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FEATURE STORY

One Million New Jobs Needed Each Month to Sustain Growth and Reduce Poverty in South Asia

September 21, 2011

South Asia has seen an accelerated job growth and a substantial decrease in poverty over the past three decades, second only to East Asia. The region will be the largest contributor to the global workforce over the next two decades. More and better jobs are needed to sustain growth and reduce poverty.

According to the new flagship report, More and Better Jobs in South Asia, the region—defined by the World Bank as Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka,—will need to add between 1 and 1.2 million additional jobs every month for the next twenty years, equivalent to about 40% of the increase in the global labor force. Reforms will have to be accelerated if the region is going to meet the challenge of providing better jobs for them.

Human Capital

South Asia has a young population and the second lowest female participation rate in the labor force. The demographic transition will result in more than 350 million people to enter the working age population over the next two decades. South Asia created nearly 800,000 jobs per month between 2000 and 2010. However, despite growth, the region is still home to the largest number of the world’s poor—a half billion people. Since labor is the primary asset of the poor, having more and better jobs is the key employment challenge facing the region.

The number of additions to the labor market over the next few decades will result in a 25–50 percent increase over the historical average. Going forward, the region faces an enormous employment challenge, but its demography can help if countries choose to reform.

Education is key to labor mobility. Education attainment remains low and well over 25 percent of the labor force in all countries except Sri Lanka lacks any education at all. More education facilitates labor mobility to more productive employment, from rural agriculture to rural-based industry and service jobs and from urban casual work to urban-based regular wage and salaried industry and service jobs.

Quality of Jobs

It’s not only the quantity of jobs but the quality of the jobs being created in the region that is relevant. There has not been much change in the composition of employment, that is between casual laborers, the self-employed and regular and salaried wage earners, but there has been an increase in real wages and poverty reduction within these categories. However, the share of wage employment and high-end self-employment are stagnant.

Nutrition

Additionally, South Asia has some of the highest rates of malnutrition in the world as well as high levels of anemia and iodine deficiency. Malnutrition rates are higher even than Sub-Saharan Africa. Poor nutrition results in lower productivity of the labor force.

Despite significant progress in recent years, the contrast between increasing demand for higher levels of education and the educational attainment of the labor force could not be starker. Education reform is key. The biggest payoff in quality may well come from addressing poor nutrition and other factors in early childhood before children enter formal schooling.

Infrastructure and Governance

Since the demand for labor is derived from businesses, it is important to address constraints of electricity shortages, corruption and political instability in some parts of the region. A lack of electricity was ranked highest and the report outlines the electricity reform agenda to tackle the issue. The reform agenda is not only about investment. Improvements in the regulatory framework and governance of the sector are equally critical.

Growth has varied within the region. The demographic transition—when the number of workers grows faster than their dependents—can provide a tailwind for the next three decades in much of South Asia. This is because the resources saved from having fewer dependents to support, provided it used for high-priority investment, can support rapid growth of labor productivity.

Such a reform agenda is challenging, but it is feasible. It will be helped if governments use the resources made available by South Asia’s demographic transition wisely.

Future generations will thank today’s populations for having used this opportunity to create an environment for progressively better jobs. It’s the only sustainable pathway out of poverty.