Research on poverty in Bangladesh requires answers to four fundamental questions: First, what are the poverty trends in Bangladesh? Do the official figures present a true picture? Second, how do different shocks (economic and noneconomic) affect poverty and vulnerability? Third, what are the structural factors behind poverty? And fourth, what are the important aspects of addressing poverty in a sustainable way?
According to the Bangladesh Bureau of Statistics (BBS), in Bangladesh, the headcount poverty rate (as per the cost of basic needs method) declined from as high as 80% in the early 1970s to 18.7% in 2022. In recent years, between 2016 and 2022, the national poverty rate declined from 24.2% to 18.7%. Both the rural and urban areas experienced a drop in poverty rates. While the official statistics paint an optimistic picture of poverty reduction, alternative surveys suggest a more nuanced reality. According to SANEM’s two rounds of surveys conducted in 2018 and 2023, which tracked the same 10,000 households nationwide, the decline in the national poverty rate has been slower than reported, while there was also a rise in urban poverty. The Multidimensional Poverty Index (MPI), which measures various deprivations at the household level in health, education, and living standards, corroborates this trend. Furthermore, the surveys highlight a worrying trend of increasing inequality. The food security situation, a critical component of poverty, has also worsened.
The persistent vulnerability among a large section of the population in Bangladesh remains a pressing concern despite high economic growth, rise in per capita income, export and remittance performances, and microfinance initiatives. Vulnerable households are those who are categorised as nonpoor but may fall into poverty due to any economic or natural shocks. Shocks such as the COVID-19 pandemic, climate change, and inflationary pressure have exacerbated these vulnerabilities. SANEM’s surveys indicate that COVID-19 led to a sudden spike in poverty rates, reversing some of the progress made in poverty reduction. Climate change poses another significant threat to Bangladesh’s development. My recent research suggests that if there is inaction in addressing climate change, a rise in temperature by 2 degrees Celsius by 2040 could increase the headcount poverty rate in Bangladesh by 3.5 percentage points. The ongoing prolonged inflationary pressure added woe to the vulnerabilities. As the vulnerability of households to different shocks is a reality, the coping strategies available to poor and vulnerable households remain limited. Repeated shocks make poor and vulnerable households exhaust their limited options for coping strategies.
In-depth poverty research in Bangladesh requires understanding the structural factors behind poverty. The ownership structure plays a critical role, as unequal distribution of assets can lead to wealth concentration in the hands of a few, exacerbating poverty for the majority. The labour market is another determinant; limited access to well-paying jobs and the prevalence of low-wage work perpetuate a cycle of poverty. Gender disparities further compound poverty, particularly for women who often face barriers to equal rights in property, receiving equal pay, and are sometimes subjected to practices like child marriage, which can limit educational and economic opportunities. Exclusion based on ethnicity, disability, or social stigma can restrict access to resources and services, leading to entrenched poverty. Lastly, prevailing economic, social, and institutional paradigms shape the opportunities and capabilities of individuals to improve their well-being.
A significant aspect of the labour market in Bangladesh is its informality, which leads to a lack of job security, benefits, and legal protections for workers. Unemployment and underemployment are persistent issues. Among the youth, the NEET (not in education, employment, or training) rates are concerning, pointing to a generation at risk of being left behind. The labour force participation (LFP) among females remains low due to cultural norms and structural barriers. Workers face poor working environments, low wages, and little to no social security. Occupational rigidities, such as difficulty in transitioning between jobs or sectors, further exacerbate the situation. The lack of opportunities for productive and diversified employment means that workers are often stuck in low-value, labour-intensive jobs with little chance for advancement or skill development. This situation can be called the “low pay, low productivity, and low compliance” vicious circle.
The economic, social, and institutional paradigms of Bangladesh shape the pathways to the reduction of poverty. The economic paradigm is related to the pattern of structural transformation of the economy. Despite the notable progress over the past five decades, the lack of economic and export diversification in Bangladesh undermines the prospects of the reduction in poverty and vulnerability in a sustainable manner. The policy regime, related to the pattern of structural transformation, remained narrowly focused towards supporting a few sectors. There is a need for productive economic and export diversification supported by a broad-based policy regime.
The social paradigm refers to the pattern of social development. Over the past five decades, there have been some notable improvements in health and education. Bangladesh’s success in health and education came with finding some low-cost solutions to addressing child and maternal mortality, and a rise in school enrolment. However, with the evolving demographic structure of the population and growing demand for high-skilled labour, the current and future outlooks remain bleak. Low public spending on health and education and inefficient education and health sectors are not suitable to reap the benefit of demographic dividends and thus are not in a position to enhance the capabilities of the poor and vulnerable population to break the vicious cycle of poverty.
The institutional paradigm refers to the quality of institutions and the political economy of development. In Bangladesh, weak formal institutions, in the form of weak state capacity, weak regulatory regime, the prevalence of corruption, crony capitalism, and the dominance of informal institutions seriously undermine the scope for enhancing the capabilities of the poor and vulnerable population. For example, the weak state capacity in mobilising tax revenue limits the state’s capacity to spend high on health, education, and social protection, and at the same time, the high reliance on indirect taxes leads to a regressive tax system which affects poor people.
In conclusion, we can highlight three important aspects for sustainably addressing poverty in Bangladesh. First, there should be a meaningful solution to the ownership issue. The economic, social, and institutional paradigms for poverty alleviation in Bangladesh have to ensure enhancing both material ownership and the feeling of ownership among poor and vulnerable people. Second, the economic and social capabilities of the poor and vulnerable households have to be enhanced through economic diversification, labour market reform, and investment in health and education. Third, the state has to effectively redistribute resources from rich to poor through taxes and social expenditures.
This article was first published in Thinking Aloud, Volume XI, Issue 1: June, 2024 edition.
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