Recent developments in Bangladesh underscore economic disenchantment as a fundamental driver of political upheaval, churn, and change. This has been observed globally and in other parts of South Asia (for example, in Sri Lanka). Much of the frustration, especially among the youth, stems from an employment deficit or other dimensions thereof. The issues range from cumulative job losses over long periods with structural transformation due to globalisation; stagnant or low-employment growth induced by fundamental changes in global manufacturing, such as fragmentation and increased capital-intensity; falling ratios of employment in many countries despite healthy growth rates as a young workforce has paced faster; low-paying or poor-quality jobs; and increasingly skewed income-distribution or inequality, amongst major ones. High inflation, especially in food and in energy, and raised costs of living have exacerbated economic hardships for vulnerable populations worldwide.

Together, these have combined with country-specific, non-economic factors to form a critical mass of discontent that has only required a matchstick. What lit the fire in Bangladesh was a court verdict regarding the reservation of public jobs that led to a movement spearheaded by students helming socio-political discontents. The dissatisfaction manifest politically reflects a seeming search for a new or different equilibrium and configuration that, hopefully, are more equal and less difficult all-round, especially economically.

A growing shortfall in employment and its concentration amongst the youth is seen globally. The recent report by the International Labour Organization, Global Employment Trends for Youth 2024, illustrates the magnitude. Following the pandemic, although youth employment in relation to population (employment-to-population ratio) has been restored to previous levels (35%), it is substantially lower than that in the early 2000s; this restoration is also uneven — while youth unemployment has remained above 2019 levels in the upper-middle-income countries, the gap vis-à-vis high-income countries has widened to 1.5 times compared to 1.3 in 2019, with bigger increases in female unemployment; and one-fifth of the world’s young are neither employed, nor studying or training — this idleness is slightly less than that in 2015 because one-third of the countries slipped in its reduction.

This closely tracks the trajectory of world output growth. Since the 2008 crisis ended a five-year economic boom in which global output grew 5% a year on average, the world economy grew slower by about one-and-half percentage points until the pandemic-induced crisis. Thereafter too, global economic growth has recovered to its former, albeit lower, trend in the 3% region. Medium-term growth is likely to slow down as well for several reasons, some structural, according to projections by prominent international agencies.

The context matters for all countries. However, it is more difficult for those with fast-growing, working-age populations such as those in South Asia, one of the world’s youngest regions. In this decade, its workforce is projected to grow at 1.3% a year by the World Bank (South Asia Development Update, April 2024), much above the emerging market and developing economies’ group average (EMDEs, 0.9%). South Asia’s positive demographics enhance its growth prospects compared to its peers. In fact, in this millennium, one-third of South Asia’s GDP growth has come from this demographic endowment, shows World Bank research. However, this growth came with falling ratios of employment in some of its countries (Bhutan, India, Maldives, and Nepal) and reduced ones in others (Bangladesh, Pakistan, and Sri Lanka), subtracting from the total increase in economic output.

It is no surprise that South Asia had one of the world’s highest net migration rates in the decade of 2010-19, undoubtedly in search of jobs or for better ones. A meaningful absorption of its expanding workforce into the labour market is a monumental challenge, therefore. Should growth disappoint or not be sustained with insufficient employment generation, economic frustrations are bound to multiply.

A snapshot preview of Bangladesh’s growth track shows it bucked the slowing world economy for almost one-and-half decades till 2019, growing 6.4% a year on average. Between 2011-2022, its GDP per capita increased 2.6 times to $2,730.8, exceeding India’s; its agriculture-to-manufacturing employment shift was amongst the largest in South Asia; employment acceleration more than twice the EMDE average and one-quarter above its workforce growth, according to the World Bank. These gains came from a garment manufacturing boom, hit badly in this decade by slowing world trade. Its sole growth engine, the low-value-added garment exports sector, has bigger-than-usual linkages with trade, transport, and logistic services, leading to an across-the-board dispersion of the drag down. The plunge in export earnings and a raised import bill from shooting oil prices spilled over to balance of payments difficulties and recourse to IMF-financing while steep currency depreciation exacerbated inflation.

The squeeze from adverse economic shocks is hard amidst a persisting shortfall in employment. The pinch is harder in the absence of freedom or its curtailment, corruption, inequities, amongst other factors that played a role in Bangladesh. For now, the desire for a new political order has been met; this foundation may be built upon and strengthened in forthcoming times. Addressing economic distortions with price stability and adequate employment to accommodate a bulging young workforce will be harder though. This is not quickly achievable. Urgent and concerted efforts are needed; else, economic woes could persist, or compound. These can be painful and unpalatable, especially when buffers are few, indicating the rough path ahead.

In a broader perspective, the growth­-employment mismatch characterising South Asia stands out globally. It underscores the common failure in fully employing its young and growing workforce. World Bank research finds that this enduring weakness has heightened in this millennium — while employment ratios remained generally stable in other EMDEs during 2000-23, that for South Asia fell by 2 percentage points (this covers declines and increases as noted above). At 59%, South Asia’s employment ratio is substantially below the EMDE average (70%). That this is driven by a rapidly growing workforce underlines the jobs’ deficit challenge for all its constituent countries, including India.

Renu Kohli is an economist with the Centre for Social and Economic Progress, New Delhi