Beyond the Budget: Building a Skills Strategy for Bangladesh’s Youth

Papri Das

In the recently announced budget of 2025, the government of Bangladesh has emphasized its ambition to harness the energy of the youth through employment generation and skill development.  The government has taken initiatives like the celebration of Tarunyer Utshob 2025, expansion of funds for youth entrepreneurship loans and raising investment in technical and vocational training. Focusing on self-employment, freelancing and digital skill-building indicates an important policy shift from traditional, wage-based employment models to more flexible, innovation-driven pathways that align with the goal and expectations of youth. The initiative to create a self-reliant, digitally competent and entrepreneurially active labor force is a positive move and it forms a solid foundation on which deeper and systemic reforms can be built. However, beneath the rhetoric lies the critical question: are these budgetary commitments aligned with the structural realities of labor market of Bangladesh? Do these efforts have the potential to bring about the transformative change required to ensure inclusive, productive and sustainable employment? According to human capital theory (Becker, 1964), productivity and growth are closely tied to education and skills[1]. While Budget 2025 reflects some awareness of this, actual investments remain modest, especially when compared with global benchmarks. Public spending on skill development is not so high, significantly short of the amount required for sustained transformation. Moreover, capital alone cannot compensate for the structural bottlenecks that young entrepreneurs, especially those from rural and marginalized communities, face in obstacles in getting permits, starting or enlarging businesses or accessing global value chains. Furthermore, enhancing skills development requires increased investment in the education sector, an area where Bangladesh continues to lag significantly till now.

Budget 2025 represents a mixed picture in addressing the diverse challenges of employment and skill development across the major economic sectors of Bangladesh. While the government has taken noteworthy steps in labor welfare and industrial wage reform, there remains some scope to further enhance inclusivity, strengthen sector-specific skill development and expand support for informal and rural workers. One of the most commendable interventions in the current budget is the effort to stabilize the industrial sector. In response to labor unrest and inflationary pressures, approximately Tk 651.37 crore has been disbursed to various industries since August 2024, demonstrating a crisis-responsive approach. Moreover, the annual wage increment rate in the industrial sector has been raised from 5% to 9% as of December 2024, a significant move aimed at protecting real wages amidst rising living costs. New minimum wages have been declared for tannery, soap and cosmetics, cold storage, and tailoring industries, with plans to revise wages in 15 additional sectors over the next three fiscal years[2]. These measures signal the intent to formalize labor markets and promote fairness in compensation. However, while such reforms are necessary, these steps must be complemented by strategies that align skill development with the changing labor market demands. Moreover, fiscal adjustments introduced in the FY 2025–26 budget have escalated the cost of importing essential raw materials, potentially affecting employment opportunities and leading to wage instability or irregularities within the sector.

The fiscal plan allocates a large amount of resources for the Information and Communication Technology (ICT) sector, with a focus on strengthening digital infrastructure, cultivating a skilled tech workforce and promoting innovation through support for start-ups. Nevertheless, these programs are primarily urban-centric and often limited to basic digital skills. There is an urgent need for deeper investment in advanced areas such as artificial intelligence, cybersecurity and programming to move the sector up the value chain and ensure that the benefits of digital growth are more widely distributed[3]. Artificial Intelligence (AI) is a transformative domain that demands a long-term vision and a comprehensive, forward-looking strategy from the government. Sill development in AI will empower the labor force in Bangladesh to access high-value jobs, boost productivity across sectors, and enhance the country’s competitiveness in the global digital economy.

Most strikingly, the budget continues to overlook the informal sector, which employs approximately 85% of the national labor force. Workers in construction, domestic service, micro-retail and other informal occupations receive little policy attention. There are no significant programs offering recognition of prior learning (RPL) or formal skill certification. This reflects a deeper structural divide in the economy. As W. Arthur Lewis’s Dual Economy Theory (1954) reminds us, when formal sector growth ignores the informal majority, inequality widens and productivity gains are limited[4]. Without incorporating informal workers into the national employment framework through enhancing their skills, protection and support, Bangladesh has the chances of deepening economic fragmentation.

The Budget 2025 takes some commendable steps to modernize Bangladesh’s foreign employment sector, particularly through expanding Technical Training Centres (TTCs), introducing caregiver and nursing training aligned with international demand and digitalizing exit-clearance and grievance systems to improve transparency. It also proposes decentralizing dispute resolution for migrant workers. However, these advances are undermined by a significant cut in the allocation for the Ministry of Expatriates’ Welfare and Overseas Employment down by over 25% from the revised FY25 budget. Moreover, the budget overlooks critical areas such as migrant health and legal support, protection for female migrants and improvements in remittance incentives, limiting its potential to ensure safe, skilled, and equitable overseas employment for Bangladesh’s growing migrant workforce[5].

To discuss about the key challenges, it is important to prioritize that a persistent gap exists between the curriculum of training institutions and employers’ demand. Many of the training programs are outdated, giving little or no input for the industries, which results in underemployment even among those who complete training. Rather than dispersing funds through fragmented short-term schemes, it is high time that Bangladesh should adopt policies with long-term skill enhancement. For example, aligning the TVET training with the export diversification goal may provide a more sustainable outcome in the near future. Countries like Vietnam and Malaysia used skills policies as strategic ladders to shift their comparative advantage.

Youth in rural areas and marginalized groups face barriers in accessing quality training. Although dedicated funds exist for rural youth, women, and marginalized groups, significant barriers to accessing quality training persist due to gaps in implementation, weak outreach mechanisms, and lack of supportive infrastructure

While many informal workers and returning migrants possess valuable skills acquired through experience, these skills remain unrecognized and uncertified. Bangladesh should establish a nationwide Recognition of Prior Learning (RPL) program modeled after the Philippines’ TESDA initiative, focusing particularly on informal workers and returning migrant laborers. This program would deploy mobile RPL assessment units to rural and urban communities, enabling workers in sectors such as construction, caregiving, garment manufacturing, and small-scale entrepreneurship to receive formal certification of their existing skills without the need for lengthy retraining.

To conclude, while funding is important, what Bangladesh needs now is a coherent, inclusive and future-focused strategy that addresses structural gaps, improves implementation and provides long-term sustainable employment opportunities for the youth.

[1] https://www.scirp.org/reference/referencespapers?referenceid=1634120

[2] https://mof.portal.gov.bd/site/page/d1ca893d-7ab0-4b43-a506-a868545de55e

[3] https://www.tbsnews.net/thoughts/future-cant-wait-why-budget-falls-short-ict-1167536

[4] https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1467-9957.1954.tb00021.x

[5] https://mof.portal.gov.bd/site/page/d1ca893d-7ab0-4b43-a506-a868545de55e

Author’s Biography: 

Papri Das is a Research Associate at the Bangladesh Institute of Development Studies (BIDS). Her research interests lie in macroeconomics, labor economics and education, with a focus on evidence-based policy analysis