Tuesday, October 2, 2012

Jobs for development and good development policies for jobs

The latest World Development Report 2013 is focused on jobs. The main point is that jobs in developing countries pay off far beyond income alone as it is the best insurance against poverty and vulnerability.

The report shows that providing jobs reduces poverty and it also empowers women to invest more in their children. It also offers alternatives to conflict and makes fragile countries stable.

The best things about WDRs are new policy relevant evidence and the steering of development debate, to some extent,in a single contemporary topic. Below are excerpts from WDR 2013:

  • Jobs with the greatest development payoffs are those that make cities function better, connect the economy to global markets, protect the environment, foster trust and civic engagement, or reduce poverty. Critically, these jobs are not only found in the formal sector; depending on the country context, informal jobs can also be transformational. Productivity is lower in informal sector but then formalizing it doesn’t guarantee greater efficiency.
  • More than 3 billion people are working worldwide. But, nearly half work in farming, small household enterprises, or in casual or seasonal day labor, where safety nets are modest or sometimes non-existent and earnings are often meager.
  • More than 620 million young people are neither working nor studying. To keep employment as a share of the working-age population constant, in 2020 there should be around 600 million more jobs than in 2005, a majority of them in Asia and Sub-Saharan Africa.
  • In 10 of 18 Latin American countries, changes in labor income explain more than half the reduction in poverty, and in another 5 countries, more than a third.
  • In many developing countries, where farming and self-employment are prevalent and safety nets are modest at best, unemployment rates can be low. Quality and not just the number of jobs is vitally important.
  • 6 out of 7 workers in Eastern Europe and Central Asia are wage earners, but 4 out of 5 workers in Sub-Saharan African are farmers or self-employed.
  • More women than men are in non-wage work in low- and lower-middle income countries. In middle-income countries women are more likely to be wage workers, though too often they earn less than men.
  • In Sub-Saharan Africa, 10 million youth enter the labor force every year, but in many middle-income countries the population is aging and in some the labor force is shrinking.
  • There is 22 times difference in productivity (gap) between manufacturing firms in the 90th and 10th percentiles in India. Meanwhile, there is 9 times difference in productivity (gap) between manufacturing firms in the 90th and 10th percentiles in the US.
  • Nonwage work represents more than 80 percent of women’s employment in Sub-Saharan Africa— but less than 20 percent in Eastern Europe and Central Asia.

  • Rapid urbanization is changing the composition of employment. More than half the population in developing countries is expected to be living in cities and towns before 2020.The growth of the nonagricultural labor force will vastly exceed the growth of the agricultural labor force.
  • On average across developing countries, between 7 and 20 percent of jobs in manufacturing are created within a year, but a similar proportion disappear.
  • Tradeoffs among improving living standards, accelerating productivity growth, and fostering social cohesion arguably reflect a measurement problem, more than a real choice. If growth indicators captured the intangible social benefits from jobs, from lower poverty to greater social cohesion, a growth strategy and a jobs strategy would be equivalent. But a growth strategy may not pay enough attention to female employment, or to employment in secondary cities, or to idleness among youth. When potentially important spillovers from jobs are not realized, a jobs strategy may provide more useful insights.

Recommendations to increase jobs:

  • Maintain solid fundamentals – including macroeconomic stability, an enabling business environment, human capital, and the rule of law.
  • Labor policies should not obstruct job creation, but then they should also provide access to voice and social protection to the most vulnerable.
  • Identify jobs that would do the most for development given their specific country context, and remove or offset obstacles to private sector creation of such jobs.

Relevant in Nepal’s context:

In conflict-affected countries, the most immediate challenge is to support social cohesion. Employment for ex-combatants or young men vulnerable to participation in violence takes on particular importance. With fragile institutions and volatile politics, attracting private investment and connecting to global value chains may be out of reach for quite some time. Yet construction can boom even in poor business environments, and it is labor intensive. Investments in infrastructure can not only support social cohesion through their direct employment impact, they can also be a step in preparing for future private sector job creation.

[All figures/pictures extracted from WDR 2013.]