Published in The Daily Star on 25 December 2020
The Rule of 70, sometimes also referred to as the Rule of 72 or Rule of 69.3, is a method for approximating the number of years it will take for a number to double, given its annual growth rate. As mentioned in the book “Summa de Arithmetica”, by the “father of accounting and bookkeeping” Luca Pacioli, in 1494, it is a simple calculation in which the rule number is divided by the annual growth rate to obtain the approximate number of years required for doubling. Using this rule for per capita Gross Domestic Product (GDP), it can be shown that if per capita GDP grows at 1 percent per year, then it will take roughly 70 years for the average person in a country to become twice as rich as they are today. On the other hand, if per capita GDP grows at 3 percent per year, it will take only a little more than 23 years for the average person in a country to become twice as rich as they are today.
Thus, even small differences in the growth rate of the economy over long periods of time may lead to dramatically different standards of living for the people of a country. So, what are the characteristics of an economy that make it grow faster than others? What policies can the government take to accelerate the pace of economic growth? Regarding such questions, Nobel laureate economist Robert Lucas remarked, “The consequences for human welfare involved in questions like these are simply staggering: once one starts to think about them, it is hard to think about anything else.”
The Sustainable Development Goal (SDG) 8 acknowledges the importance of economic growth. Unfortunately, Covid-19 has brought in sudden and drastic disruptions that have ravaged the world economy and will most likely produce the greatest rise in global unemployment since World War II. For Bangladesh, the economic fallout from Covid-19 will be multidimensional in nature and massive in magnitude. For example, as of October 2020, real GDP growth for Bangladesh in 2020 has been estimated to be 1.6 percent by the World Bank and 3.8 percent by the International Monetary Fund (IMF).
Earlier in April, the World Bank had forecasted that on a disaggregated level, real growth in Bangladesh economy in 2020 would be 3.5 percent for the agriculture sector, 2 percent for the industry sector and 3.5 percent for the services sector. At this rate, the agriculture sector would create 0.10 million more jobs, whereas the industry and services sectors would create 0.21 million and 0.9 million less jobs respectively, compared to 2018-19, assuming that employment-to-GDP elasticity would remain equal to that between 2015-16 and 2016-17 and the level of employment would be equal to that in 2016-17. This suggests that the economic slowdown caused by Covid-19 may reduce employment in services and industry sectors, but create jobs in the agriculture sector, which would reverse decades of gradual structural transformation and stall the development of the economy.
Such dismal predictions seem to reflect the ground reality since, as of June 2020, at least 50,000 low-income individuals left Dhaka and returned to their village homes after losing their jobs due to the pandemic.
SDG 8 also asserts the need for decent jobs. Unfortunately, despite the rapid economic growth, Bangladesh has struggled to provide productive employment and decent jobs for its young labour force. In 2017, the youth unemployment rate was as high as 10.6 percent, whereas the national unemployment rate was 4.2 percent. Regrettably, the unemployment rate among the youth who had completed tertiary-level education was 13.4 percent. This implies that the education system in Bangladesh is being unable to endow young people with market-relevant skills. In 2018, the share of the youth Not in Education, Employment or Training (NEET) was 26.2 percent in Bangladesh compared to the global average of 21.2 percent. These issues are particularly disconcerting because the country is now at the juncture where it may be able to reap the demographic dividends if it can gainfully employ its enormous young population.
The International Labour Organization has estimated that the fall in working hours in South Asia due to Covid-19 in the first two quarters of 2020 would be equivalent to 161 million full-time 40-hour-per-week jobs. Computable General Equilibrium (CGE) modelling has estimated that almost 140 million people in five South Asian countries and 12.37 million in Bangladesh may lose their jobs due to the pandemic. A survey by the Asian Development Bank has shown that the number of online job postings in Bangladesh in April 2020 was only 13 percent of the number of online job postings in April 2019. As of April 2020, 71 percent of urban slum-dwellers and 55 percent of the rural poor had no jobs due to Covid-19.
In the book “Youth Employment in Bangladesh: Creating Opportunities—Reaping Dividends”, which I co-authored, we put forward a few suggestions for achieving SDG 8 in Bangladesh that are more relevant now in the context of Covid-19. These include: i) creating a database of youth NEET; ii) linking youth with employers; iii) revolutionising the education system so that it can build analytical competence and instil critical thinking skills in students; iv) increasing availability of technology and internet, particularly in the rural areas; v) reforming technical and vocational training to address the current need of industries; vi) ensuring equal employment opportunities for all without discrimination, prejudice or nepotism; vii) improving access to information at national, regional, and local levels; viii) promoting self-employment through entrepreneurship; ix) providing career counselling for the youth from an early stage; x) fostering an enabling environment for female youth; xi) training informal workers; and xii) seeking employment opportunities abroad.
Syed Yusuf Saadat is a Senior Research Associate at the Centre for Policy Dialogue (CPD).
Email: saadat@cpd.org.bd