South Asia is not creating enough jobs to keep pace with its growing working-age population. Photo: PradeepGaurs / Shutterstock
South Asia did not create nearly enough jobs during 2000-23 to keep pace with its growing working-age population. As a result, its employment ratio (employment relative to the working-age population) declined, while the average employment ratio of other emerging market and developing economies (EMDEs) held steady. Underlying the weakness in job creation is South Asia’s lopsided structural transformation: its agricultural sector has shed labor like elsewhere, but the employment ratio outside agriculture has increasingly fallen behind other EMDEs. This in part reflected challenging institutional and economic environments that have held back firms’ growth. Policy reforms that remove obstacles to firms’ growth and facilitate hiring decisions will help job creation.
1. South Asia has not created enough jobs.
South Asia’s employment ratio—employment in percent of the working-age population—has been below the average of other EMDEs since 2000. During 2000-23, the region’s employment ratio declined by 2 percentage points as employment grew more slowly than the working-age population, despite a pickup in job creation since the COVID-19 pandemic. This weakness in job creation stood in sharp contrast to other EMDEs where employment ratios held steady. South Asia was the only EMDE region in which the employment ratio for men declined over this period.
2. Women’s employment ratios remain much lower than elsewhere.
Women’s employment ratios have historically been well below those in other EMDEs. Despite a sharp pickup in women’s employment ratio in 2023, women’s employment ratios in almost all South Asian countries remain in the lowest quartile of other EMDEs, and one-half or less of men’s employment ratios. Many factors <link to Raiser 2023> have limited employment of South Asian women, including a lack of education, safe transport, childcare, and poor law enforcement, as well as deep-rooted social norms.
3. Employment outside agriculture has grown more slowly than elsewhere.
While South Asia’s agricultural sector shed labor during 2000-22 much like in other EMDEs, employment ratios in the region’s non-agricultural sectors have not kept pace with the increases elsewhere. As a result, by 2022, South Asia’s non-agricultural employment ratio was almost 20 percentage points below the average in other EMDEs, compared to a difference of 12 percentage points in 2005.
4. South Asia falls behind in areas linked to strong job growth.
Most South Asian countries rank in the lowest quartile of other EMDEs by their firm size—especially in services—trade openness, and education outcomes. Small firm sizes, low trade openness, and poor education outcomes are associated with significantly lower employment ratios in non-agricultural sectors.
5. Reforms could boost firms’ growth and job creation.
Policy measures to remove obstacles to firms’ growth, increase openness to international trade, increase the flexibility of labor market and product market regulations, and build human capital will help boost job creation in non-agricultural sectors. Strengthening legal protection of women’s rights will boost women’s employment ratios. As working-age population growth is expected to slow and productivity growth has already slowed in South Asia, these reforms will help accelerate job creation and jump start a missing engine of growth and development.
This blog is part of a series on the World Bank's latest South Asia Development Update, Jobs for Resilience.
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