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Employment in the spotlight: too hot to handle?

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Pedro Martins

Pedro Martins

Date: 
21 December 2012
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Pedro works for the United Nations Economic Commission for Africa (UN-ECA).

Employment has become a burning issue in policy circles since the late 2000s. This is hardly surprising, given the jobs crisis troubling advanced economies, the role of youth unemployment in the Arab uprisings, and the lack of decent and productive employment in many parts of the world.

But despite its obvious social and political importance, employment continues to come as an afterthought in economic strategies, second to the importance of economic growth, market efficiency and profits. In fact, employment is often seen as the responsibility of a single government ministry with a fairly limited set of (labour-market) policies.

But employment is crucial to our lives, since in the words of the 2013 World Development Report on Jobs, it defines ‘what we earn, what we do, and even who we are’. It therefore impacts on how we interact and develop as a society. A more comprehensive (people-centred) approach is urgently needed.

The debate: let it simmer

Measured by the number of reports on the topic, the debate is a healthy one.  In recent years, we’ve seen UNCTAD’s Trade and Development Report 2010, UNECA’s Economic Report on Africa 2010, and the World Bank’s 2013 World Development Report on Jobs (WDR) – to name a few – in addition to the ILO’s regular flagship publications, such as Global Employment Trends, the Global Wage Report and the World of Work Report. This renewed attention is very much welcomed and has contributed to a reinvigorated policy debate.

At ODI, we have also been reflecting on these issues. In early November, ODI and the World Bank co-hosted the London launch of this year’s WDR. The Report provides a useful country typology to unpack the diversity of employment challenges, and highlights some success stories in different contexts, such as Vietnam (as an agrarian country), Rwanda (conflict-affected country), Chile (resource-rich country) and Korea (urbanising country).

We have also heard a variety of perspectives on the challenges and opportunities that lie ahead. Dr. Rizwanul Islam argued that both economic and labour-market policies are needed to ensure that economic growth creates high-earning jobs. This will require strong investments and other measures to promote the growth of labour-intensive sectors, in addition to supporting smallholder farmers and public-works programmes.

Prof. Rolph van der Hoeven welcomed the WDR’s ‘more heterodox economic view’ that policies ought to be time- and context-specific. However, he also warned that external factors, such as financial globalisation, are changing the nature of work – leading to more precarious forms of employment and greater wage inequality – and called for these issues to be taken into account.

Finally, my colleague Paula Lucci noted that people often migrate in search of better jobs (in fact, jobs themselves also move!), which emphasises the international nature of the employment challenge. Matching people and jobs across boundaries will also be important to raise global living standards.

New recipes, same ingredients

Despite the gloomy outlook, there are some significant examples of success that can inform future policy decisions. For instance, China has achieved remarkable economic and social progress by creating masses of manufacturing jobs and consequently lifting millions of people out of poverty. This was only possible through an eclectic policy mix that blended the virtues of the market system with the need for adequate coordination and regulation. A similar strategy had been followed by South Korea a few decades earlier. Vietnam’s recent experience may also fit the so-called East Asian development model.

What these cases have in common is the determination to pursue active economic policies to encourage structural transformation: facilitating the shift of labour from relatively low-productivity activities (such as subsistence agriculture) to higher productivity activities (normally associated with the modern sectors). This process has been a cornerstone of economic and social development ever since the industrial revolution, and remains the only viable strategy to create productive employment and sustainably raise living standards.

But while these experiences are fairly well-known, the precise blend of policies in each case was unique and may not be replicable elsewhere. The nature of the employment challenge is context-specific (unemployment vs. underemployment, for instance), while the external environment is also rapidly changing. Therefore, policy-makers will need to create their own recipes, even if they have all the required ingredients – as provided by the necessary domestic policy space and a conducive external environment.

Building the evidence base

One way forward is to undertake in-depth case studies to better understand the drivers and obstacles to employment creation in specific country contexts. In particular, the knowledge gap in the poorest developing countries is notoriously large. We are exploring the use of diagnostic tools as potentially useful instruments to provide tailored policy advice and insights. This will support the selection of the most important and relevant ingredients that, when combined in adequate quantities and at the right time, are likely to create more and better job opportunities in a given country.

Development Progress will certainly contribute to these efforts, as we explore the drivers and obstacles to employment creation in a few selected countries over the months to come. In that process, we hope that some myths might be debunked and some gems unearthed. Watch this space.