This post appeared on the Guardian’s Poverty Matters blog yesterday. See the original for some insightful comments.
A recent survey asking people in Sub-Saharan Africa to rank different development objectives found that providing jobs for young people was considered more important than reducing maternal mortality, providing universal primary education, or reducing the spread of malaria. The International Labour Organization estimates that 440 million new jobs will need to be created in the next 10 years, to keep pace with population growth.
While developing country governments have of course been long aware of this issue, there are signs that donors are waking up to it too.
DFID’s Bilateral Aid review promised that the UK’s aid money would create just over 1 million jobs in 10 countries or regions, including 300,000 in South Africa, 200,000 in Afghanistan, and 144,000 in Ghana. But thinking on how this might be done is somewhat hazy .
There is optimism that improving the ‘investment climate’ might help, and that interventions such as improving infrastructure or providing training will also play a role. But will this be enough? ODI has pored over the evidence and distilled country studies into five lessons for policy-makers trying to boost jobs in developing countries.
1. Don’t assume that growth will automatically create jobs
Policies like ‘improving the investment climate’ are assumed to help economic growth, which, it is again assumed, will generate jobs. If only it was that simple. In India, a magnet for foreign investment in recent years, each 1 percent increase in growth increases employment by a mere 0.15 percent. This phenomenon of ‘jobless growth’ stalks countries in Africa, Asia and Latin America. So growth policy has to be more nuanced – how and where will growth actually increase jobs?
2. Don’t assume that jobs will automatically reduce poverty
There’s evidence that even when people are in work, they’re not necessarily earning enough to reduce poverty – around 4 in 10 workers worldwide live below $2 a day. Again turning to India, it’s the jobs which pay the least and are most insecure that have been increasing the fastest. So policy-makers have to focus not just on numbers of jobs, but on whether they offer the security and pay that allow people to escape poverty.
3. Don’t fixate on manufactures.
There’s a not unreasonable assumption, based mainly on the experience of East Asia, that building up low-skilled manufacturing industries like garments or electronics factories will create jobs that reduce poverty. And policies such as the creation of export processing zones have often been recommended by donors to attract investors in these sectors.
But evidence suggests that jobs in agriculture or services are just as important for poverty reduction. In China, it was growth in agriculture that really kick-started poverty reduction, and the impact of manufacturing jobs was actually rather less. In many countries it’s the services sector – providing haircuts, selling food, cleaning houses – that is the real growth area for jobs. The potential for expansion in any sector, whether manufacturing, agriculture or services is finite, and too much focus on any one sector is almost certain to reach a dead end before too long. The key is a mix of sectors and the ability to move people and money easily between them.
4. Don’t assume that movement out of agriculture is all one-way
In the long run, economic growth has always meant a one-way shift as jobs move out of agriculture and into industry or services. Often policy has reflected this, with a focus on getting people into a single specific job with targeted training schemes or apprenticeships. But movement between jobs has to be part of the mix. In 2009, after the financial crisis, global employment in industry fell, while those employed in agriculture actually rose. Policy-makers need to think not just about getting people into one job, but about social policies, such as providing cash transfers, that allow people to move between jobs.
5. Do worry about young people
This last hardly needs saying, after the events in the Middle East which provided a graphic – and, for many governments, frightening – illustration of the impact that a large number of unemployed young people can have. Almost everywhere unemployment among young people is higher than any other group. In South East Asia, the under-25s are five times more likely than older people to be unemployed. Considering that young people make up half or more of the population in many developing countries, this is an appalling waste of resources as well as a personal tragedy for millions of people.
Jobs – and the urgent need to provide them – are rapidly moving up the development agenda. And not before time. But to make the difference that’s needed, policy-makers must discard some of their cherished assumptions about how to create jobs.
Better answers are needed, and fast, if the global employment crisis is to be fixed.
