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Jobs are a Cornerstone of Development, says World Development Report 2013

November 9, 2012

Islamabad, November 9, 2012 -- In developing countries, jobs are a cornerstone of development, with a dividend 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 center stage to promote prosperity and fight poverty,” says World Bank Group President Jim Yong Kim. "It is critical that governments work well with the private sector, which accounts for 90 percent 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.

The global economic crisis and other recent events have raised employment issues to the center 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 labor, where safety nets are modest or sometimes non-existent and earnings are often meager.

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, labor 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.

"In Pakistan female participation rate in the labor force is only 28%, it is particularly low in the urban areas,” says Rachid Benmessaoud, World Bank Country Director for Pakistan.  “After household duties which are cited by more than 80% Pakistani women as the number one reason for non-participation in labor force, lack of education is the second most cited reason.”

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. Demography matters too. Total employment in South Asia (excluding Afghanistan and Bhutan) has grown from 473 million in 2000 to 568 million in 2010, creating an average of just under 800,000 new jobs per month.  The demographic window of opportunity in the region is expected to close around 2040 for all countries except Sri Lanka where it closed in 2005 and Afghanistan where it will stay open beyond 2040.

“The youth challenge alone is staggering. More than 620 million young people all-over the world are neither working nor studying”, says Jesko Hentschel, Director Human Development, World Bank South Asia Region and co-author of WDR 2013. “Just to keep employment rates constant, the worldwide number of jobs will have to increase by around 600 million over a 15-year period.”

Focusing on the key features of different country types can help identify more clearly the kinds of jobs that would make the greatest contribution to development in each case. This focus allows for an analysis of the potential tradeoffs between living standards, productivity, and social cohesion in a specific context. It provides clues about the obstacles to job creation and, ultimately, the priorities for policy makers as they identify the most important constraints to job creation and how to overcome them.

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 microenterprises 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.

The World Bank Group fosters job growth through its two main channels of support to the developing world -- the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA) -- as well as through the IFC and the Multilateral Investment Guarantee Agency. Assistance comes in the form of policy advice, support for private sector development plus loans and programs to advance urbanization, infrastructure and human development (including social protection).

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