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Strong private sector and creating jobs, the way out of poverty says World Bank

Jim Yong Kim: “a good job can change a person’s life, and the right jobs can transform entire societies”

In developing countries, jobs are a cornerstone of development, with a pay off far beyond income alone. They are critical for reducing poverty, making cities work, and providing youth with alternatives to violence, says a new World Bank report.

The “World Development Report 2013: Jobs” stresses the role of strong private sector led growth in creating jobs and outlines how jobs that do the most for development can spur a virtuous cycle. The report finds that poverty falls as people work their way out of hardship and as jobs empower women to invest more in their children. Efficiency increases as workers get better at what they do, as more productive jobs appear, and as less productive ones disappear. Societies flourish as jobs foster diversity and provide alternatives to conflict.

“A good job can change a person’s life, and the right jobs can transform entire societies. Governments need to move jobs to centre stage to promote prosperity and fight poverty,” says World Bank president Jim Yong Kim. “It's critical that governments work well with the private sector, which accounts for 90% of all jobs. Therefore, we need to find the best ways to help small firms and farms grow. Jobs equal hope. Jobs equal peace. Jobs can make fragile countries become stable.”

The report’s authors highlight how jobs with the greatest development payoffs are those that raise incomes, make cities function better, connect the economy to global markets, protect the environment, and give people a stake in their societies.

“Jobs are the best insurance against poverty and vulnerability,” says Kaushik Basu, World Bank Chief Economist and Sr. Vice President, “Governments play a vital enabling role by creating a business environment that enhances the demand for labour.”

The global economic crisis and other recent events have raised employment issues to the centre of the development dialogue. The WDR authors, who processed over 800 surveys and censuses to arrive at their findings, estimate that worldwide, more than 3 billion people are working, but nearly half work in farming, small household enterprises, or in casual or seasonal day labour, where safety nets are modest or sometimes non-existent and earnings are often meagre.

“The youth challenge alone is staggering. More than 620 million young people are neither working nor studying. Just to keep employment rates constant, the worldwide number of jobs will have to increase by around 600 million over a 15-year period”, says Martin Rama, WDR Director.

But in many developing countries, where farming and self-employment are prevalent and safety nets are modest at best, unemployment rates can be low. In those places, most poor people work long hours but cannot make ends meet. And the violation of basic rights is not uncommon. Therefore, the quality and not just the number of jobs is vitally important.

The Report advances a three-stage approach to help governments meet these objectives:

• First, solid fundamentals – including macroeconomic stability, an enabling business environment, human capital, and the rule of law- have to be in place.
• Second, labour policies should not become an obstacle to job creation, they should also provide access to voice and social protection to the most vulnerable.
• Third, governments should identify which jobs would do the most for development given their specific country context, and remove or offset obstacles to private sector creation of such jobs.

Understanding the particular jobs challenge for a given region or country is essential. Differences in the structure of employment across regions, across genders, and across age groups are striking. For example, 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. Many more women than men are in non-wage work in low- and lower-middle income countries. Meanwhile, in middle-income countries women are more likely to be wage workers, though too often they earn less than men.

Policy priorities are different in agrarian societies and in urbanizing countries. Making smallholder farming more productive is key in the first case, while better infrastructure, connectivity, housing, and city planning are vital in the second.

Policy makers should tackle these challenges by answering such questions as: Should countries build their development strategies around growth, or should they focus on jobs? Can entrepreneurship be fostered, especially among micro-enterprises in developing countries, or are entrepreneurs born? Are greater investments in education and training a prerequisite for employability, or can skills be built through jobs? Amidst crises and structural shifts, should jobs, not just workers, be protected?

Jobs agendas at the country level are connected by the migration of people and the migration of jobs. Policies for jobs in one country can thus have spillovers on other countries – both positive and negative. The report explores whether international coordination mechanisms, such as bilateral migration agreements, could enhance the positives and mitigate the negatives.

”To move jobs centre stage, we also need reliable country-level data that is disaggregated and covers more than urban or formal sector jobs,” says Rama.