Around 44% of university graduates in Bangladesh are employed in the informal sector, highlighting the country’s struggle to translate higher education into formal employment opportunities, according to a new World Bank report.

The report, titled Demographic Change in South Asia: From Tailwinds to Headwinds for Development, released on Tuesday (Nov 3), warns that Bangladesh has around two decades to fully benefit from its demographic dividend before the share of its working-age population peaks in 2045.

However, the country needs urgent reforms to turn this demographic opportunity into better jobs, higher productivity and sustainable economic growth.

Around 84% of Bangladesh’s workforce, or approximately 58 million people, are employed in the informal sector, the report says.

It identifies inadequate formal job creation, low female labour-force participation and persistent skills gaps as major barriers to harnessing the country’s demographic potential.

Formal businesses are creating jobs slowly, while small firms have recently reduced their workforce on average, according to the report.

“Bangladesh’s demographic opportunity depends on what it does now: help firms create better jobs, equip young people with market-relevant skills, and remove barriers that keep women out of work,” said Jean Pesme, World Bank Division Director for Bangladesh and Bhutan.

He also stressed the need to strengthen healthcare and old-age income security in preparation for an ageing population, adding that the country would need to improve domestic resource mobilisation to meet the growing financial demands of demographic change.

The report notes that South Asia currently has a working-age population of 1.17 billion, offering significant potential for economic growth. However, this window is gradually closing, with the region’s working-age population expected to peak and begin declining in less than a decade.

By 2049, South Asia is projected to become an aged region, with 14% of its population aged 65 or above. Bangladesh is expected to reach this stage in 2051.

Since 2000, the growing share of adults in their prime working years has contributed 0.4 percentage points to South Asia’s annual GDP growth and boosted labour productivity by 1.1% annually.

However, the annual contribution of demographic factors to GDP growth is projected to fall to just 0.1 percentage points by 2050.

“South Asian economies are ageing faster and earlier in their development journeys,” said Johannes Zutt, World Bank Vice-President for South Asia.

He said countries needed appropriate policies and infrastructure to generate more and better jobs, maximise the benefits of their young populations and prepare for ageing societies.

The report also highlights gaps in social protection across the region. Only 17% of South Asia’s working-age population contribute to pension schemes, while just 10% of older people receive pension benefits, the lowest coverage rate globally.

It recommends creating more productive jobs, expanding access to finance for micro, small and medium enterprises, simplifying regulations and improving healthcare, education and skills development.

Removing barriers to women’s employment and strengthening healthcare, long-term care and pension systems are also essential to sustaining economic growth as populations age, the report adds.