73068 - -.) About the cover In almost every language there is a range of words related to jobs, each emphasizing a different angle. Some words hint at the nature of the activity being performed, evoking the skill or expertise that is required. Others refer to the volume of human inputs used in production, bringing images of effort and con- veying a sense of physical exertion. There are also words asso- ciated with the sheer numbers of people engaged in economic Arabic Mapuche Bulgarian Mal"g"sy activity, which are more easily associated with aggregate sta- lndonc·sian/M.ilc1ysi;rn ....c: CO Lithuanian tistics. In other cases, what seems to be at stake is a contrac- tual relationship, involving mutual obligations and a degree of French ~ ~I~ JKocean Chinese Italian Thai ~ g1 d stability. In some languages, there are even words to designate i-..: ~ Ur u c Cl~ Greek § .~ ~ '9, the place where the person works, or at least a slot in a produc- German Burmese u: Hebrew ~ ru ~ Tsw .. n> tion process. This multiplicity of words clearly shows that jobs are multi-dimensional and cannot be characterized by a single Croatian Pmtugw"'.'. Be ngal i Is h • Eng 1 0 :l \fl Maori Q) - Farsi (.'.J M~hawk 8dsqu( term or measured by a single indicator. Swahili Romanian Afrikaans Words related to jobs do not always translate well from one Russian ~ Hind iv 0 0 ' b.i Portuguese language to another, as the range of options available in each Tamil co ~ if' ""tJ Tib et an case can be different. If languages shape thinking, there are Ouechua T k'h ur is mN E c - C:: ~ 0 c6 0 -· =: . . ukra1nian (/) Kirund1 · · Rom.::insh ~ C r+ ':l ::J"'" Vietn<:1rnese Albanian times when the ways in which people refer to jobs seem to be n G ae lic .. k. J u b a A ra b.IC Rorn,1 ::r Amharic 1a1 1 1 at odds. Gaps probably arise from the different characteristics of jobs being emphasized in different societies. They also sug- Spanish j Dmk .. Japanese gest that jobs' agendas can differ across countries. G al icia n In many languages, words related to jobs serve not only as common nouns but also as proper nouns. Throughout his- tory family names have been associated with specific skills or trades: Vankar in Hindi, Hattori in Japanese, Herrero in Span- ish, or Mfundisi in Zulu, just to mention a few. The use of job-related words as household identifiers shows that people associated themselves with what they did. Nowadays, people aspire to choose their jobs based on what motivates them and on what could make their lives more meaningful. In almost every language there are also several words to express the lack of a job. Almost invariably these words have a negative connotation, close in spirit to deprivation; at times they even carry an element of stigma. In all these ways, language conveys the idea that jobs are more than what people earn, or what they do at work: they are also part of who they are. "'W'. ~ *-~-- ~ :wor:ld ~~v,elopment report _ ~~ --:. / OVERVIEVV THE WORLD BANK Washington , DC Foreword Today, jobs are a critical concern across the globe-for policy makers, the business community, and the billions of men and women striving to provide for their families. As the world struggles to emerge from the global crisis, some 200 million people-includ- ing 75 million under the age of 25-are unemployed. Many millions more, most of them women, find themselves shut out of the labor force altogether. Looking forward, over the next 15 years an additional 600 million new jobs will be needed to absorb burgeoning working-age populations, mainly in Asia and Sub-Saharan Africa. Meanwhile, almost half of all workers in developing countries are engaged in small-scale farming or self-employment, jobs that typically do not come with a steady paycheck and ben- efits. The problem for most poor people in these countries is not the lack of a job or too few hours of work; many hold more than one job and work long hours. Yet, too often, they are not earning enough to secure a better future for themselves and their children, and at times they are working in unsafe conditions and without the protection of their basic rights. Jobs are instrumental to achieving economic and social development. Beyond their critical importance for individual well-being, they lie at the heart of many broader societal objec- tives, such as poverty reduction, economy-wide productivity growth, and social cohesion. The development payoffs from jobs include acquiring skills, empowering women, and stabilizing post-conflict societies. Jobs that contribute to these broader goals are valuable not only for those who hold them but for society as a whole: they are good jobs for development. The World Development Report 2013 takes the centrality of jobs in the development pro- cess as its starting point and challenges and re-frames how we think about work. Adopting a cross-sectoral and multi-disciplinary approach, the Report looks at why some jobs do more for development than others. The Report finds that the jobs with the greatest development payoffs are those that make cities function better, connect the economy to global markets, protect the environment, foster trust and civic engagement, or reduce poverty. Critically, these jobs are not only found in the formal sector; depending on the country context, informal jobs can also be transformational. Building on this framework, the Report tackles some of the most pressing questions policy makers are asking right now: Should countries design their development strategies around growth or focus on jobs? Are there situations where the focus should be on protecting jobs as opposed to protecting workers? Which needs to come first in the development process- creating jobs or building skills? The private sector is the key engine of job creation, accounting for 90 percent of all jobs in the developing world. But governments play a vital role by ensuring that the conditions are in place for strong private-sector led growth, and by alleviating the constraints that hinder the private sector from creating good jobs for development. The Report advances a three-stage approach to help governments meet these objectives. First, policy fundamentals-including macroeconomic stability, an enabling business envi- ronment, investments in human capital, and the rule oflaw-are essential for both growth and job creation. Second, well-designed labor policies can help ensure that growth translates into employment opportunities, but they need to be complemented by a broader approach to job creation that looks beyond the labor market. Third, governments should strategically identify vii viii FOREWORD which jobs would do the most for development given their specific counfry context, and re- move or offset the obstacles that prevent the private sector from creating more of those jobs. In today's global economy, the world of work is rapidly evolving. Demographic shifts, tech- nological progress, and the lasting effects of the international financial crisis are reshaping the employment landscape in countries around the world. Countries that successfully adapt to these changes and meet their jobs challenges can achieve dramatic gains in living standards, productivity growth, and more cohesive societies. Those that do not will miss out on the trans- formational effects of economic and social development. The World Development Report 2013 is an important contribution to our collective under- standing of the role of jobs in development. Its insights will provide valuable guidance for the World Bank Group as we collaborate with partners and clients to advance their jobs agendas. Working together, we can foster job creation and maximize the development impact of jobs. Jim Yong Kim President The World Bank Group Acknowledgments This Report was prepared by a team led by Martin Rama, together with Kathleen Beegle and Jesko Hentschel. The other members of the core team were Gordon Betcherman, Samuel Freije-Rodriquez, Yue Li, Claudio E. Montenegro, Keijiro Otsuka, and Dena Ringold. Research analysts Thomas Bowen, Virgilio Galdo, Jimena Luna, Cathrine Machingauta, Daniel Pala- zov, Anca Bogdana Rusu, Junko Sekine, and Alexander Skinner completed the team. Addi- tional research support was provided by Mehtabul Azam, Nadia Selim, and Faiyaz Talukdar. The team benefited from continuous engagement with Mary Hallward-Driemeier, Roland Michelitsch, and Patti Petesch. The Report was cosponsored by the Development Economics Vice Presidency (DEC) and the Human Development Network (HDN). Overall guidance for the preparation of the Report was provided by Justin Lin, former Senior Vice President and Chief Economist, Development Economics; Martin Ravallion, acting Senior Vice President and Chief Economist, Develop- ment Economics; and Tamar Manuelyan-Atinc, Vice President and Head of the Human Development Network. Asli Demirgii<;:-Kunt, Director for Development Policy, oversaw the preparation process, together with Arup Banerji, Director for Social Protection and Labor. Former World Bank President Robert B. Zoellick, President Jim Yong Kim, and Manag- ing Directors Caroline Anstey and Mahmoud Mohieldin provided invaluable insights during the preparation process. Executive Directors and their offices also engaged constructively through various meetings and workshops. An advisory panel, comprising George Akerlof, Ernest Aryeetey, Ragui Assaad, Ela Bhatt, Cai Fang, John Haltiwanger, Ravi Kanbur, Gordana Matkovic, and Ricardo Paes de Barros, contributed rich analytical inputs and feedback throughout the process. Seven country case studies informed the preparation of the Report. The case study for Bangladesh was led by Binayak Sen and Mahabub Hossain, with Yasuyuki Sawada. Nelly Agu- ilera, Angel Calderon Madrid, Mercedes Gonzalez de la Rocha, Gabriel Martinez, Eduardo Rodriguez-Oreggia, and Hector Villarreal participated in Mexico's case study. The study for Mozambique was led by Finn Tarp, with Channing Arndt, Antonio Cruz, Sam Jones, and Fausto Mafambisse. For Papua New Guinea, Colin Filer and Marjorie Andrew coordi- nated the research. The South Sudan study was led by Lual Deng, together with Nada Eissa. AbdelRahmen El Lahga coordinated the Tunisian work, with the participation of Ines Bouassida, Mohamed Ali Marouani, Ben Ayed Mouelhi Rim, Abdelwahab Ben Hafaiedh, and Fathi Elachhab. Finally, Olga Kupets, Svitlana Babenko, and Volodymyr Vakhitov con- ducted the study for Ukraine. The team would like to acknowledge the generous support for the preparation of the Report by the Government of Norway, through its Ministry of Foreign Affairs, the multi- donor Knowledge for Change Program (KCP II), the Nordic Trust Fund, the Government of Denmark through its Royal Ministry of Foreign Affairs, the Swiss State Secretariat for Eco- nomic Affairs (SECO), the Canadian International Development Agency (CIDA), the Gov- ernment of Sweden through its Ministry for Foreign Affairs, and the Government of Japan ix x ACKNOWLEDGMENTS through its Policy and Human Resource Development program. The German Ministry for Economic Cooperation and Development Cooperation (BMZ) through the German Agency for International Cooperation (GIZ) organized a development forum that brought together leading researchers from around the world in Berlin. Generous support was also received for the country case studies by the Australian Agency for International Development (AusAID), Canada's International Development Research Centre (IDRC), the Government of Denmark through its Royal Ministry of Foreign Affairs, the Japan International Cooperation Agency (JICA) through the JICA Institute, and the United Nations University World Institute for Development Economics Research (UNU-WIDER) . The United Kingdom's Overseas Development Institute (ODI) assisted the team through the organization of seminars and workshops. A special recognition goes to the International Labour Organization (ILO) for its contin- ued engagement with the team. Jose Manuel Salazar-Xirifiachs and Duncan Campbell coor- dinated this process, with the participation of numerous colleagues from the ILO. Interagency consultations were held with the International Monetary Fund (IMF), the Organisation for Economic Co-operation and Development (OECD), and the United Nations Economic and Social Council (ECOSOC). The team also benefited from an ongoing dialogue with the Inter- national Trade Union Confederation (ITUC). Country consultations were conducted in Bangladesh, Canada, China, Denmark, Finland, France, Germany, India, Japan, the Republic of Korea, Mexico, Mozambique, Norway, Papua New Guinea, Singapore, Sweden, Switzerland, Tunisia, Turkey, Ukraine, and the United King- dom. All consultations involved senior government officials. Most included academics, business representatives, trade union leaders, and members of civil society. In addition, bilateral meet- ings were held with senior government officials from Australia, the Netherlands, South Africa, and Spain. Consultations with researchers and academics were arranged with the help of the African Economic Research Consortium (AERC) in Kenya, the Economic Research Forum (ERF) in the Arab Republic of Egypt, and the Latin American and Caribbean Economic Associa- tion (LACEA) in Chile. The Institute for the Study of Labor (IZA) organized special work- shops with its research network in Germany and Turkey, coordinated by Klaus Zimmerman. Forskningsstiftelsen Fafo in Norway undertook a household survey in four countries, which this Report draws on. The production of the Report and the logistics supporting it were assured by Br6nagh Murphy, Mihaela Stangu, Jason Victor, and Cecile Wodon, with a contribution by Quyen Thuy Dinh. Ivar Cederholm coordinated resource mobilization. Irina Sergeeva and Sonia Joseph were in charge of resource management. Martha Gottron, Bruce Ross-Larsen, Gerry Quinn, and Robert Zimmermann participated in the editing of the Report. The Development Data Group, coordinated by Johan Mistiaen, contributed to the preparation of its statistical annex. The Office of the Publisher coordinated the design, typesetting, printing, and dissemina- tion of both the hard and soft versions of the Report. Special thanks go to Mary Fisk, Stephen McGroarty, Santiago Pombo-Bejarano, Nancy Lammers, Stephen Pazdan, Denise Bergeron, Andres Meneses, Theresa Cooke, Shana Wagger, Jose De Buerba, and Mario Trubiano, as well as to the Translations and Interpretation Unit's Cecile Jannotin and Bouchra Belfqih. The team also thanks Vivian Hon, as well as Claudia Sepulveda, for their coordinating role; Merrell Tuck-Primdahl for her guidance on communication; Vamsee Krishna Kanchi and Swati P. Mishra for their support with the website; Gerry Herman for his help with the prepa- ration of the movie series associated with the Report; and Gytis Kanchas, Nacer Mohamed Megherbi, and Jean-Pierre S. Djomalieu for information technology support. Many others inside and outside the World Bank contributed with comments and inputs. Their names are listed in the Bibliographical Note. Farmers in a pomegranate field in Tajikistan © Gennadiy Ratushenko I World Bank Street vendor in Kabu l, Afghan istan Wage worker at a garment factory in Vietnam ©Steve McCurry I Magnum Photos © Lino Vuth I World Bank Drying peppers in the street in Mexico ©Curt Carnemark/World Bank Moving jobs center stage obs are the cornerstone of economic and • While jobs can contribute to social cohesion, J social development. Indeed, development happens through jobs. People work their way out of poverty and hardship through bet- ter livelihoods. Economies grow as people get is there anything governments can do about it, apart from trying to support job creation? • Are greater investments in education and training a prerequisite for employability, or better at what they do, as they move from farms can skills be built through jobs? to firms, and as more productive jobs are cre- ated and less productive ones disappear. Soci- • Should efforts to improve the investment cli- eties flourish as jobs bring together people mate target the areas, activities, or firms with from different ethnic and social backgrounds greater potential for job creation? and nurture a sense of opportunity. Jobs are • What is the risk that policies to foster job thus transformational-they can transform creation in one country will come at the ex- what we earn, what we do, and even who we pense of jobs in other countries? are. No surprise, then, that jobs are atop the • When confronted with large shocks and ma- development agenda everywhere-for every- jor restructuring, is it advisable to protect jobs one from policy makers to the populace, from and not just people? business leaders to union representatives, from • How can the reallocation of workers be ac- activists to academics. Looking to seize oppor- celerated from areas and activities with low tunities for job creation presented by massive productivity to those with greater potential? demographic shifts, technological innovations, global migrations of people and tasks, and deep Individuals value jobs for the earnings and changes in the nature of work, policy makers ask benefits they provide, as well as for their contri- difficult questions: butions to self-esteem and happiness. But some jobs have broader impacts on society. Jobs for • Should countries build their development women can change the way households spend strategies around growth or should they money and invest in the education and health rather focus on jobs? of children. Jobs in cities support greater spe- • Can entrepreneurship be fostered, especially cialization and the exchange of ideas, making among the many microenterprises in devel- other jobs more productive. Jobs connected oping countries, or are entrepreneurs born? to global markets bring home new technologi- Moving jobs center stage 3 cal and managerial knowledge. And in turbulent tries grow richer, the policy environment environments, jobs for young men can provide must be conducive to growth. That requires alternatives to violence and help restore peace. attending to macroeconomic stability, an en- Through their broader influence on living abling business environment, human capital standards, productivity, and social cohesion, accumulation, and the rule oflaw. these jobs have an even greater value to society • Labor policies. Because growth alone may not than they do for the individual. But some jobs be enough, labor policies need to facilitate can have negative spillovers. Jobs supported job creation and enhance the development through transfers or privilege represent a bur- payoffs from jobs. Policies can address labor den to others or undermine their opportunities market distortions while not being a drag on to find remunerative employment. Jobs damag- efficiency. But they should avoid distortion- ing the environment take a toll on everybody. ary interventions that constrain employ- Thus it is that some jobs do more for develop- ment in cities and global value chains-and ment, while others may do little, even if they are provide voice and protection for the most appealing to individuals. vulnerable. Which jobs have the greatest develop- ment payoffs depends on the circumstances. • Priorities. Because some jobs do more for Countries differ in their level of development, development than others, it is necessary to demography, endowments, and institutions. identify the types of jobs with the greatest Agrarian societies face the challenge of making development payoffs given a country's con- agricultural jobs more productive and creat- text, and to remove-or at least offset-the ing job opportunities outside farms. Resource- market imperfections and institutional fail- rich countries need to diversify their exports, ures that result in too few of those jobs being so that jobs are connected to global markets created. rather than supported through government The centrality of jobs for development transfers. Formalizing countries need to de- should not be interpreted as the centrality of sign their social protection systems in ways labor policies and institutions. Nearly half that extend their coverage without penalizing the people at work in developing countries employment. are farmers or self-employed and so are out- A vast majority of jobs are created by the side the labor market. And even in the case of private sector. Governments, though, can sup- wage employment, labor policies and institu- port--0r hinder-the private sector in creat- tions may or may not be the main obstacle to ing jobs. The idea that development happens job creation. Often, the most relevant obstacles through jobs sheds new light on the strategies, lie outside of the labor market. The catalysts policies, and programs governments can pur- for job creation may be policies that make cit- sue. Strategies should identify which types of ies work better, help farmers access and apply jobs would have the highest development pay- appropriate agricultural techniques, or allow offs, given a country's circumstances. Policies firms to develop new exports. Jobs are the cor- should remove the obstacles that prevent the nerstone of development, and development private sector from creating jobs. Programs for policies are needed for jobs. generating employment may also be warranted, for instance, in conflict-affected countries. But the costs and benefits of these policies and pro- Jobs wanted grams have to be assessed, taking into account the potential spillovers from jobs, both positive To many, a "job" brings to mind a worker with and negative. an employer and a regular paycheck. Yet, the At a more practical level, this jobs lens on majority of workers in the poorest countries development leads to a three-layered policy are outside the scope of an employer-employee approach: relationship. Worldwide, more than 3 billion • Fundamentals. Because jobs provide higher people are working, but their jobs vary greatly. earnings and broader social benefits as coun- Some 1.65 billion are employed and receive reg- 4 WORLD DEVELOPMENT REPORT 2013 16 • billion people working for a wage or a salary 15• billion people working in farming and self-employment 0 LO labor fore~ part~cipation OLO labor fore~ particip~tion 77 7l by women in Vietnam 28 7l by women in Pakistan QL of the m~nufaeturi~g QL of the m~nufaeturi~g 39 70 are in m1eroenterpnses in Chile jobs 97 jobs 70 are in m1eroenterpnses in Ethiopia 2x employment growth in a firm in Mexico over 35 years 1Ox employment growth in a firm in the United States over 35 years 115 million children working in hazardous 21 conditions million · victims of forced labor 600 million jobs needed over 15 to keep current employment rates years million people million youth 90 working abroad 621 neither working nor studying 22x the productivity gap between manufacturing firms in the 90th and 10th percentiles in India 9X the productivity gap between manufacturing firms in the 90th and 10th percentiles in the United States 10 million entrants to the labor force per year in Sub-Saharan Africa 30 million postsecondary students in China 3OL 0 7l international migrants 6OQLO 7l as a share of the world population foreign-born population in Kuwait, Qatar, and the United Arab Emirates Moving jobs center stage 5 ular wages or salaries. Another 1.5 billion work rights as the boundaries of what is unacceptable. in farming and small household enterprises, or Among them are the United Nations Universal in casual or seasonal day labor. Meanwhile, 200 Declaration of Human Rights (1948) and the million people, a disproportionate share of them International Labour Organization Declaration youth, are unemployed and actively looking for on Fundamental Principles and Rights at Work work. Almost 2 billion working-age adults, the (1998), which further specifies core labor stan- majority of them women, are neither working dards. Combining these different perspectives, nor looking for work, but an unknown number jobs are activities that generate income, mone- of them are eager to have a job. Clarifying what tary or in kind, without violating human rights. is meant by a job is thus a useful starting point. The meaning of the words used to de- Different places, different jobs scribe what people do to earn a living varies across countries and cultures. Some words re- The world of work is particularly diverse in de- fer to workers in offices or factories. Others are veloping countries. This variety refers not only broader, encompassing farmers, self-employed to the number of hours worked and the number vendors in cities, and caregivers of children and of jobs available, the usual yardsticks in indus- the elderly. The distinction is not merely seman- trial countries, but also to the characteristics of tic. The varied meanings hint at the different jobs. 'Two main aspects stand out. One is the aspects of jobs that people yalue. And views on prevalence of self-employment and farming. 2 what a job is almost inevitably influence views The other is the coexistence of traditional and on what policies for jobs should look like. modern modes of production, from subsistence For statisticians, a job is "a set of tasks and agriculture and low-skilled work to technology- duties performed, or meant to be performed, driven manufacturing and services and highly by one person, including for an employer or skilled knowledge work. in self-employment." 1 Jobs are performed by While nearly half of the jobs in the developing the employed. These are defined as people who world are outside the labor market, the shares of produce goods and services for the market or wage work, farming, and self-employment differ for their own use. But the statistical definition greatly across countries. 3 Nonwage work repre- is mute about what should not be considered sents more than 80 percent of women's em- a job. International norms view basic human ployment in Sub-Saharan Africa-but less than F 1Gu RE 1 A job does not always come with a wage men women 100 wage employment ~ i - 0 self-employment Ci 60 E c 20 10 - -I I II I • state-owned enterprises • private firms (8 workers or more) • individual firms (fewer than 8 workers) • foreign-owned companies Source: Kanamori and Zhao 2004. Note: Data for foreign-owned companies in 2002 and for non-state-owned enterprises in 2003 are not available. Policy responses to prevent and mitigate the im- Demography, urbanization, globalization, pact of crises involve different combinations of technology, and macroeconomic crises bring instruments, with potentially diverse implica- about formidable jobs challenges. Countries tions for jobs-. 29 that fail to address them may fall into vicious circles of slow growth in labor earnings and job-related dissatisfaction affecting a sizable FIGURE 4 Jobs are transformational portion of the labor force. 30 Youth unemploy- ment and idleness may be high, and women may have fewer job opportunities, leaving po- tential economic and social gains untapped. 31 A repeating pattern of small gains in living standards, slow productivity growth, and erod- ing social cohesion can set in. In contrast, countries that address these jobs challenges can develop virtuous circles. The results-pros- perous populations, a growing middle class, LIVING SOCIAL PRODUCTIVITY increased productivity, and improved oppor- STANDARDS COHESION tunities for women and youth-may then be self-reinforcing. Development happens through jobs Jobs are more than just the earnings and benefits they provide. They are also the output they gen- erate, and part of who we are and how we interact Source: World Development Report 2013 team. with others in society. Through these outcomes, Moving jobs center stage 9 jobs can boost living standards, raise productiv- not refer to identical workers. But growth also ity, and foster social cohesion (figure 4). improves the living standards of workers whose skills have not changed. More than two decades of research on pov- ]obs are what we earn erty dynamics, spanning countries as different Jobs are the most important determinant of as Canada, Ecuador, Germany, and South Africa, living standards. For most people, work is the show that labor-related events trigger exits from main source of income, especially in the poorest poverty. 33 These events range from the head of countries. Many families escape or fall into pov- a household changing jobs to family members erty because family members get or lose a job. starting to work and to working family mem- Opportunities for gainful work, including in bers earning more. Conversely, a lack of job op- farming and self-employment, offer households portunities reduces the ability of households the means to increase consumption and reduce to improve their well-being. 34 In a large set of its variability. Higher yields in agriculture, ac- qualitative studies in low-income countries, get- cess to small off-farm activities, the migration ting jobs and starting businesses were two of the of family members to cities, and transitions to main reasons for people to rise out of poverty.35 wage employment are milestones on the path to Quantitative analysis confirms that changes prosperity. 32 And as earnings increase, individ- in labor earnings are the largest contributor to ual choices expand-household members can poverty reduction (figure 6). In 10 of 18 Latin choose to stay out of the labor force or to work American countries, changes in labor income fewer hours and dedicate more time to educa- explain more than half the reduction in poverty, tion, to retirement, or to family. and in another 5 countries, more than a third. In Earnings from work increase with economic Bangladesh, Peru, and Thailand, changes in edu- development, and the benefits associated with cation, work experience, and region of residence jobs improve as well. The relationship is not mattered, but the returns to these characteristics mechanical, but growth is clearly good for jobs (including labor earnings) mattered most. Just (figure 5). Admittedly, as economies become having work was not enough, given that most more developed, the average skills of jobhold- people work in less developed economies. What ers increase, implying that observations across made a difference for escaping poverty was in- countries are not strictly comparable, as they do creasing the earnings from work. 36 F 1Gu RE s Jobs provide higher earnings and benefits as countries grow a. Average wage b. Social security coverage 100,000 ... c 100 cj, .!: z:. ·;:: E QJ :J >. 3 u u QJ - 0 80 "' a. "' ..... V> :J V'l 10,000 ~ u_ ~ ~ ::> 60 E a.. "' ... 0 "' a.. - ~a.. ... 0 ... 0 ..... QJ "' ~ 0 40 O'lo "'0 B~ ~N 1,000 :J QJ .0 ·5 E 20 O'l c ~ "' Q; 0 u O'l e > a. "' 100 • 0 300 3,000 30,000 300 3,000 30,000 GD P per capita, 2005 PPP USS GDP per capita, 2005 PPP USS Source: World Development Report 2013 team. Note: GDP= gross domestic product; PPP= purchasing power parity. Each dot represents a country. 10 WORLD DEVELOPMENT REPORT 2013 F 1Gu RE 6 Jobs account for much of the decline in extreme poverty >. 200 t:'. Q) > 0 0. Q) 150 E ~ >< Q) 100 .s Q) Ol c so "' ..c u • fa mily composition • labor income • nonlabor income • con sumption-to-income ratio Sources: Azevedo and others 2012; lnchauste and others 2012; both for the World Development Report 2013. Note: Family composition indicates the change in the share of adu lts (ages 18 and older) within the household. Labor income refers to the change in employment and earnings for each adult. Nonlabor income refers to changes in other sources of income such as transfers, pensions, and imputed housing rents. If a bar is located below the horizon- tal axis, it means that that source would have increased, instead of decreased, poverty. The changes are computed for Argentina (2000-10); Bangladesh (2000-1 O); Brazil (2001-09); Chile (2000-09); Colombia (2002- 1O); Costa Rica (2000-08); Ecuador (2003-10); El Salvador (2000-09); Ghana (1998-2005); Honduras (1999-2009); Mexico (2000-1 O); Moldova (2001-1 O); Panama (2001-09); Paraguay (1999-201 O); Peru (2002-1 O); Nepal (1996-2003); Romania (2001-09); and Thailand (2000-09). The changes for Bangladesh, Ghana, Mol- dova, Nepal, Peru, Romania, and Thailand are computed using consumption-based measures of poverty, while the changes for the other countries are based on income measures. Beyond their fundamental and immediate are created and less productive jobs disappear. contribution to earnings, jobs also affect other These gains may ultimately be driven by new dimensions of well-being, including mental and goods, new methods of production and trans- physical health. Not having a job undermines portation, and new markets, but they material- life satisfaction, especially in countries where ize through a constant restructuring and real- wage employment is the norm and where the location of resources, including labor.38 Net job lack of opportunities translates into open un- creation figures hide much larger processes of employment rather than underemployment. gross job creation and gross job destruction. On Among those employed, the material, nonmate- average across developing countries, between rial, and even subjective characteristics of jobs 7 and 20 percent of jobs in manufacturing are can all have an impact on well-being. 37 Other created within a year, but a similar proportion features such as workplace safety, job security, disappear (figure 7).39 learning and advancement opportunities, and Because economies grow as high-productivity health and social protection benefits are valued jobs are created and low-productivity jobs dis- by workers. But relatively few jobs offer these appear, the relationship between productivity advantages in developing countries. gains and job creation is not mechanical. In the medium term, employment trends align closely with trends in the size of the labor force, so Jobs are what we do growth is truly jobless in very few cases. In the Economic growth happens as jobs become more short term, however, innovations can be associ- productive, but also as more productive jobs ated with either increases or decreases in em- Moving jobs center stage 11 ployment.40 The popular perception is that pro- ductivity grows through downsizing, but some F 1Gu RE 7 Simultaneous job creation and destruction firms are able to achieve both productivity and characterize all economies employment gains. 41 In Chile, Ethiopia, and Romania, successful "upsizers" contributed to net job gross job output and employment growth substantively; creation sometimes they are more numerous than the successful "downsizers."42 And the combination ECONOMY-WIDE Latvia - -1 1 of private sector vibrancy and state sector re- structuring led to rapid output and employ- ment growth in transition economies and in Mexico China in the late 1990s and the early 2000s.43 Successful upsizers tend to be younger, leaner, and more innovative. 44 But overall, large firms are both more innovative and more pro- ductive. They invest more in machinery. They are much more likely than small firms to de- velop new product lines, to introduce new tech- nology, to open and close plants, to outsource, and to engage in joint ventures with foreign partners.45 These firms produce more with a given amount oflabor, and export more as well. industrial economies They also pay substantively higher wages than (average) micro- and small enterprises (figure 8). In de- veloping countries, however, many people work MANUFACTURING SECTOR ONLY in very small and not necessarily very dynamic Ethiopia I economic units. Family farms dominate in agriculture. At 1.8 Indonesia and 1.2 hectares, respectively, average farm size is small in Sub-Saharan Africa, and especially - I - Brazil in Asia.46 The Green Revolution has led to both higher cereal yields and more job creation be- I Chile cause the new technologies are labor intensive. But progress has been uneven across regions - l .. Taiwan, China and has not taken place on a large scale in Sub- Saharan Africa. More mechanized farms have Colombia higher productivity, but constraints in land markets usually slow mechanization; without it, yields per hectare tend to be higher on smaller farms. - Venezuela, RB l industrial economies Ill Outside agriculture there are massive (average) numbers of microenterprises and household I I I I I businesses (figure 9). These small units play -5 0 10 15 20 significant roles in job creation, even in high- share of total employment, % middle-income countries. They account for 97 percent of employment in the manufacturing Sources: World Development Report 2013 team estimates based on Bartelsman. Haltiwanger, and sector in Ethiopia, but still for a sizable 39 per- Scarpetta 2009b and Shiferaw and Bedi 2010. cent in Chile. In the services sector, their role is Nore: The figure shows annual job flows. Data are from Argentina (1996-2001); Brazil (l 997-2000); often more important. Even in Eastern European Canada (1984-97); Chile (1980-98); Colombia (1983-97); Estonia (1996-2000); Ethiopia (1997-2007); Finland (l 989-97); France (1989-97); Germany (1977-99); Hungary (1993- 2000); Indonesia (1991-94); Italy countries, where the private sector is only two (1987-94); Latvia (1983-98); Mexico (1986-2000); the Netherlands (1993-95); Portugal (1983-98); Romania decades old, niicroenterprises are the source of (1993-2000); Slovenia (1991 - 2000); Taiwan. China (1986-91 ); the United Kingdom (1982-98); the United 10 to 20 percent of employment in manufactur- States (1986-91, 1994-96); and Republica Bolivariana de Venezuela (1996-98). 12 WORLD DEVELOPMENT REPORT 2013 enterprises, the gazelles, invest and earn higher FIG u RE s Larger firms pay higher wages returns.so While large firms are more productive, they were not all born large. In industrial countries, some of the more resounding successes, from Honda to Microsoft, started in garages. Many successful companies in developing countries also grew out of small household businesses. Thailand's Charoen Pokphand Group, founded 4 in 1921 as a smaJl seed shop in Bangkok by two > -;;; ·c; 0 -;;; ·c; 0 0 20 ~ 20 "' 0 10 10 G 0 0 0 10 20 30 40 50 0 10 20 30 40 50 in dividual va lue individual value c. Colombia d. Sierra Leone 50 50 0 40 40 Q) Q) 0 " -;;; > 30 " -;;; > 30 -;;; ·c; "' ·c; ~ 20 0 ~ 20 0 0 0 10 10 0 0 0 10 20 30 40 so 0 10 20 30 40 so individual value individual value 8 0 0 0 0 civ i l doct or farm er shop teac her se rvant ow ner Sources: Bj0rkhaug and others 2012; Hatl0y and others 2012; Kebede and others 2012; and Zhang and ot hers 2012; all for the World Development Report 2013. Note: The figure shows t he share of respondents who would want the job for themselves (individual value) and those who think the job is good for society (social value). payoffs to jobs has shaped recent development tribute to common goals, such as poverty reduc- thinking.69 tion, environmental protection, or fairness. Spillovers from jobs can be identified across Because a job can affect the well-being of all three transformations (figure 12). Some di- others as well as that of the jobholder, two jobs rectly affect the earnings of others, as when a job that may appear identical from an individual is supported through government transfers, or perspective could be different from a social per- restrictive regulations that reduce employment spective (figure 13). The individual perspective opportunities for others. Other spillovers take provides a useful starting point, because it often place through interactions: in households in the coincides with the social perspective. A high- case of gender equality, at the workplace when paying job in Bangalore's information technol- knowledge and ideas are shared, or in society ogy sector is probably good for the worker; it is more broadly in the case of networks. Spillovers also good for India because it contributes to the also occur when jobs and their allocation con- country's long-term growth. In other cases, the Moving jobs center stage 17 two perspectives may conflict. For instance, Viet- nam's poverty rate declined with unprecedented F 1Gu RE 1 2 Some jobs do more for development speed in the 1990s when land was redistributed to farmers and agricultural commercialization was liberalized. 7° From the individual perspec- tive, farming jobs involve difficult working con- ditions, substantial variability in earnings, and no formal social protection. But they can make a major contribution to development, as a ticket out of poverty for many. Conversely, bloated public utilities often offer a range of privileges to their employees even if the utilities themselves provide only limited coverage and unreliable services and are obstacles to economic growth and poverty reduction. Such jobs may look ap- pealing from an individual perspective, but are less so to society. Source: World Development Report 2013 team. Jobs agendas are diverse ... but connected the biggest payoff may be for jobs that reduce Jobs challenges are not the same everywhere. poverty or defuse conflict. Certainly, the level Creating more jobs may be a universal goal, but of development matters. The jobs agenda is not the types of jobs that can contribute the most the same in an agrarian economy as in one that to development depend on the country context. is rapidly urbanizing. It is bound to be different Jobs that connect the economy to the world may still in countries already grappling with how far matter the most in some situations; in others, the formal economy can be extended. F 1Gu RE 1 3 The individual and social values ofjobs can differ urban job connected to a global value chain for a woman job offer ing an ············n··~-~~-1~~~ratio n opportunity to a young person effects ·············n··:~~:~~··· n informal job giving a chance t o globa l spi ll ove r a poor person iden tity in tegration job in a protected Q) sector using outdated sense gend er :0 poverty technology of fai rn ess eq uality "' > reduction ind ivid ual burde n val ue sh ifte d indi vidua l en vironmental val ue U cost Source: World Development Report 2013 team. 18 WORLD DEVELOPMENT REPORT 2013 But the nature of good jobs for development jobs that do no environmental damage have in a particular context is not simply a function particularly positive development impacts. of income per capita. It may be influenced by • Formalizing countries. Large and growing ur- conflict that is ongoing or still reverberating. ban populations generally lead to more de- A country's geography or its natural endow- veloped economies, where a fairly substantial ments can also be determining factors. Small is- proportion of firms and workers are covered land nations have unique jobs challenges, as do by formal institutions and social programs. resource-rich economies. Or demography may But further increasing formality to levels typi- be the key characteristic-witness the imposing cal of industrial countries involves tradeoffs but very different challenges in countries facing between living standards, productivity, and high youth unemployment and those with ag- social cohesion. There is a premium on jobs ing populations. that can be formalized without making labor too costly and on jobs that reduce the divide A typology ofjobs challenges between those who benefit from formal insti- tutions and those who do not. A country's level of development, institutional strength, endowments, and demography de- In some countries, the jobs challenge is fine where the development payoff from jobs shaped by demography and special circum- is greatest. The jobs agenda in one country will stances affecting particular groups. thus be different from that in another country, • In countries with high youth unemployment depending on their dominant features . The young people do not see opportunities for challenges facing countries as they move along the future. Many of these countries have large the development path are illustrated by the youth bulges, which can put downward pres- agrarian, urbanizing, and formalizing cases: sure on employment and earnings. Many also • Agrarian countries. Most people are still en- have education and training systems that are gaged in agriculture and live in rural areas. not developing the kinds of skills needed by Jobs that improve living standards have a the private sector. On closer inspection, the substantial development payoff because of problem is often more on the demand side high poverty rates. Cities need to be more than the supply side, with limited compe- functional to reap the benefits from agglom- tition reducing employment opportunities, eration and global integration, so jobs that especially in more skill-intensive sectors. In set the foundation for cities to eventually be- these settings, removing privilege in business come economically dynamic are good jobs entry and access to jobs is likely to have large for development. Even in the most optimistic development payoffs. scenario, however, it may take decades before • Aging societies also face generational issues, urbanization is complete, so increasing pro- but these stem from a shrinking working-age ductivity in agriculture is a priority. population and the high cost of providing and caring for a growing number of elderly • Urbanizing countries. Productivity growth in people. The impact of the declining working- agriculture has risen enough to free up large age population can be mitigated through pol- numbers of people to work in cities. Job icies for active aging, ensuring that the most opportunities for women, typically in light productive members of society, including manufacturing, can have positive impacts the highly skilled elderly, can work. Contain- on the household allocation of resources. ing the increase in pension, health care, and Jobs that deepen the global integration of long-term care costs can be achieved through urbanizing countries, especially in higher- reforms in program design, but these reforms value-added export sectors, are also good can be a source of social strain. for development. As countries urbanize, congestion, pollution, and other costs of Natural endowments, including geography, high density become increasingly serious, so and institutions can create unique jobs challenges. Mo ving jobs center stage 19 • Resource-rich countries may have substantial that would make the greatest contribution to foreign exchange earnings, but this wealth development in each case. This focus allows may not translate into employment creation for a richer analysis of the potential tradeoffs beyond the exploitation of natural resources. between living standards, productivity, and Indeed, the abundance of foreign exchange social cohesion in a specific context. It pro- can hamper the competitiveness of other ex- vides clues about the obstacles to job creation port activities. Some resource-rich countries and, ultimately, the priorities for policy makers distribute part of their wealth through trans- (figure 14). fers or subsidized public sector jobs, while relying on migrants to do menial work. This Migration ofpeople-and ofjobs approach can maintain living standards but at the expense of productivity growth and social The movement of people and jobs implies that cohesion. In those countries, jobs that sup- jobs challenges, while being country specific, port the diversification of exports can have also have a global scope. These processes have large development payoffs. implications for living standards and productiv- ity at both the sending and the receiving ends, • Small island nations, because of their size and and they can transform families and entire com- remoteness, cannot reap the benefits from munities, for better or for worse. Tradeoffs are agglomeration and global integration except inevitable, and coping with them only through through tourism. So the productivity spill- the policies of receiving countries alone may overs from jobs are limited, as are employ- prove unsatisfactory. ment opportunities outside basic services and At the turn of the 21st century, there were government. Outmigration offers an alter- more than 200 million international migrants native for improving living standards, while worldwide, nearly 90 million of them work- return migration and diaspora communities ers. Many migrants are temporary or seasonal can stimulate the diffusion of new business workers who eventually return home. Some ideas among locals. countries are mainly recipients, while others are • In conflict-affected countries, the most imme- sources, and yet others neither host nor send diate challenge is to support social cohesion. significant numbers of migrants (map 1). Some Employment for ex-combatants or young are large recipients either in absolute numbers men vulnerable to participation in violence (for instance, the United States) or in relative takes on particular importance. With fragile terms (Jordan and Singapore). Migrants from institutions and volatile politics, attracting Bangladesh, Mexico, and India represent a large private investment and connecting to global share of total migrants worldwide; Fiji, Jamaica, value chains may be out of reach for quite and Tonga have a large share of their population some time. Yet construction can boom even overseas. Figures for some of the smaller coun- in poor business environments, and it is la- tries are striking. For instance, about a fifth of bor intensive. Investments in infrastructure all Salvadorians live abroad, while more than 60 can not only support social cohesion through percent of the populations of Kuwait, Qatar, and the United Arab Emirates are foreign-born.7 1 their direct employment impact, they can also International migration increases the in- be a step in preparing for future private sector comes of migrants and their families through job creation. earnings and remittances. The majority of the These criteria are not mutually exclusive. studies find either no effect or a very small nega- Chad and the Democratic Republic of Congo tive effect on the labor earnings of locals in re- are b.o th resource rich and conflict affected; ceiving countries. Migrants also contribute to Jordan and Armenia are formalizing and also global output if their productivity abroad is have high youth unemployment. Still, look- higher than it would be at home, which is usually ing through the jobs lens and focusing on the the case. They may even contribute to output in key features of the different country types can the sending country, as networks of migrants help identify more clearly the kinds of jobs and returnees channel investments, innovation, 20 WORLD D EV E LO PM ENT R E P O RT 2 01 3 F 1Gu RE 14 Good jobs for development are not the same everywhere Jobs challenge What are good jobs for development? Agrarian More productive smallholder farming economies Urban jobs connected to global markets Conflict-affected Jobs demobilizing combatants countries Jobs reintegrating displaced populations Jobs providing alternatives to confrontation Urbanizing Jobs providing opportunities for women countries Jobs moving the country up the export ladder Jobs not leading to excessive congestion Jobs integrating rural migrants Resource-rich Jobs supporting export diversification countries Jobs not subsidized th rough transfers Small island Jobs connected to global markets nations Jobs not undermining fragile ecosystems Countries with high Jobs not supported through rents youth unemployment Jobs not allocated on the basis of connections Formalizing Jobs with affordable social benefits countries Jobs not creating gaps in social protection coverage Aging Jobs keeping the skilled active for longer societies Jobs reducing the cost of services to the elderly Source: World Development Report 2013 team. and expertise. Social effects are more mixed. computer and information services, legal and On the positive side, migration connects people technical support, and other business services. from different cultures in ways bound to widen India was the pioneer, but other countries- their horizons. On the negative side, the separa- Brazil, Chile, China, and Malaysia, to name a tion from family and friends can be a source of few-have also seized the opportunity. 72 distress and isolation. Migration may also bring The obvious winners of job migration are the racial prejudice and heighten social tensions in workers and entrepreneurs in countries to which host countries, especially when migrants are se- industries and splintered service jobs have mi- cluded in segregated occupations or neighbor- grated. This migration, along with the transfer hoods, preventing their integration in society. of new technologies and advanced management Jobs are on the move as well. The past four methods, contributes to productivity growth decades have been marked by the outsourcing of and higher living standards. The hidden win- manufacturing tasks from industrial countries ners of job migration are consumers worldwide. to the developing world, especially to East Asia The improved international division oflabor in- (figure 15). More recently, the same pattern is creases the availability of goods and services and observable for service tasks. In fact, services are enhances the possibility of gaining from trade. the fastest-growing component of global trade. The clear losers are those who have seen their Developing countries are now exporting not jobs disappear because of the declining compet- only traditional services, such as transportation itiveness of their industries and services. Among and tourism, but also modern and skill-inten- the losers, many skilled workers find comparable sive services, such as financial intermediation, jobs without a substantial loss in salary, but oth- Moving jobs center stage 21 MAP 1 Only in some countries are migrants a substantial share of the population a. Immigrants,% of labor force Percent O-f.99 - 2:00-4.99 - 5.00-9.99 - 10.00-1 4.99 - 15.00-100 L"J no data b. Emigrants,% of native labor force -..:--- Pe«ent 0-1.99 . - 2.00-4.99 - 5.00-9.99 - 10.00-1 4.99 - 15.00-100 c:=i ...;. &ta , TMINlpw~prodll