How would Automation Impact Employment in the Manufacturing Sector of Bangladesh? An Empirical Projection

Abstract Using the two rounds of the Survey of Manufacturing Industries, this paper empirically investigates the likely scenarios of the impacts of technological progress on sectoral employment by divisions in the manufacturing sector in Bangladesh. We performed multiple linear regression of output on labour, capital stock, region fixed effects, year fixed effect, and cluster our robust standard errors at the industrial classification to obtain the Solow residual where the technology parameter comes from the residual of this regression. Then, we introduce advancements in the technology parameter and estimate the impacts on the labour, holding other things fixed. The manufacturing industry in Bangladesh has a total of 5.3 million employees, with the majority in the textile and apparel sector. A 15% increase in productivity due to technological advancement would eliminate 688,000 jobs in Bangladesh, a 30% increase would eliminate 1.22 million, and a 50% increase would result in a dire consequence, with a total job loss of 1.8 million. The largest affected sectors are textiles and apparel. Dhaka would be affected most, followed by Chattogram, Rajshahi, and Khulna. Assuming a 10% annual growth in the industry, the net increase in total manufacturing employment would be 2.02 million in 2025. The unemployment we have forecasted will not occur with the rise in technology if the technology is augmenting instead of labour replacing.