A Strong Labor Market is key to Bhutan’s Inclusive Growth

Bhutan”s labor market is at a critical juncture, facing challenges in creating jobs in the private sector. The country needs to ensure that all sections of society, including women and rural workers, have access to productive jobs, which continues to be a major challenge.

The new World Bank report, Bhutan Labor Market Assessment Report, examines the labor market in Bhutan and identifies the most pressing challenges at the recovery stage of the COVID-19 pandemic and ways to mitigate them.

The report indicates that more and better jobs are required in the private sector to absorb the growing educated workforce in urban areas, while ensuring that access to productive jobs is inclusive. Currently, quality jobs are mostly concentrated in the public sector, and comprise of men and high-skilled workers. Women, low-skilled, and rural workers are mostly employed in low-productivity agricultural jobs as self-employed or family workers, with limited options for upward mobility.

Outside of the public sector, employment quality in nonagricultural economic sectors remains poor. Overwork (working more than 48 hours a week) is prevalent and affects 63 percent of the workforce. One out of three salaried employees have no written contract from their employer, accounting for over 11 percent of workers in Bhutan (and 23 percent of workers in urban areas). In response to limited attractive options, unemployment among educated workers has steadily increased since 2019, and majority are queuing for public sector jobs. In addition, the average number of migrating Bhutanese workers has increased to more than 5,000 a month in early 2023, compared with less than 500, on average, one month before the pandemic.

Young women aged between 15–24 have a 1.5 times higher risk of being not in education, employment, or training (NEET). Their participation in the workforce is heavily dependent on their marital status, the presence of young children, and participation of other women in their family and community. They have limited access to public or private sector jobs.

The private sector faces numerous barriers to their growth and productivity improvements. it is dominated by low-productivity microenterprises that do not grow over time—one of the main reasons for the high unemployment rate among skilled professionals. It also faces labor shortages and hiring difficulties, which stem partially from limited linkages between employers and training institutes and a weak labor intermediation system.

The report highlights other barriers facing private sector growth that relate to investment climate factors, labor regulations, and role of state-owned enterprises that could be crowding out private sector activity. For sustaining robust and inclusive growth, policies will be needed to support private sector development, improve the business environment, and address barriers to growth and job creation.

Despite these challenges, Bhutan has witnessed significant economic progress over the last two decades. Creating a pathway for productive and sustainable employment that can boost prosperity requires pursuing sector-specific policies to create jobs in high value-added sectors, as well as reforms across the entire economy to improve conditions for firm growth and human capital accumulation.