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What Development Through a Jobs Lens Means for Ukraine

December 3, 2012

Kyiv, December 3, 2012 -- Jobs are a cornerstone of development, with a pay off far beyond income alone. They can boost living standards, raise productivity, and foster social cohesion, says a new World Development Report 2013: Jobs.

From an economic perspective, jobs provide earnings opportunities to lift households out of poverty, raise their living standards, and reduce the variation of their main income source. Through job creation and destruction within sectors, and reallocation across sectors and countries, jobs are also at the root of aggregate productivity gains. Jobs can also foster social cohesion: over the course of development as the structure of the labor force changes too: by sector of activity, location, type of occupation, and gender. These in turn affect societies. Values surveys in developing countries suggest connections between employment status, on the one hand, and trust in institutions and willingness to participate in civil society on the other.

Both in developed and developing countries jobs challenges are high. Worldwide, 200 million people, a disproportionate share of them youth, are unemployed and actively looking for work. 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.”

High pay jobs may be coveted by individuals, but they may be less valuable or have different impacts on society. “Good 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”, he adds. Jobs with high development payoffs can transform society and spur prosperity. Governments need to move jobs to center stage to promote prosperity and fight poverty. The number of jobs is not all that matters: jobs with high development payoffs are needed.

Job challenges vary across countries, and the report provides a framework that cuts across sectors and shows that the best policy responses vary across countries, depending on their levels of development, endowments, demography, and institutions. 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. It 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.

In parallel with the main World Development Report, a number of case studies have been conducted in seven countries, among them in Ukraine.  Ukraine faces particular jobs challenge given its aging demographic profile, ongoing structural transformation and fundamental economic changes. During the last twenty years, Ukraine as one of the fastest-aging countries in Europe has been suffering from the severe losses of population and the labor force. If age-specific labor force participation rates are kept constant, the labor force is projected to shrink by over 15% between 2012 and 2035.

Aging population and shrinking labor force pose very serious threats for the future development of the country”, says Qimiao Fan World Bank Country Director for Ukraine, Belarus and Moldova. “In order to compensate for the labor force decline and ensure improved living standards, it is necessary to provide for a steady increase in labor productivity”.

In Ukraine, composition of employment is not socially optimal, with the bulk of non-standard employment (including casual, temporary, undeclared and own-account work). Employment does not always provide a solid pathway out of poverty, and households with a working member could face even more severe economic hardship and social deprivation than households relying on social assistance, pension and other non-labor income. Access to better jobs is limited and unfair, especially for youth and older workers, lower skilled workers, residents of rural areas and regions with limited employment opportunities. Education, skills and personal attributes which are considered individual’s 'employability assets' in developed countries appear to be less important for gaining and maintaining employment in Ukraine than personal connections and social status (often defined by family background). Job creation occurs predominantly in the informal sector and in low productive sectors (less knowledge-intensive services and medium- or low-technology sectors with pollution externalities). Being predominantly “survival jobs”, they can hardly contribute to the long term development and have rather detrimental effect for the future quality of the labor force.

The real challenge for policymakers is to develop jobs policies and programs which focus on generating such employment opportunities that bring positive spillovers with respect to living standards, productivity gains and social cohesion and minimize the possible side effects. Improving fairness in the Ukrainian labor market is one of the priority tasks to rebuild social cohesion in Ukraine's society and increase the development payoff of jobs. Other important areas for policy interventions are removing market distortions and structural obstacles for doing business, investments, innovation and creation of jobs in the formal sector; targeted investment programs; facilitating employment prospects for youth, elderly and other vulnerable groups; reforming the education and training system and making it more responsive to labor market needs; supporting geographical and occupational mobility of the workforce.

Jobs agendas at the country level are connected by the migration of people and the migration of jobs.  Achieving economic growth and improving living standards requires connecting people to places where economic opportunity flourishes. Bringing people to these regions of growth and jobs is essential to move Ukraine forward argues another recent World Bank report “In Search of Opportunities: How a More Mobile Workforce Can Propel Ukraine’s Prosperity”.

Right now, Ukraine’s economy lacks dynamism, with job creation and job destruction rates significantly below those of its peers. This is both the cause and the effect of people not moving. Ukrainians do not move often, and when they do move, they don’t necessarily go to areas with good jobs and high wages. Internal mobility is about half of what is expected when comparing Ukraine with other countries.

 “Increasing internal mobility in Ukraine will contribute to Ukraine’s transition to a modern economy. With a population that is aging more rapidly than most, increasing labor mobility must happen sooner rather than later, since an older population is even less likely to migrate to find work. Therefore, an agenda that aims to remove existing barriers to internal mobility can help people access more and better jobs and move Ukraine forward”, says Johannes Koettl, Senior Economist, World Bank Europe and Central Asia Region, Human Development Sector.

Media Contacts
In Kyiv
Victor Zablotskyi
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