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Bangladesh's demographic dividend: A ticking time bomb or a golden opportunity?

Published : Sunday, 2 March, 2025 at 12:00 AM  Count : 273
Dr  Matiur Rahman
Bangladesh, a South Asian nation with a population of over 170 million, stands at a critical juncture in its development trajectory. The country is currently experiencing a demographic dividend, a phenomenon that occurs when a significant proportion of the population is of working age. This dividend could potentially lead to accelerated economic growth.

However, whether this demographic dividend becomes a golden opportunity or a ticking time bomb depends on how effectively Bangladesh can harness its youthful population, create employment opportunities, and invest in human capital development.

The demographic dividend refers to the economic growth potential that arises from changes in a population's age structure, mainly when the working-age population (typically defined as those aged 15 to 64) grows more significantly relative to the dependent population (children and older people). This shift can lead to increased productivity, higher savings, and more substantial investment in the economy, provided that the working-age population is gainfully employed and possesses the necessary skills to contribute to economic activities.

In Bangladesh, the demographic dividend is driven by a declining fertility rate and improvements in life expectancy. According to the World Bank, Bangladesh's total fertility rate (TFR) has fallen from over six children per woman in the 1970s to around 2.0 in 2024, which is close to the replacement level. This decline has been attributed to increased access to family planning services, higher levels of female education, and urbanisation.

At the same time, life expectancy has risen to approximately 73 years, reflecting improvements in healthcare and living standards. As a result, the proportion of the working-age population has been growing steadily, presenting an opportunity for economic transformation.
Bangladesh's demographic dividend has the potential to fuel significant economic growth if the country can effectively utilise its youthful workforce. The ready-made garment (RMG) sector, which accounts for over 80% of the country's exports and employs millions of workers, has been a key driver of economic growth in recent decades.

The sector has benefited from the availability of a large, low-cost labour force, particularly young women who have migrated from rural areas to urban centres in search of employment. In 2024, the RMG sector continues to play a crucial role in the economy, with exports reaching record levels and contributing to the country's foreign exchange reserves.
Beyond the RMG sector, Bangladesh has also made strides in other industries, such as pharmaceuticals, information technology, and agriculture. The pharmaceutical industry, for instance, has grown significantly, with domestic companies meeting over 97% of the country's demand for medicines and exporting to more than 150 countries.

Similarly, the IT sector has shown promise, with a growing number of tech startups and freelancers contributing to the digital economy. These developments suggest that Bangladesh has the potential to diversify its economy and create new opportunities for its youthful population.
Despite the potential for economic growth, Bangladesh faces several challenges in fully harnessing its demographic dividend. One of the most pressing issues is the lack of quality employment opportunities for its growing workforce. While the RMG sector has been a significant source of employment, it is often characterised by low wages, poor working conditions, and limited opportunities for upward mobility. Moreover, the sector's reliance on low-cost labour makes it vulnerable to external shocks, such as fluctuations in global demand and competition from other low-wage countries.

The informal sector, which employs a significant portion of the workforce, also poses challenges. Informal workers often lack job security, social protection, and access to decent working conditions. According to the International Labour Organization (ILO), over 85% of Bangladesh's workforce is engaged in informal employment, highlighting the need for policies that promote formalisation and improve labour standards.
Another major challenge is the mismatch between the workforce's skills and the labour market's demands. While Bangladesh has made progress in expanding access to education, the quality of education remains a concern. Many young people graduate from schools and universities without the skills needed to secure well-paying jobs in emerging sectors such as IT, engineering, and healthcare. This skills gap is exacerbated by limited investment in vocational training and technical education, which are critical for preparing the workforce for the demands of a modern economy.

Youth unemployment and underemployment are significant issues that threaten to undermine Bangladesh's demographic dividend. According to recent data from the Bangladesh Bureau of Statistics (BBS), the youth unemployment rate stands at around 12%, which is significantly higher than the overall unemployment rate of 4.5%. This disparity reflects the challenges faced by young people in transitioning from education to the labour market, particularly in a context where job creation has not kept pace with the growing number of job seekers.

Underemployment is another concern, with many young people working in jobs that do not fully utilise their skills or provide adequate income. This is particularly true for university graduates, who often find themselves overqualified for the available jobs. The lack of opportunities for meaningful employment can lead to frustration and disillusionment among young people, potentially fueling social unrest and political instability.

Gender disparities in the labour market further complicate Bangladesh's efforts to harness its demographic dividend. While the RMG sector has provided employment opportunities for millions of women, gender inequality remains pervasive in other sectors of the economy. Women's labour force participation rate in Bangladesh is around 36%, which is significantly lower than that of men. Cultural norms, limited access to education and training, and safety concerns are among the factors that constrain women's participation in the workforce.
Moreover, women who enter the labour market often face discrimination and unequal pay. According to a 2024 report by the International Labour Organization (ILO), the gender pay gap in Bangladesh is around 20%, meaning that women earn significantly less than men for similar work. Addressing these gender disparities is essential for maximising the potential of Bangladesh's demographic dividend, as women represent a significant portion of the working-age population.

Urbanisation is another key factor shaping Bangladesh's demographic dividend. The country has experienced rapid urbanisation in recent decades, with the urban population growing at an annual rate of around 3%. Dhaka, the capital city, is one of the fastest-growing megacities in the world, with a population of over 22 million people. While urbanisation has contributed to economic growth by creating opportunities for employment and entrepreneurship, it has also placed immense pressure on infrastructure, housing, and public services.

Rural-urban migration has been a major driver of urbanisation, with millions of people moving to cities in search of better economic opportunities. However, many migrants end up in informal settlements, where they face poor living conditions, limited access to essential services, and vulnerability to environmental hazards such as flooding and waterlogging. The lack of affordable housing and adequate urban planning has exacerbated these challenges, highlighting the need for policies that promote sustainable urbanisation and improve the quality of life for urban residents.

Investing in education and skill development is critical for ensuring that Bangladesh's youthful population can contribute to economic growth and development. While the country has made significant progress in increasing school enrollment rates, the quality of education remains a concern. According to the World Bank, learning outcomes in Bangladesh are below regional averages, with many students lacking basic literacy and numeracy skills. This is particularly true in rural areas, where access to quality education is limited.

“Bangladesh's demographic dividend presents both a significant opportunity and a challenge for the country's future. With a growing working-age population, driven by declining fertility rates and rising life expectancy, Bangladesh has the potential to fuel economic growth, especially in sectors like ready-made garments, pharmaceuticals, and IT.”

To address these challenges, the government has launched several initiatives aimed at improving the quality of education and expanding access to vocational training. For example, the National Skills Development Authority (NSDA) has been working to align vocational training programs with the labour market's needs, particularly in emerging sectors such as IT, healthcare, and construction. However, more needs to be done to scale up these efforts and ensure that young people have the skills necessary to succeed in a rapidly changing economy.
The health and well-being of the population are also critical for realising the demographic dividend. While Bangladesh has made significant progress in improving health outcomes, challenges remain. Maternal and child mortality rates have declined, and life expectancy has increased, but access to quality healthcare remains uneven, particularly in rural areas. Non-communicable diseases (NCDs) such as diabetes, cardiovascular diseases, and cancer are on the rise, posing a growing burden on the healthcare system.

Investing in healthcare infrastructure and preventive care is essential for ensuring that the working-age population remains healthy and productive. The COVID-19 pandemic highlighted the importance of a robust healthcare system. While Bangladesh has made strides in vaccinating its population, the pandemic has also exposed weaknesses in the healthcare system that need to be addressed. Strengthening the healthcare system will not only improve health outcomes but also contribute to economic growth by reducing the burden of disease and increasing productivity.

Environmental challenges and climate change pose significant risks to Bangladesh's demographic dividend. The country is one of the most vulnerable to the impacts of climate change, with rising sea levels, increased frequency of cyclones, and erratic weather patterns threatening livelihoods and food security. According to the Intergovernmental Panel on Climate Change (IPCC), Bangladesh could lose up to 17% of its land area by 2050 due to sea-level rise, displacing millions of people and exacerbating urbanisation pressures.

The agricultural sector, which employs a significant portion of the workforce, is particularly vulnerable to climate change. Changes in rainfall patterns, increased salinity, and extreme weather events can reduce crop yields and threaten food security. Addressing these challenges requires investments in climate-resilient infrastructure, sustainable agriculture, and disaster risk management. Failure to do so could undermine the country's economic growth and exacerbate social inequalities, turning the demographic dividend into a demographic burden.

To maximise the potential of its demographic dividend, Bangladesh needs to adopt a comprehensive and integrated approach that addresses the challenges outlined above. Key policy recommendations include:

1. Promoting Job Creation and Economic Diversification: The government should focus on creating quality employment opportunities by promoting economic diversification and supporting emerging sectors such as IT, pharmaceuticals, and renewable energy. This can be achieved through targeted investments, incentives for private sector development, and policies that encourage innovation and entrepreneurship.

2. Investing in Education and Skill Development: Improving the quality of education and expanding access to vocational training are essential for equipping the workforce with the skills needed for a modern economy. The government should prioritise investments in education infrastructure, teacher training, and curriculum development, with a focus on STEM (science, technology, engineering, and mathematics) education and digital literacy.

3. Addressing Gender Disparities in the Labor Market: Policies aimed at promoting gender equality in the labour market are critical for maximising the demographic dividend. This includes measures to increase women's access to education and training, encourage women's entrepreneurship, and address barriers to women's participation in the workforce, such as safety concerns and cultural norms.

4. Strengthening Healthcare Infrastructure: Investing in healthcare infrastructure and preventive care is essential for ensuring that the working-age population remains healthy and productive. The government should prioritise investments in healthcare facilities, training for healthcare workers, and programs aimed at addressing the growing burden of non-communicable diseases.

5. Promoting Sustainable Urbanization: Addressing the challenges of urbanisation requires investments in infrastructure, housing, and public services. The government should prioritise sustainable urban planning, affordable housing, and policies that promote inclusive and resilient cities.

6. Building Climate Resilience: Given the significant risks posed by climate change, Bangladesh needs to invest in climate-resilient infrastructure, sustainable agriculture, and disaster risk management. This includes measures to protect vulnerable communities, promote renewable energy, and reduce greenhouse gas emissions.
Bangladesh's demographic dividend presents both a golden opportunity and a ticking time bomb. By harnessing the potential of its youthful population, the country has the potential to achieve significant economic growth and development. However, realising this potential requires addressing a range of challenges, including unemployment, underemployment, gender disparities, and environmental risks.

By adopting a comprehensive and integrated approach that promotes job creation, invests in education and healthcare, and builds climate resilience, Bangladesh can turn its demographic dividend into a driver of sustainable development and prosperity. The choices made today will determine whether the demographic dividend becomes a source of strength or a missed opportunity for the nation.

The writer is a researcher and development worker Bangladesh's demographic dividend: A ticking time bomb or a golden opportunity?



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