Bhutan faces narrowing window to convert demographic shift into economic gains

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Bhutan's demographic window narrows

Highlights

Large firms comprise only 0.3 percent of Bhutan's businesses but employ 32 percent of workers, indicating limited business dynamism despite rapid job creation in high-productivity firms.
Bhutan leads South Asia in education spending per student, yet student test scores remain unimpressive, highlighting inefficiencies between educational investment and labor market outcomes.
Only 17 percent of South Asia's working-age population contributes to a pension, and just 10 percent of older adults receive a pension benefit, exposing the region to aging-related income risks.

World Bank outlines jobs and skills agenda

As reported by the World Bank, a new regional report says South Asia's rising share of prime working-age adults has supported GDP growth and labor productivity since 2000, but that demographic boost is now weakening as the region ages more quickly than other developing economies.

For Bhutan, the report points to a highly concentrated employment base. Large firms account for just 0.3 percent of all firms but employ 32 percent of workers, a sign that broader business dynamism remains limited even though high-productivity firms have been adding jobs faster than in 75 percent of other emerging market and developing economies.

The report also highlights gaps in human capital. Bhutan has the highest education spending per student in South Asia, yet student test scores do not surpass those of countries that spend much less, suggesting a mismatch between investment and labor market outcomes.

World Bank Group Country Manager for Bhutan Xavier Furtado says the priority is to turn investment in people into market-relevant skills and more and better jobs, especially for young people and women. He says policy choices made now on jobs, skills and productive social protection will determine whether demographic change becomes a driver of long-term prosperity.

Labor market pressures and aging risks

Women face some of the clearest barriers in Bhutan's labor market. One in three women aged 15 to 24 is not in employment, education or training because of family duties, underscoring the economic cost of weak female workforce participation.

Across South Asia, the broader challenge is a persistent jobs gap. Only 60 percent of the working-age population is employed, while 88 percent of those in work are in informal jobs, limiting income security and productivity growth.

The report says the region also remains poorly prepared for aging. Just 17 percent of the working-age population contributes to a pension scheme, and only 10 percent of older South Asians receive any pension benefit, the lowest coverage level globally.

To extend the youth dividend and build what it calls a second dividend, the report recommends more productive job creation, better access to finance for MSMEs, simpler regulation, stronger health and education systems, and the removal of barriers to women's employment. It also calls for stronger healthcare, long-term care and pension systems, alongside higher savings and investment to support productivity as populations age.

In our earlier article on early-career job-hopping in the U.S., we reviewed research showing that switching jobs can be a major driver of wage growth and a pathway to better long-term job matches. The piece highlighted evidence that avoiding job changes early on may limit earnings gains, even as cultural attitudes often view frequent moves negatively.

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