Jobs are Development

Carl-Gustav Lindén

Carl-Gustav.jpgOne important part of ReCom–Research and Communication on Foreign Aid is the sharing of results. October saw the largest effort so far to bring attention to ReCom results by arranging a meeting for the theme aid and employment entitled ‘Jobs–Aid at Work’ in Copenhagen, Denmark. The setting, the impressive Black Diamond conference hall at the Royal Library, provided an excellent venue for this event. Hilary Bowker, former CNN Senior European Anchor, was moderator and top academic experts were invited for a discussion on how aid donors can help to create better jobs in the South.

More than two hundred people—from students to policy makers, private sector experts, and academics—actively participated in the event that was also followed by an international audience via real time video webcast and on Twitter. The video links to the event can be found here.

What did we learn? Development without jobs is not development

The key message from the meeting was that jobs drive development and not the other way around. For the World Development Report 2013 director Martin Rama at the World Bank, this insight should be built into how we think about human progress. He led the research team that during the last year visited two dozen countries, analysed thousands of household surveys and consulted panels of experts, policy makers, including advisers from developing countries and from academia, to find the answers to the question: what do jobs do for development? That intellectual journey took the World Bank team from labour economics to development economics. ‘Gradually a clear picture emerged, and that picture is that much of what we care about in development actually happens through jobs, jobs should not be an afterthought. Development is what happens when the right jobs appear’, said Rama.

AfDB projects have created employment through micro finance

Still, the link between aid and employment is far from clear and is actually quite difficult to pin down, pointed out Abebe Shimeles, contributor to the day’s events and manager of the Development Research Division at the African Development Bank (AfDB). According to a large survey of AfDB’s own project portfolio the highest impact on job creation is from micro-finance projects. Shimeles adds that in aid sectors such as education and health the link to employment seems to be weak.

The contributors of the 'Jobs- Aid at Work' event (from right to left) Sam Jones, Måns Söderbom, Tetsushi Sonobe, Keijiro Otsuka, Finn Tarp, Ib Petersen, Gary Fields, Martin Rama, Abebe Shimeles, John Page, Carin Norberg, Morten Elkjær, Johnny Flentø.

All poor people work—the key is to make that work pay better

To this insight Gary Fields from Cornell University added the finding that coupling microcredit with business training usually works better than microcredit alone. Fields emphasizes that rather than unemployment, the main problem in the developing world is that those who work are still poor, and their employment is not generating sufficient income.

John Page from the Brookings Institute, and a UNU-WIDER external project director, points out that this is also true in the African context:

'81 per cent of Africans work in what is called ‘vulnerable jobs’ by the International Labour Organization (ILO). 25 per cent work in marginal jobs that they can’t even rely on being there the next day. What is even more striking, though, in the data is that the fastest growing economies in Africa— and we celebrate ourselves since 1995 about fast growth—are the ones that have the least employment impact. The elasticity of growth with respect to employment is the lowest in the fastest growers; the Tanzanias, the Kenyas, the Ghanas of Africa.'

As Page noted, since 1995, Africa has been growing a little bit slower than East Asia and faster than South Asia, but in terms of poverty reduction the curve is flat. It has become part of the political discourse in every African country to talk about growth without poverty reduction and jobless growth.

Structural change of the economy—the necessary way forward

Page strongly argues that the solution must be found in structural change. That is, the movement of people mainly from low-productivity to high-productivity jobs. Those are also the jobs that are capable of paying higher wages and providing better working conditions—in short, decent work. For Africa, researchers find that growth in productivity, industry by industry, sector by sector, has been about equal to that in East Asia, but structural change has been moving in the wrong direction. ‘One way to think about this – it’s not quite right, but it’s easy – is that people have been moving from better jobs to worse jobs. In fact, what has been happening is that a rapidly expanding labour force has been increasingly crowding themselves into jobs with a lower output per worker’, says John Page.

John Page notes that researchers find a much stronger statistical relationship between structural change and poverty reduction than they do between the rather weak relationship found between growth per output per person and poverty reduction.

If a shared goal is to accelerate poverty reduction in Africa, part of what policy makers and donors have to worry about is employment, not just raising the productivity of people, but also the increasing opportunities in African economies for people to find better, decent jobs.

What can development aid do?

What might the role of aid be in promoting that process of structural change? John Page listed three measures:

  1. Aid needs to help natural resources economies focus on how to use resource revenues to diversify economies and create more jobs. What is striking about the last five years in Africa is how many formerly resource-poor economies are now near or at middle-income status while they still struggle to create better jobs.
  2. The investment climate is fundamentally important since it is the private sector that creates the jobs. But here the focus on reforms, set in Washington, is too strong while there is too little emphasis on infrastructure and skills. Infrastructure as a share of ODA has gone down every year since 1987. ‘It is not a coincidence that DAC meets in Paris. Aid is a fashion-driven industry, and the fashion for the last few years have been the MDGs—there is no infrastructure MDG, there is no jobs MDG, there is no growth MDG’, Page said.
  3. There is underinvestment in agricultural innovations that are profitable for the farmer and in general to revitalize the innovations eco-system in African economies. ‘Biologists and agricultural innovators are interested in maximizing the yields from a particular innovation, but what is relevant to the farmer is the maximization of the return on his land. It is harder in Africa because we have so many local climates and we have so many climate challenges. The aid industry can really help here’, Page said.

The ReCom team wants to thank the contributors as well as everybody who participated in the results meeting, which was the fourth and last one for this year. Next year we are planning for four more events in Stockholm and Copenhagen. Up to date information can always be found on the ReCom webpage at:

Carl-Gustav Lindén is Senior Communications Specialist, UNU-WIDER

WIDERAngle newsletter
October 2012
ISSN 1238-9544