World Bank: Job creation key to driving development

In developing countries jobs can alleviate poverty, empower women, improve knowledge, see societies flourish and provide alternatives to conflict – making them much more than a by-product of economic growth, says the World Bank

Unemployment was making headlines just over a year ago when we began work on the World Development Report on jobs. In developing countries, finding jobs for massive numbers of youth was urgent. Middle-income countries were struggling to move up the value-added ladder in production and to extend the coverage of social protection. Technology and globalisation were transforming work worldwide. Joblessness was what kept policy-makers awake at night.

Yet, the analytical tools at hand to think about jobs did not seem to match the importance the issue had in the public debate. The organising concepts circled around wage employment and a labour market – where households and firms meet, an equilibrium price for labour emerges, and full employment prevails. And if this does not happen, then the assumption is that some misguided regulation or powerful interest is probably getting in the way. A clear agenda emerges from this way of thinking about jobs. It involves investing in skills so that the labour supply curve shifts up, improving the investment climate so that the labour demand curve does the same, and making sure that matching mechanisms work, so that both earnings and productivity increase.

This is fine, but policy-makers seem to have more in mind when they say that jobs are their main concern. Vocational training agencies, competition authorities and labour ministries can certainly help. But most often decisions that most affect jobs lie elsewhere – with ministries of finance allocating budgets, planning commissions making strategic development choices, cities deciding land-use plans and infrastructure investments, or ministries of agriculture undertaking land reforms.

Concepts such as a labour market, households and firms, useful as they are, do not seem to apply in all circumstances. What is the relevant labour market for the many farmers in developing countries? Don't gender differences, or those between adults and youth, matter on the household side? And are the myriad self-employed vendors and micro-enterprises in developing countries really firms?

Throughout the consultations we held in dozens of countries, it became clear that the non-income dimensions of jobs were vital. People often identify themselves with what they do at work. Jobs can lead to new knowledge, whether it is acquiring technical or managerial skills when working in a foreign firm, or simply shaping norms and behaviours such as punctuality and reliability. Jobs provide networks, and these are all the more valuable to those who tend to be left out, such as rural migrants. The lack of fairness in access to employment opportunities can easily make people feel alienated and disengaged from society. For an institution whose mandate is to help alleviate poverty, it is also clear that a pro-poor allocation of jobs is preferable. But can the labour market alone handle identity, networks, or poverty alleviation?

Given these priors, we started from the premise that a job has several dimensions –some affecting living standards, others relevant for productivity, and yet others influencing social cohesion. We thought beyond wage employment, including farming and self-employment, in our definition of jobs.  

We enlisted a diverse advisory panel and as our work advanced, it became clear that much of what we care about in development happens through jobs. Poverty falls as people work their way out of hardship and as jobs empowering women lead to greater investments in children. Efficiency increases as workers get better at what they do, as more productive jobs appear, and less productive ones disappear. Societies flourish as jobs bring together people from different ethnic and social backgrounds and provide alternatives to conflict. Jobs are thus more than a by-product of economic growth. Jobs are created mainly by the private sector, but public policy sets the stage to enhance job creation, and especially the creation of good jobs for development.

Now, as this year working on the report comes to an end, we feel much less puzzled. As the report production was wrapping up, the World Bank under the leadership of president Jim Yong Kim began embarking on an exciting campaign to identify 'What Will It Take?' What will it take to reduce extreme poverty? What will it take for everyone to have a decent living? As jobs drive development – and because they can be transformational for living standards, productivity and social cohesion –we strongly believe that they must be part of the answer.

Martin Rama is the director of the World Bank's World Development Report 2013