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Overview

Good jobs are the surest pathway out of poverty. In recent years, rising labor incomes directly accounted for around 40 percent of the drop in poverty worldwide. The other important factor, smaller family sizes and falling dependency ratios, is also closely linked to people getting better jobs. But the developing world faces a jobs crisis. In low-income countries, over 90 percent of workers are in low-quality, low-productivity jobs (self-employed or informal wage jobs). So, the challenge of finding Pathways to better Jobs is at the heart of the development challenge for low-income countries.

The disruptive impact of the COVID-19 crisis on workers, labor markets, and livelihoods has further underlined the importance of the jobs agenda.

By July 2020, up to a third of workers in developing countries had lost their jobs or faced pay cuts. The crisis is unlikely to be limited to a “V-shaped” dip produced by the temporary need to contain the pandemic. The global economy may confront a “U-shaped” recession or even an “L-shaped” depression, with a protracted period of weak labor demand. Governments have responded quickly to address the immediate jobs challenges of COVID-19, by using (i) liquidity support for firms, (ii) wage subsidies to retain jobs; and (iii) income support for the unemployed and vulnerable households. But they will also need to address the medium and long-term effects of the pandemic by stimulating job creation, re-employment, and economic inclusion. And they’ll have to do so in a world beset by disruptive technological change and shifting patterns of demand. There is also an urgent need to strengthen health and social protection systems to provide robust universal coverage and reduce their dependence on financing through labor taxes, which creates disincentives to the growth of formal jobs.   

To tackle the jobs crisis, governments in developing countries need to address two main challenges:

1. To create better jobs that increase productivity and earnings for the growing workforce. The world’s working-age population will increase by about 700 million people between 2019 and 2035. Assuming no change in women’s and men’s respective participation rates of 50 and 80 percent, this means that an additional 470 million people will be seeking work – most of them in the private sector. Most people in low-income countries work, because they have no alternative. The problem is that many of these jobs produce low incomes and are insufficient to help them climb out of  poverty. Some  also face unsafe or abusive working conditions. The central challenge is to create more productive jobs with higher incomes and better working conditions. While it is important to boost formal sector jobs, it is also crucial to improve the productivity and earnings of informal sector jobs — which are the main source of income for most people in low-income countries — by connecting them to markets on more favorable terms.

2. To support access to better jobs for disadvantaged groups, such as: youth, women, minority groups, people with disabilities, and displaced populations. That means working to eliminate the multiple barriers that prevent disadvantaged workers from acquiring the skills they need and accessing better jobs. Low female labor force participation is a key challenge.

 

Last Updated: Mar 01, 2021

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