play an important role in expanding the market for goods and services, and hence in creating incentives for investment and production. One does not have to be a high-calibre economist to understand that increase in the incomes of the lower income groups can contribute to economic growth by strengthening the demand side.

Second, income inequality is important from the point of view of poverty reduction as well. Why? Shouldn't high rate of economic growth automatically result in poverty reduction? Indeed, economic growth is a necessary condition for poverty reduction on a sustained basis. But research has shown that growth is a necessary condition for poverty reduction, but not a sufficient one. The relationship between growth and poverty reduction can actually vary, depending on the type of economic growth a country attains. It is in that regard that the degree of inequality and whether it is rising or falling would be important. When an economy moves to higher levels of per capita income, it may not be possible to sustain the same rate of poverty reduction in relation to output that is attained at low levels of per capita income and development. In Bangladesh, this aspect has to be monitored closely; and in order to maintain the rate of poverty reduction attained in recent years, attention has to be given to what happens to income distribution.

However, it does not appear that the issue of inequality is being given due attention. In fact, until recently, the problem was often ignored. It seems that there has been at least a change in attitude in preparing the Seventh Five-Year Plan (2016-2020). Unfortunately, however, one does not see measures that are needed to tackle the problem effectively. Instead, we have started estimating the number of years that would be needed to graduate to the next level - i.e., to the upper middle-income status.

This is important. We do need to keep our longer-term goal in front of us and move ahead accordingly. But should we limit the goal to increasing the average income or could we add a few other goals? One may note in this regard that the post-MDG development agenda includes, alongside economic growth, elimination of income poverty, reducing income inequality and attaining full and productive employment. Hence, when we talk about graduating to the upper middle income level, can we not say that our goal should be to become upper middle class by taking everyone along and by creating productive employment for everyone? May we hope that by the time the country attains the upper middle-income status, our youths will not have to be on high seas in search of a better life and that the poor will not have to risk their lives while queuing for zakat donations?

The author, an economist, is former Special Adviser, Employment Sector, ILO, Geneva. He is associated with The Financial Express (FE)-Policy Research Institute (PRI)- Bangladesh Economic Analysis Unit.