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Creating More and Better Jobs Through Stronger Labor Markets

April 11, 2013

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With World Bank Group lending, technical assistance, and economic sector work, countries are protecting workers and investing in programs that help promote job creation through a range of initiatives, including guiding financial and private sector reform in countries, managing macroeconomic policy, improving the investment climate, pursuing strategic analysis of industrial sectors, strengthening financial systems, investing in public works and infrastructure, providing employment services and training, implementing unemployment benefits, supporting small-scale businesses and the self-employed, and broadening access to credit. Bank Group projects are helping thousands of youths in Uganda start their own businesses, increase the awareness of workers’ rights in China, and have provided skills and experience for 13,000 youths in the Dominican Republic.

Challenge: Jobs are the main source of income for the majority of the world’s people. Jobs provide much more than economic benefits: Jobs give people meaning and purpose, and help them contribute to their families, communities, and nations. Improving people’s livelihoods and earnings strengthens nations’ economies: By building more competitive and resilient economies, investment in new job creation can increase individuals’ returns from their current jobs and help them move from unemployment or low-return occupations to higher-productivity jobs.

Despite sluggish growth, labor markets in developing countries continue their gradual recovery from the global financial crisis. Employment outcomes continued to improve in the second quarter of 2012 including in the countries more affected by the recession in Eastern Europe and Latin America. In a sample of middle-income countries, median employment growth nudged upward to 2.3 percent, while median unemployment fell to 5.7 percent, resuming its steady decline from the heights of the financial crisis. The continued sluggishness in the global economy has not halted the steady recovery of these countries’ labor markets from the impacts of the financial crisis.  Nonetheless, despite the progressing recovery, it has to be noted that worldwide more than 1 billion people are marginally employed in low-income or informal jobs.  Labor market outcomes are particularly worrisome for youth. Across countries unemployment rates for them are up to three times higher than for adult workers and many—around 30 percent in the Middle East and North Africa region—are out of the labor force and not studying.

A demographic surge will soon make the job-creation challenge even more urgent: The International Labor Organization (ILO) estimates that, during the next 10 years, the world will need to create more than 400 million jobs to avoid a further increase in unemployment.


Solution: The Bank Group’s job creation initiatives coordinate efforts on macroeconomic policy, the investment climate, industrial development, innovation and entrepreneurship, private-sector development, labor regulations, education and skills, and social protection. To help countries meet their job-related challenges, the Bank Group is providing technical assistance as well as lending and investment, building an evidence base for successful initiatives, and promoting cross-country learning.

Results:

Africa

Liberia: Temporarily Employing Youth

In post-conflict Liberia, the Bank is working with the government on a youth employment project that is generating temporary employment for young people through a cash-for-work program that will help bridge the gap created by the global crisis, and by improving medium- and long-term employability and employment by helping young people develop job-appropriate skills.

Uganda: Providing Youth Opportunities

In Uganda, the Youth Opportunities Program of the Northern Uganda Social Action Fund helped almost 6,000 unemployed youth start enterprises and improve their economic livelihoods. By providing vocational training opportunities and cash grants to youth groups, the $1.8-million program almost doubled cash earnings among participants (relative to a control group) while also improving social cohesion and community support.

East Asia and Pacific

China: Employing Rural Workers

China's Rural Migrant Skills Development and Employment Project supports the transition of rural workers to urban areas, to help workers access better employment opportunities that improve their incomes and working conditions. The project helps provinces to improve their capacity to deliver training, improve the provision of labor market information and public employment services for rural migrants, advance employment conditions of migrant workers, and increase awareness of worker rights and support legal services for migrants.

Malaysia: Instituting a Minimum Wage

In Malaysia, a law instituting a national minimum wage was passed for the first time. The Bank led nationwide consultations with stakeholders from all sectors of the Malaysian economy and prepared a report that assessed the potential impacts and proposed an institutional framework for the implementation of an appropriate minimum wage for the country.

Papua New Guinea: Employment Disadvantaged Youth

The Urban Youth Employment Project is providing training and work opportunities to help disadvantaged youth in the Port Moresby area. The project is provides financing and technical assistance for the National Capital District Commission to deliver bank accounts, mobile phones, basic life skills training, public works opportunities, and on-the-job internships to participants. 

Europe and Central Asia

Armenia, Azerbaijan, and Serbia: Upgrading Labor Market Institutions

In the Armenia Social Protection Administration Project, Azerbaijan Social Protection Development Project, and Serbia Employment Promotion Project, labor market institutions—such as national employment services and labor inspectorates—are being upgraded and employment protection legislation is being improved to better manage the risks associated with joblessness and mass redundancies.

Bulgaria: Investing in Social Infrastructure

In Bulgaria's Social Investment and Employment Promotion Project, more than 700,000 people are benefiting from small social infrastructure improvements and services at the municipal and community level through demand-driven subprojects, including improved employment services, training for vulnerable people (including the Roma population), and small business support through virtual incubators, and local economic development planning.

Turkey: Providing Technical Assistance in Employment and Labor Markets

In Turkey, the Bank is providing comprehensive technical assistance in employment and labor markets. The government requested support for several initiatives, including the quality-based selection of private providers of Active Labor Market Programs, the re-introduction of performance-based incentives for private providers, and help in the launch of projects that provide quality vocational training in technical schools and internships in private firms. Efforts are also underway to activate social assistance recipients by linking benefit receipts to registration at the Turkish Employment Agency (ISKUR). ISKUR technical assistance has supported the government in implementing ongoing impact evaluation of the ISKUR vocational training programs, which aims to identify which trainees benefit the most from training, pinpointing the mechanisms and processes through which training affects labor market outcomes (e.g. improved skills, reduced search costs), and identifying which provider’s characteristics make training most cost-effective.

Latin America and Caribbean

Brazil: Moving Beyond Wage-and-hours Dimensions of Employment

In Brazil, the Bank is working with the government to understand how to improve the quality of big gains in employment and wages in recent years, moving beyond just the wage-and-hours dimensions of employment. This involves (a) identifying and analyzing a range of indicators of job quality; (b) identifying the linkages between growth and trade patterns, employment creation, and the quality of jobs being created and destroyed over the cycle; and (c) providing guidance to labor market analysts to identify policies that enhance the quality of jobs that are being created. The work looks deeply at the skills and learning content of the job, the idiosyncratic and sector job risks, the availability of insurance mechanisms, and the portability of these job attributes across occupations—all of which are critical to sustaining productivity increases and growth. 

Brazil, Chile, Colombia: Developing Unemployment Benefit Systems

In Brazil, Chile, and Colombia, governments have developed unemployment benefit systems based on savings. Relative to traditional unemployment insurance, these systems provide better incentives to search for and keep jobs and therefore are less demanding in control and administrative capacity. They also could be extended to the informal sector.

Colombia: Reforming Labor and Social Sectors

In Colombia, the Bank has been involved with projects in a range of labor and social sector reforms. Better institutional practices and an improved regulatory environment have been key ingredients to promote higher employment and employability. The projects have placed almost equal importance on labor markets improvement, health, education, and social protection measures for reaching the targets. Over time, these projects have increasingly focused on the monitoring and evaluation component.

Dominican Republic: Training Poor and Disadvantaged Youth

In the Dominican Republic, a youth employment training program targeted poor and disadvantaged youth ages 16-29 to build their technical skills, work experience, and life skills. Consisting of classroom-based training and apprenticeships in private companies, the program served more than 13,000 beneficiaries. Initial results suggest that the life-skills training effectively improved short-term labor market and other outcomes, especially for women.

El Salvador: Guaranteeing a Minimum Level of Income to Poor Urban Families

The Temporary Income Support Program (PATI) in El Salvador aims to guarantee a minimum level of income to poor urban families, while providing a labor market experience at the municipal level. Unlike traditional income support programs, PATI funds the participation of people working in projects submitted by municipalities, with an emphasis on social services provision, and also comprises an innovative training component that enhances beneficiaries’ technical skills and their labor market “soft skills.” An impact evaluation that is underway is reviewing the program’s impacts on beneficiaries’ welfare and employability.

Middle East and North Africa

Afghanistan, Jordan, Lao Peoples Democratic Republic, Liberia, Nepal, Rwanda, South Sudan, Nepal: Increasing Young Women’s Economic Opportunities

The US$20-million multi-country Adolescent Girls’ Initiative (AGI) was launched in October 2008. Objectives include increasing young women’s economic opportunities by improving their human capital and their access to the labor market, agricultural land, and technology, credit, and infrastructure services. As of January 2012, AGI projects were being implemented in Afghanistan, Jordan, Lao Peoples Democratic Republic, Liberia, Nepal, Rwanda, South Sudan, and Nepal. The second round of training has begun in Nepal and Liberia, and follow-up surveys from those projects are being analyzed.

Tunisia: In Tunisia the Bank is supporting the Government with the reform of active labor market programs for youth. A new decree integrating dispersed programs and improving their design has been approved. The Bank is providing technical assistance and lending to implement the reforms which are expected to benefit around 300,000 youth. In the new system, youth have access to an integrated package of services including training in technical and life skills; counseling; internships; wage subsidies; and programs to support self-employment or entrepreneurship. To improve governance and administration, the Tunisian programs operate through a biometric ID card that is issued to youth when they register in the employment service offices. The card allows tracking beneficiaries in real time and the services they use improves the enforcement of conditionality (e.g., attendance of training program to receive stipends); and facilitates the payment of providers based on the services that they offer. Providers include private sector firms and NGOs operating on the basis of results contracts. 

South Asia

Bhutan: Examining the First Labor and Employment Act

In Bhutan, a project is examining the effects and enforcement of the first labor and employment act. The new labor code is designed to fill the institutional void and lay foundations for the enhancement of working conditions and labor relations. Rules and regulations on employment conditions were recently implemented and are being enforced by labor inspectors. Further rules on occupational health and safety have also been developed and will be implemented soon. The Bhutanese government has been working on introducing a labor code since the early 2000s to provide the right balance between labor market flexibility and social protection, encouraging job creation and efficient labor allocation while protecting the fundamental rights of workers.

India: Fostering Youth Entrepreneurship

Bharatiya Yuva Shakti Trust in India is a successful training and youth entrepreneurship initiative. It offers a range of business development services and mentoring to its clients. The mentoring models have been tailored to suit the needs of entrepreneurs who come from underprivileged sections of both urban and rural society. More than 1,200 youth enterprises have been created since its inception, generating more than 11,700 new jobs.

Link to MDGs

•  1 – Eradicate extreme poverty and hunger

•  2 – Achieve universal primary education

•  3 – Promote gender equality and empower women

•  7 – Ensure environmental sustainability

•  8 – Develop a global partnership for development

Bank Contribution

From 1998-2012, the Bank Group supported job creation and worker protection activities in 99 countries, with total lending reaching $7.3 billion (comprising $5.6 billion through IBRD lending, $1.7 billion through IDA lending, and $47 million in grants). Programs included unemployment benefits, public works, employment services, training, support to self-employment and entrepreneurship, and access to credit. Regionally, during 1998-2012, the Bank Group’s Europe and Central Asia and Latin America and Caribbean units were the largest borrowers to support their jobs agendas, with $2.6 billion and $1.9 billion in labor market lending, respectively.

Partners

The Bank Group has pursued a broad range of partnerships—with governments, donor agencies, the private sector, the ILO, the International Trade Union Confederation (ITUC), non-governmental organizations, civil society, academia, and think tanks—that have helped promote the job-creation agenda. Recent activities include:

  • The Social Protection Inter-agency Cooperation Board (SPIAC-B), which is co-chaired by the ILO and the Bank, was established in 2012 upon request of the G20 Development Working Group. The objective of the SPIAC-B is to coordinate SP efforts among multilateral and bilateral agencies. Numerous UN-agencies, regional Banks, and bilaterals are members of SPIAC and regularly attend meetings. Points of collaboration and discussion include: (i) ongoing cooperation on Social Protection data; (ii) status of the Post-Millennium Development Goals process; and (iii) strengthening of interagency cooperation at the country-level.
  • IFI-Global Union Dialogue: Facilitating and enabling the continuous dialogue with the international trade union movement (especially with ITUC, the umbrella organization), including organizing biannual and other meetings with the International Monetary Fund and trade unions.
  • Youth Employment Inventory (YEI), a global repository that reviews youth employment interventions is a global project done in collaboration with the ILO, the IDB, the Youth Employment Network (YEN), and the German Implementing Agency (GIZ).
  • Working with the Bonn-based Institute for the Study of Labor (IZA) on activities related to the Jobs Knowledge Platform, and on various joint training activities and research conferences.
  • Managing a multi-donor trust fund on labor markets, job creation, and economic growth, which addresses knowledge and capacity gaps in low- and middle-income countries. The trust fund is financing pilot activities, research, and capacity building work on entrepreneurship, skills and employability, migration, informal labor markets, self-employment, and entrepreneurship.
  • Coordinating the Global Partnership for Youth Employment, which builds and shares evidence on youth employment methods and outcomes, with a special focus on Sub-Saharan Africa and the Middle East. The partnership released studies on youth employment issues and policies, funds impact evaluations, provides technical assistance, and organizes workshops and other learning events. Partners include the International Youth Foundation, Understanding Children’s Work, the Youth Employment Network, and the Arab Urban Development Institute.

Moving Forward 

After the launch of the 2013 WDR on Jobs and Social Protection and Labor Strategy 2012-2022, the Bank is operationalizing the strategies. The WDR 2013 Jobs places jobs at the center of economic development, driving not only households’ welfare but also productivity and social cohesion. It notes that creating better jobs requires getting the basics right (a business environment that promotes entrepreneurship, investments, infrastructure and human capital, political stability and an independent judiciary); improving the performance of workers protection systems (labor regulations, social insurance and safety nets); and then introducing country specific policies to, for instance, promote urbanization and rural development and facilitate labor market transitions—from school, inactivity or unemployment into wage or self-employment, and from low to higher productivity jobs.

At the operational level there are various areas the Bank will focus on:  improving the availability and accessibility of data on labor markets; promoting and facilitating the development of multi-sectoral job strategies at the country level (a Jobs Knowledge Platform has been created to this end); supporting the evaluation of programs; developing guidelines to benchmark, design and implement social protection and labor programs.

The Bank Group is leveraging resources and partnerships to improve the flow of capital toward job-creating investments and to develop and track guidelines for promising labor market activities. It is also monitoring and evaluating labor markets and the quality of labor market data.

To help achieve these goals, the Bank Group is:

  • Continuing the partnership platform of the Jobs Knowledge Platform in partnership with IZA, McKinsey & Company, the Latin American and Caribbean Economic Association, and the Canadian International Development Research Centre. The Knowledge Platform brings together experts and policymakers from around the world to strengthen the multi-sector approach to the jobs agenda. Additional activities include the World of Labor Policy Notes on Employment and Development, making research more accessible via relevant, standardized, non-technical policy notes; increased access to multimedia data on jobs; and showcasing projects related to job creation.
  • Pursuing analytical work with national governments and the private sector to identify and invest in the job-creation potential of specific industrial sectors, weighing each country’s individual economic conditions.  
  • Conducting and promoting impact evaluations that show whether programs make a difference and why, and if they are cost-effective.
  • Supporting data collection and analysis to help improve labor market assessments and benchmarking, upgrade models to include country and sector data, and strengthen countries’ labor market information systems and survey instruments.
  • Developing and sharing operational manuals for scalable employment interventions.

 


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300,000
A new labor market system in Tunisia will provide training in technical and life skills, internships, wage subsides and programs supporting entrepreneurship to some 300,000 youth.