World Bank Group | Brief May 2012

At a glance

+ Jobs are the cornerstone of economic and social development. Poverty drops to a large extent as people work their way out of hardship. Economies grow as people’s skills are honed and as more productive jobs are created while less productive ones are destroyed. Social institutions become stronger as legitimate earnings opportunities offer alternatives to confrontation, or as working together with people from different genders, ethnicities, or beliefs nurtures trust and civic engagement.

+ Jobs are an outcome of the development process but they are also instrumental to achieving it. They are more than individual earnings. Good jobs for development—ones that reduce poverty, support agglomeration effects, do not damage the environment, and contribute to building trust and civic engagement—have a high social value. Which jobs these are varies with phases of development, endowments, and the institutional features of countries.

+ The private sector drives job creation, accounting for 90 percent of jobs in developing countries today. The fundamentals of development policies, including macroeconomic stability, rising levels of education, a supportive investment climate, good governance, and functioning infrastructure, are necessary but not sufficient. The priority of jobs policies is to remove the obstacles that prevent the private sector from creating good jobs for development.

+ Market and institutional failures often foster distortions that make it difficult for private sector firms to generate “good jobs for development” with a high social value. This can result in a cycle of dysfunction in the labor markets. For example, in a setting where too few women are working, an underinvestment in children persists; in cities where jobs are scarce, economy-wide benefits can’t occur; or in conflict-ridden or fragile countries the meager job market for men prevents them from integrating and contributing to society.

+ Monitoring the impact of jobs on living standards, productivity, and social cohesion requires a significant, global data effort.

The challenge

The global financial crisis resulted in massive job losses in both emerging and industrial countries. Political upheavals in the Arab world highlight the discontent of educated youth whose employment opportunities fall far short of expectations. Today, 200 million people the world over are unemployed, many of them young people. Half of those working in developing countries are not wage employees but farmers or self-employed, many making only a basic living, at best. Almost 2 billion working-age adults, the majority women, are not working or looking for work. About one-third of young people in Eastern European countries and half in Arab countries are idle, neither working nor studying.

These pressures will only increase. Tectonic shifts, including demographic transitions, the migration of people and jobs, structural change, and technological progress, are changing the world of work. To keep employment as a share of the working-age population constant till 2050, around 700 million jobs need to be created, mainly in Asia and Sub-Saharan Africa. Other populations are aging—Ukraine, for example, loses about 100,000 working-age persons a year—so tapping the skills and experience of older workers (possibly beyond retirement age) becomes a priority. Worldwide, 200 million migrants, or 3 percent of the world population, are in search of better living conditions and this trend is growing. In the next 15 years, half of the population in developing countries will reside in urban areas.

The nature of the jobs challenge varies across phases of development, from agrarian economies to urbanizing countries to formalizing countries. Endowments can also shape jobs challenges, as in the case of resource-rich countries and small island nations. And institutional features matter too, from weak governance in the case of conflict-affected countries to instances where privileged elites exert economic dominance in ways that limit competition, often leaving youth with very limited job prospects. Individual countries may face several of these challenges at once. Obstacles for the private sector to create jobs also vary, ranging from access to finance and infrastructure (in particular power) to the investment climate and education and skills. More than half of the people

Moving Jobs Center Stage

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World Bank Group | Brief May 2012

+ Understand the nature of the jobs challenge. Assessing how different types of jobs contribute to living standards, productivity growth, and social cohesion is vital, as it grasping what hinders the creation of “good jobs.” Data and analytical tools to do so exist, but they are partial and need to be mainstreamed. A significant data agenda lies ahead, both in terms of data collection and harmonization as well as goal setting.

+ Remove obstacles to the private sector. Obstacles that hinder the improvement or creation of good jobs for development come from both within as well as outside the labor market. Understanding why the non-wage earners in developing countries cannot be more productive or why they lack voice is unlikely to be related to the labor code. As for the labor market itself, policy interventions, as long as they are not drastic, tend to have a modest impact on efficiency. Where policies are indeed strong, employment can be hurt, especially for women, youth, and the less skilled.

+ Recognize country specificity. In a conflict-affected country more jobs in sectors which offer youth employment opportunities may be needed, whereas in a formalizing country the priority may be to design social insurance systems in a way that does not distort incentives. Connecting infrastructure and functional urban zoning and basic service supply are often of central importance in urbanizing environments. Recognizing how obstacles to the creation of good jobs for development vary across countries is the basis for more effective policy design and prioritization.

References and suggested readingsBacchetta, Marc, and Marion Jansen, eds. Making Globalization Socially Sustainable. Geneva: Interna-tional Labor Organization.

Kanbur, Ravi, and Michael Spence, eds. 2011. Equity and Growth in a Globalizing World. Washington, DC: World Bank.

Organisation of Economic Co-operation and Development. 2012. Perspectives in Global Development 2012: Social Cohesion in a Shifting World. Paris: OECD.

World Bank. 2011. World Development Report 2013: Concept Note. Available online at http://econ.worldbank.org/external/default/main?noSURL=Y&theSitePK=8258025&piPK=8258028&pagePK=8261309&contentMDK=23044920.

at work in developing countries are not wage earners, implying the need to go beyond the supply and demand for jobs but also highlighting the need to create more formal, private sector jobs that tend to offer better wages and working conditions.

The future we want

Creating good jobs in a comprehensive way is the key to improving living standards, increasing productivity, and enhancing social cohesion. It moves away from short-term mitigation of unemployment and confronts the deeper structural barriers to fostering the creation of good jobs for development. Such jobs will need to be created, overwhelmingly, by the private sector. Well-performing and high-potential companies need to be free to evolve, expand, and become more productive. Improving the livelihoods and productivity of farmers and the self-employed in developing countries is also vital.

While jobs are transformational, some forms of work are simply harmful and effective institutions would prevent the perpetuation of such “bad” jobs—those that (a) do not respect basic labor rights, (b) expose workers to dangerous environments, or (c) threaten their physical or mental well-being. Basic labor rights include the elimination of forced and compulsory labor, the abolition of child labor, the elimination of discrimination in employment and occupation, and freedom of association and collective bargaining. Preventing workers’ exposure to hazardous substances and to serious health-related risks at work is a goal societies can aspire to.

How do we get there?

Fundamentals need to be in place. Policies conducive to support the creation of jobs can only have traction with a stable macroeconomic environment, a global trade and investment policy which allows for access to new technologies, a governance system which respects the rule of law, reliable infrastructure supply for households and firms, and a continued focus on, and improvement of, numeracy and literacy skills of the young and the workforce.

Jobs policies. But jobs policies start rather than stop with the fundamentals being in place. They aim to enable the creation of jobs that reduce poverty and exploit “knowledge spillovers,” or the exchange of ideas among individuals. For example, a given company’s innovation may spur a flood of related inventions and technical improvements by other companies, which may in turn lead to the creation of new goods and services, which can in turn raise the demand for better skilled, better paid workers. Jobs policies should also boost access to foreign technology, as well as contribute to social identities and a sense of fairness in society. In sum, effective jobs policies should do the following:

+ Adopt a cross-sectoral focus. The multidimensional nature of jobs needs to be recognized, and obstacles to the creation of good jobs for development need to be tackled across disciplines, sectors, and ministries. The centrality of jobs implies that some of the most important decisions to be made are strategic in nature. While growth is a necessity, it may not always be sufficient to bring about these developmental values of jobs.