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«Jobs and Labour Markets in Developing Countries Policy Issues and Priorities Steven Miller 1. Introduction The challenge of providing productive ...»

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Therefore, when seeking policy solutions to address vulnerable employment in developing countries, it is important to put a youth perspective on the debate surrounding the informal economy. In fact, youth employment can be most effectively addressed by ensuring that mainstream employment policies include young people rather than devising special programmes which are targeted exclusively at young people with the effect of separating, rather than including, young people in overall employment policy. Given the urgency and high political traction associated with youth employment, it may be more effective to view young people as a starting point for, rather than a target group of, for overall employment policy.

3.6 Conclusion While each of the policy issues discussed in this section has its own implications, they are all

interdependent and this demands a coherent and effective development cooperation strategy to:

• Foster employment-rich economic growth;

• Address not only job creation but also improvements to the quality (i.e., productivity, remuneration and working conditions) of those jobs;

• Evaluate regulatory frameworks with specific reference to job creation and quality;

• Improve employment opportunities, protection and job quality for workers in the informal economy; and

• View young people as a starting point (rather than target group) for employment policy reform.

The following section will review policy options for putting these goals into practice.

4. Policies and programmes for job creation

4.1 Macro-econonomic policies The previous section reviewed the growth-employment-poverty nexus, noting that the macroeconomic policies associated with the neo-liberal development paradigm did not necessarily lead to growth, that growth does not automatically lead to employment creation, and that employment creation does not automatically lead to poverty reduction. This section will discuss the policy measures required for stimulating employment-intensive growth, as well as additional mechanisms, such as employment targeting, that can be brought to bear to better leverage the employment impact of macro-economic policies.

The recent crisis and the need to strengthen post-crisis recovery provide a window of opportunity to re-define the concept of macroeconomic stability to include the goal of full employment.14 While a focus on employment is incorporated in Article I of the IMF’s Articles of Agreement, which states that one of the Fund’s purposes is “to facilitate the expansion and balanced growth of international trade, and to contribute thereby to the promotion and maintenance of high levels of employment and real income and to the development of the productive resources of all members as primary objectives of economic policy,” in practice, the focus has tended to be on targeting inflation.15 A recent staff paper by Blanchard et al. (2010) has attracted a lot of attention in this regard because it is seen as a serious introspection by the International Monetary Fund (IMF) about its macroeconomic policy prescriptions.16 The paper acknowledges that there can be “multiple targets in a macroeconomic strategy, and multiple instruments to attain these targets.” PUBLIC WORLD / Jobs and Labour Markets in Developing Countries / Steven Miller 13 An economic policy focused on employment growth and decent work predicates growth targets on the need not only to absorb new entrants to the labour market but also to convert existing unproductive jobs into productive ones. To be effective, employment targets need not only to be established but also defined in ways that take into account variations between sectors and changes in productivity over time. In this way, policy can be designed to prioritise the identification of dynamic-employment generating pathways for the economy, translating these into targeted employment objectives in specific sectors and in local development strategies.

Such a strategy needs to take account of the dynamic of structural change, which can have negative as well as positive effects. Productivity increases in agriculture and industry, while increasing the quality of employment in these sectors and accompanied by the growth of formal jobs in the supporting service sectors, may also result in layoffs and a corresponding growth of informal urban and rural jobs and survivalist activities. (UNRISD 2010). In this regard, the poor who are trapped in informal subsistence and survivalist activities also need to be targeted from a growth and employment perspective, so that their work and productivity, as well as work and productivity in the formal sector, can be enhanced. Whereas the growth-led paradigm views labour-intensive activities negatively because of their low productivity, an ‘employment-led growth’ perspective focuses on incremental transition from lower to higher productivity.

Public employment programmes, such as India’s National Rural Employment Guarantee Scheme (NREGA), can play a critical role, by prioritising employment generation through investments in activities such as rural connectivity and water conservation. This can contribute to enhancing the productivity and the quality of jobs in the ‘employment-led growth’ sectors of the economy as well as fostering improvements on the land of marginal farmers. While such programmes are often conceived of as ‘safety nets’ -- NREGA has been called the “world’s largest social welfare scheme”17 -- they can be designed as a component of an inclusive growth strategy that takes account of the comparative abundance of labour and scarcity of capital in poorer countries seeking to raise endowments over time.

Moreover, as Bhaduri (2005) suggests, they can be reconciled with competitiveness through:

• Closer attention to the domestic market and use of public procurement policies.

• Identifying a suitable mix of industrial and service sectors with inter-linkages between those that are more capital-intensive and/or exposed to competitive pressures and those that are more labour-intensive.

• Complementing all of this with a direct role for the state as employer of last resort to improve the functioning of the labour market. (Lal et al 2010) Fiscal sustainability is clearly a concern with schemes of this kind, but this should be assessed over a longer term, because without sustainable employment growth, governments will not generate the necessary taxes and fiscal revenues required to balance budgets. (Roy et al 2007). The alternative is a downward spiral of constantly cutting expenditures in response to falling employment.

4.2 Training, skills development and employability

Macro-economic strategy needs to be complemented by measures to enable current poor and unemployed to benefit from the job opportunities that would be created. This includes addressing constraints to their mobility through, for examples, skills upgrading, access to affordable transportation, credit, and so on. However, while lack of appropriate skills and work experience can be key entrance barriers to the labour market, analysis is required to diagnose the extent to which lack of training is the problem. If vocational training programs are evaluated (as they often are) only in terms of number of youth trained and successfully placed in employment it can mean that neither longer term retention nor PUBLIC WORLD / Jobs and Labour Markets in Developing Countries / Steven Miller 14 job displacement -- i.e. newly trained workers displacing others, rather than leading to net job creation -- are not sufficiently addressed.

One avenue to improve youth employability includes making general and technical secondary education more skills- and career- oriented. Often the knowledge and skills acquired in formal education are poorly adapted to the needs of employers and to the self-employed, and therefore supplementary training is required to make young people ‘employable’ by industry standards. In Tunisia, for example, where youth unemployment spurred a popular revolution, high levels of education and labour market preparedness did not address the need for job

creation. Kaboub (2007) wrote prophetically in 2007:

High unemployment is not only an economic problem, but it is also increasingly becoming a social and political issue that has the potential to destabilize Tunisia if not dealt with promptly and strategically.... Tunisia has spent 25% of its annual government budget on public education. Today’s unemployment situation reveals that the composition of the unemployment pool has become qualitatively different from what has been the custom in the past.... In 2006, for the first time in Tunisia’s history, two thirds of the first-time job seekers have a university degree. This trend is likely to continue well into the foreseeable future as the number of college students continues to grow exponentially. A closer look at the Tunisian labor market reveals that more than 50% of the unemployed have been actively seeking work for more than 12 months.

Unfortunately, despite the urgency of the unemployment situation, the active labor market policy (ALMP) budget has been around 1.5% of GDP with a meager 0.15% of GDP devoted to direct job creation in public works.

Improving links between schools and workplaces can help to close the gap, although dialogue between the leadership of each should be complemented by consultation with job seekers themselves. The German Dual System, which divides the technical secondary school week between the classroom and places of work, has been promoted in various forms by German technical cooperation projects around the world, such as the Mubarak-Kohl Dual System (MKDS) which ran for 14 years in Egypt. The aim was to produce a skilled and disciplined workforce for new export-oriented enterprises, following 20 years marked by unemployment rates rising five-fold, capital output ratios doubling and growth of informal forms of employment (Fares & Gonzalez 2009).

While the system might have served well the requirements of employers and investors seeking to produce a labour pool to enable them to reach new export markets and to be successful in highly competitive sectors, there was insufficient consultation with job seekers. The result was that the system did not respond sufficiently to the aspirations of the country’s young people, nor to the needs of those working in the informal economy. To address these deficiencies, a new partnership agreement launched a Mubarak-Kohl Vocational Education, Training and Employment Promotion Program (MKI-vetEP) which was intended to focus on job matching, relating to both technical skills and so-called soft skills, such as life skills, appropriate behaviour in the world of work, and literacy and numeracy skills.

As a result of the limitations of training programs focused on employers’ and labour market needs without integrating a clear understanding of youth motivations in the labour market, there has been a movement towards ‘Training-plus’ programmes, which combine vocational, inclassroom training with workplace-based training and a variety of intermediation services.

Lessons learned from conventional supply-side training programmes can be seen as supporting an evolution of these programs along a continuum towards more demand-oriented approaches involving various forms of intermediation and support services. Such a PUBLIC WORLD / Jobs and Labour Markets in Developing Countries / Steven Miller 15 comprehensive training approach has been championed by the International Youth Foundation since 2001, for example through its support for the entra-21 scheme funded also by the InterAmerican Development Bank and others.

However, while such programmes can improve skills matching and enable many young people to improve their working lives, the fundamental problem remains lack of employment opportunities, and a lesson to be drawn is that resources for education and training need to be matched by resources devoted to creating new jobs for those educated and newly trained workers. As the World Bank has acknowledged in its report of a global evaluation of skills training, work experience, apprenticeship and school-to-work transition programmes: “Attention to apprenticeship and structured work experience as a means to promote the school to work transition has grown over the past several decades to join the continued emphasis on schoolbased vocational programs for entry-level skills. Evidence favours these programs, but with qualifications. Employment growth is a key ingredient to demand for apprentices and interns.

Employers are unlikely to take on board large numbers of youths for training when conditions for sustained employment are not present.” (Adams 2007) In summary, investments in human capital development through both general education and vocational education and training programmes will continue to play an important role in an overall employment policy for developing countries. However, these policy efforts, particularly in a context of structural unemployment, underemployment and informality, and at a time when levels of investments in education and training have never been higher, will not be effective unless they are matched new job creation in the formal economy and upgrading of jobs in the informal economy, thereby better responding to the expectations and even aspirations of the workforce.18 Greater efforts should be made to evaluate the effectiveness of programmes for placing the unemployed in sustainable jobs (rather than displacing other workers), as well as their overall cost-effectiveness via-à-vis other alternative or complementary employment strategies. Otherwise, such programmes will only increase competition for the limited number of available jobs and lead to growing levels of frustration and discouragement amongst job seekers. The wave of popular uprisings in North Africa and the Middle East since 2011 has brought home this message forcefully.

4.3 Self-employment, entrepreneurship development and private sector support

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