Good jobs are the surest pathway out of poverty. The developing world faces a jobs crisis that hampers efforts to end extreme poverty and boost shared prosperity with over two billion people of working age that are not participating in the labor force. Research shows that rising wages account for around 40% of the drop in poverty over the last decade. Among those who do participate in the labor market, around 200 million people are unemployed, including 75 million youth under the age of 25.
The developing world is confronted by a jobs challenge on three levels:
1. Creating around 40 million jobs per year over the next 15 years to increase employment rates and absorb the young people entering the labor force, particularly in Sub-Saharan African and South Asia. This means enhancing the conditions for private sector growth.
2. Increasing productivity of jobs across the spectrum of activities. There are two was to do this: create as many formal jobs as possible while also working to improve productivity and earnings of jobs in the informal sector. This requires a focus on informal sector jobs which are the major source of income for the poor, and in low-income countries, the majority of the population. This might involve improving production technologies, investing in skills, and expanding access to markets. At the same time, this requires not tilting incentives to remain formal or harming formal businesses with unfair competition. It is therefore also important to facilitate the movement of jobs from low to higher productivity activities, from the informal to the formal sector, from rural to urban areas.
3. Helping connect people to jobs. Not all workers have the same opportunities in the labor market. We must ensure that those who are able to work have the incentives to do so, and that they have skills that are required in today’s modern job market. We must also make sure that they have information about the types of jobs available, and the ability to move to the regions where jobs are created.
But jobs are not all equally transformational. Some jobs are better than others at lifting the poor out of poverty or increasing the earnings of the bottom 40%. Jobs for women can change the way households spend money and invest in the education and health of children. In turbulent environments, jobs for young men can serve as an alternative to violence and help restore peace.
Just having a job is also not enough. What makes a difference in sustaining the escape from poverty is increasing the earnings from work; that is, having a more productive job. However, half of the world’s working population are farmers or self-employed. They work predominantly in low productivity activities such as farming a small plot of land, selling vegetables on the street, sewing clothes or jobs in urban areas that offer low earnings and little security.
The World Bank Group continues to support job creation in fragile and conflict-affected states through a wide variety of operational approaches, bringing a focus on private sector-led growth and ensuring incentives from short-term interventions do not distort long-term development.
Last Updated: Mar 31, 2017