Decline in working population and its impact on the economy

As Bhutan loses its young professionals and fresh graduates to countries like Australia and Canada, the working population of the country is declining. Working population essentially means the total population in an area that is considered able and likely to work, based on the number of people in pre-determined age range.

This working age population gives the estimate of the total number of potential workers within an economy.

A declining working population is detrimental to a country’s economy. Currently, the business fraternity shares the sentiment that the declining working population is the reason for the businesses not doing well, as the money spenders are the working population.

Currently, Bhutan is facing a significant decline in its fertility rate. Recent statistics reveal that the country’s fertility rate has dropped to 1.866 percent births per woman in 2023. If such trends of low birth rate will have an adverse effect on Bhutan’s economy.

According to the Professor of Economics at the Royal Thimphu College, Sanjeev Mehta, a declining working population is inimical to the growth interest. “It reduces the size of the labour force available for work, and therefore, adversely affect production process and GDP. It increases the dependency ratio, leading to decline in savings and investment.”

“Labour shortage leads to wage increase beyond productivity growth and adversely affects firm’s profitability and hiring decisions. Eventually AI will substitute human labour. It leads to a rise in the share of immigrants to bridge labour demand, supply gaps, and skills gaps, or growth suffers. In the long run, it may cause the problem of aging population and heightened burden on the social security arrangements to support older people,” he added.

As the working population decreases, we need to take into consideration the relationship between working population and savings. Professor Mehta shares, “A smaller working population supports larger fraction of dependents, consequently saving rate falls. Lower savings adversely affect investment, and increases country’s dependency on the external resources to support higher growth.”

President of the Bhutan Chamber for Commerce & Industry (BCCI), Tandy Wangchuk, shared that the declining working population is a concern. “With the high amount of attrition from the country, declining rate of working population is true. However, the government is looking into it, such as import of foreign labours, in terms of experts, house cleaners, and babysitters. For an economy to flourish, the working population is needed, but those who left have left. There is a huge vacuum created and to fill that gap, a joint collaboration between the government and the private sector is required.”

“Therefore, we are looking into giving Bhutanese people skills through collaborations. Skill development and collaboration are needed for a flourishing economy,” he added.

As Bhutan faces attrition and brain drain from the country, it might also affect the nation’s capacity for innovation and technological advancements. With regards to this, Professor Mehta shares, “There is no direct relationship between workforce compositions and innovations. However, persistent shortage of labour and skills may influence innovations supporting greater use of capital intensive technologies.”

As Bhutan face high attrition from the civil service and the private sector, a 55 percent-74 percent pay hike was implemented for the civil servants. This pay hike is believed to have made an impact as graduates are now opting for civil service. In 2022, registration for the Preliminary Exams (PE) was at 3,486 graduates, one of the lowest registrations in years, however, this year, the number of applicants increased to 4,083.

Dawa, a fresh graduate from Sherubtse College said that due to the pay hike, most of his friends will be opting for civil service instead of going outside. “Instead of suffering, most of us want to choose a comfortable life in Bhutan. Now, with the pay hike, we will be able to earn a lot better, and Australia’s pull factor is diminished by the amount of hard work for money that can now be earned in the country, even though it is on the lesser side.”

As the reality of Australia dream crushes in, and exploring better options in the country, it seems that young people might just choose to stay in the country.

However, there are still people who prefer going abroad in search of better opportunities and exposure.

According to the National Statistics Bureau (NSB), the projected population of the country is at 770,276 with an unemployment rate of 5.9 percent. 

The latest Labour Force Survey released by NSB shares that the working age population is estimated at 484,965 persons in 2022, which is a decrease of 4,767 persons from 2021.

The report also stated that half of the working population resides in rural areas.

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