IMF staff report: Educated youth return to farms as job market falters

Unemployed youth are finding an unlikely ally in the soil -- turning, once more, to agriculture for survival.

Where higher education is often seen as an exit from the farm, Bangladesh tells a different story. As educational attainment rises, the expected shift away from agriculture has instead reversed.

Unable to secure a foothold in a sluggish industrial sector, many young people are being drawn back to their rural roots.

This paradox is laid bare in a staff report prepared by the Executive Board of the International Monetary Fund following its 2025 consultation for Bangladesh, concluded on January 26, 2026.

On paper, the country appears to follow a familiar path of industrialisation. Manufacturing’s share of the economy has grown by nearly 5 percentage points over the past decade. Yet this growth has been largely “jobless”.

Employment in manufacturing and services has actually declined -- by 2.2 and 2.6 percentage points respectively -- creating a structural contradiction: the economy is industrialising, but the labour force is de-industrialising.

At the same time, while agriculture’s share of the economy fell by 3.96 percentage points, employment in the sector rose by 4.8 percentage points.

Education levels have increased across all sectors over the past decade. But the labour market has failed to keep pace.

“Rising educational attainment has outpaced job creation within the existing industrial structure, leaving too few high-quality employment opportunities for the expanding pool of highly educated workers, particularly among youth,” the report said.

“The contradiction between rising education levels and the reversed pattern of employment structural transformation indicates that building human capital has not translated into movement toward higher-productivity sectors,” it added.

The IMF described agriculture as “acting as a buffer for unemployment, absorbing excess labour but at the cost of persistently low productivity”.

The disparity in employment outcomes is stark. Those with education below Secondary School Certificate level face an unemployment rate of 3.01 percent, while those with higher degrees face 8.7 percent.

“By 2024, unemployment among highly educated youth stands at a staggering 25 percent -- more than triple the rate of their less-educated peers,” the report said.

The overall unemployment rate remains relatively low at 3.69 percent, but deeper fault lines emerge among the youth. Youth unemployment stands at 8.49 percent -- more than double the national average -- with 13.27 percent of urban youth unemployed, compared to 6.63 percent in rural areas.

Women face even harsher realities. Highly educated women experience an unemployment rate of 16.66 percent -- more than double that of their male counterparts.

The IMF noted that unemployment among the highly educated “has persistently stayed high for nearly a decade”, calling it an “alarmingly weakening labour market for youth and highly educated workers”.

Mustafa K Mujeri, former director general of Bangladesh Institute of Development Studies, said the implications stretch far beyond employment figures.

“The higher-educated youth look for jobs in the formal sector, whereas the rest go to the informal sector. And private sector investment is barely existent,” he said.

“The education system is disconnected from the industry. The degrees do not serve the needs of the job market. The RMG sector still has a scarcity of skilled labour, yet so many youth are unemployed,” he added, noting that the standard of education has declined over the years.

He warned that low-skilled jobs in manufacturing are being replaced by automation, meaning employment in the sector will continue to shrink unless education is aligned with industry needs.

Speaking about agriculture’s evolving role, Mustafa said, “Over the years, agriculture has gone through a feminisation, with uneducated women taking the place of educated men exiting the sector.”

Mustafizur Rahman, distinguished fellow of the Centre for Policy Dialogue, pointed to another constraint: a lack of diversification.

“The growth in the formal sector is low job-creating growth, and if expansion does not take place at a faster pace, then the absorption [by the agriculture sector] too will not be adequate,” he said.

Because industries are not diversifying fast enough, a swelling labour force is competing for a limited pool of jobs, he added.

“This discontent was also a driver of the July uprising,” he said.

Mustafizur cautioned that overseas employment will not expand sufficiently to absorb the growing number of unemployed youth. The focus, he said, must shift inward.

“The focus should be on the domestic market, and so the private sector needs to be incentivised.”

The IMF report observed that overeducation and education-occupation mismatches are particularly pronounced in agriculture and manufacturing, with the garment industry and youth workers most affected while gender disparities in unemployment remain significant.

It said advancing structural reforms and labour market policies will be critical to enhancing resilience, fully harnessing Bangladesh’s demographic dividend, and unlocking higher growth potential.

“Key priorities include upgrading the industrial structure, channeling investment toward high productivity sectors, and promoting diversification to expand high quality employment,” the report said.

At the same time, building stronger linkages between education institutions and industry is essential. Improved skill training,co-designed apprenticeship programmes and STEM (Science, Technology, Engineering, and Mathematics) education can better align workforce abilities with evolving labour market needs.

Finally, the IMF report said, the role of foreign direct investment (FDI) cannot be overstated. Currently Bangladesh’s FDI inflows remain very low compared to other peer developing economies, limiting opportunities for technology transfer, industrial diversification and job creation.

“Increasing FDI would bring new high-value markets into the economy and serve as a significant source of employment for youth, particularly in skill-intensive sectors.”