Bangladesh has widened access to higher education massively over recent decades, and its economy has expanded in parallel. But the formal job market has not grown in sync. Roughly 84 percent of the country’s labour market remains outside institutional structures.

The latest data and analysis from the Bangladesh Bureau of Statistics (BBS) and the International Labour Organization (ILO) show that about 84.07 percent of the country’s total workforce operates in the informal sector. Efforts to generate formal employment over the past decade have moved at a crawl. The rate exceeds 92 percent in rural areas, where agriculture still dictates the pattern of work.

A recent ILO study has identified a “structural change” underway in Bangladesh’s economy. In most developing countries, labour migrates from farming into industry and manufacturing. Bangladesh has seen the opposite. Slow industrial growth is shunting workers back into low-productivity informal activities such as agriculture and self-employment.

Economists and labour experts say the country’s industrialisation cannot absorb the bulk of the labour force. Beyond the ready-made garment sector, no large-scale labour-intensive industry has emerged. That failure forces educated and unskilled workers alike to hunt for work in the informal economy.

The Labour Force Survey 2023 reveals that 58.73 percent of highly educated young people work informally. Among those with a higher secondary qualification, the share climbs to 70.71 percent. With formal jobs unable to meet the employment demand, large numbers of highly educated youth remain without work. An unemployment breakdown by educational qualification shows the highest rate among the most educated: 13.11 percent. The rate for higher secondary graduates is 6.59 percent, while for those with lower qualifications it drops below 3 percent.

Highly educated young Bangladeshis say the country’s socio-economic realities steer a great many of them towards government employment. But government posts are scarce, and the exam system demands long, grinding preparation — forcing graduates to spend years unemployed after completing their degree.

Naim Islam finished his undergraduate studies at a public university in 2023. Three years on, he has yet to join any organisation.

“Most private companies here don’t offer enough pay or benefits. Many don’t even pay salaries and allowances on time,” he told Bonik Barta. “That’s why I’m trying for a government job. If I take a job now, preparing for the recruitment exams would become impossible, because the syllabus often bears no resemblance to what I studied at university; so I basically have to start from scratch.”

He added that much private-sector work is still not regarded as “respectable” in society. So highly educated youth spend years chasing government posts, and when their eligibility to apply eventually runs out, many are forced into the informal economy.

Evidence of this fixation on government jobs is plain in recruitment drives where graduates apply for and accept roles that require far lower qualifications than their own.

ILO data show that more than two million young people enter Bangladesh’s labour market each year. A large share end up freelancing, ride-sharing, or doing petty trading — none of which falls within any institutional framework. As a result, the sector accounts for roughly 40 to 45 percent of GDP while workers remain cut off from the protections of labour law.

AKM Fahim Mashroor, chief executive of Bdjobs, believes a growing educated population has not been matched by a growing formal economy, so the jobs market has stayed informal. “Our economy is essentially informal; the formal sector has never really expanded,” he told Bonik Barta. “So I don’t see it as abnormal that about 84 percent of the labour force is in the informal segment. The market reflects the structure of the economy. A big obstacle to breaking out of this is the absence of policies to formalise the informal sector. Specifically, the government’s revenue strategy discourages businesses from going formal — taking out a trade licence raises the tax burden, so many prefer to remain informal. In my view, taxation policy is the root problem. Without formalisation, labour rights can’t be guaranteed.”

The informal sector’s gravest risk is the absence of social protection. BBS data show that 95 percent of workers in this sector lack an appointment letter. They have no fixed working hours, no health insurance and no pension provision.

SM Hafizur Rahman, a professor at the University of Dhaka’s Institute of Education and Research, told Bonik Barta: “The reason we haven’t been able to bring a large share of the educated population into formal employment is a lack of planning. We can’t align education with employment. We are not looking at what kind of demand exists in the formal sector. The number of certificate holders far outstrips the employment on offer, which is why a big segment remains outside.

He added that in developed economies such as Europe and Australia, authorities maintain workforce demand projections based on the number of graduates entering the market. “We need that kind of policy. For those who drop out at the SSC level or earlier, we must create employment in the informal sector.”

Those in the informal economy have been hit hardest by the recent bout of high inflation. The ILO says steep price rises have sharply eroded these workers’ real wages. While formal-sector employees receive increments and allowances, informal workers’ incomes have flatlined, slowing poverty reduction.

An analysis of BBS data shows female participation in the informal sector outnumbers male participation. But in contrast, highly educated women trail in formal employment. Among highly educated men, 45.48 percent hold formal jobs; the rate for highly educated women stands at just 27.87 percent. Nearly 90 percent of women engaged in agriculture and domestic work belong to the informal sector.

Stakeholders argue that achieving the Sustainable Development Goals requires bringing this immense workforce step by step under institutional frameworks. Small and medium enterprises must be registered officially and granted access to easy credit and labour-law protections, they say.

Syed Sultan Uddin Ahmed, who led the labour reform commission under the former interim government and serves as executive director of the Bangladesh Institute of Labour Studies, told Bonik Barta: “Informal workers are consistently overlooked. Policymakers lack the necessary perspective to bring them into institutional structures and protection, though that’s urgent for society and the economy. Productivity and development are impossible while such a vast workforce remains outside.”

He added: “The labour issue is absent from the country’s political and economic discourse. That has bred a culture of neglect. Institutionalising workers isn’t difficult; a lack of will is the real problem. Fair wages are essential to curb inequality. But without standards in place, workers can’t claim what they deserve.”