Transcript growth - World Bank

Does Employment Really Matter for
Shared-Growth
Employment and Gender in the
Shared-Growth Agenda
April 25, 2007
Pierella Paci
1
What do we know so far?
2
(1) Employment is important for
‘pro-poor’ growth
The line of argument develops as follows:
• Growth is important for poverty reduction but it is
NOT sufficient;
• ‘Pro-poor growth’ requires a reduction in income
inequality as well as an increase in average
income;
• Inequalities in labor income are an important
source of existing inequality and an important
determinants of poverty;
• Thus employment opportunities are important
transmission channels between growth and
poverty reduction.
3
(2) But growth ≠
↑ employment opportunities
• The employment content of growth depends on
– The average employment elasticity of output
– Existing differentials in this elasticity across different
groups of workers (gender, age) and different ‘segments’
of the labor market (skilled/unskilled, formal/informal)
– Workers mobility across different segments .
 Only if average elasticity sufficiently positive and within
group differentials low and/or mobility high, growth↑
employment;
• For a given increase in number of jobs available, the
corresponding increase in employment opportunities
depends on concurrent trends in labor supply
e.g., if a 10% ↑ in number of jobs coupled with a 10% ↑
in labor force, employment opportunities stay the same.
4
(3) ↑ employment opportunities ≠
↓
poverty
• This is because having a job is not sufficient
to guarantee adequate living standards
• Over 500 million people are estimated to be
working poor (18% of the those employed)
and this number is not declining.
What counts is not employment per se’ but the
labor income derived from that employment;
need for ‘good’ jobs.
• But ↑ wages require ↑ productivity or ↑ labor
market efficiency
5
The ‘working poor’ are here to stay
Estimates of the Working Poor (earning less 1$ per day), millions
1990
1998
% Annual rate
China
191.3
131.5
-4.7%
East and South–East Asia
42.6
30.4
-4.2%
Middle East and Northern Africa
2.0
2.0
-0.4%
South Asia
206.1
223.1
1.0%
Latin America & Caribbean
27.5
30.2
1.2%
Sub-Saharan Africa
99.4
115.3
1.9%
Transition Economies
3.3
9.8
13.5%
572.2
542.3
-0.67%
World
Source: Majid, ILO (2001)
6
The ‘working poor’ are here to stay
• Around 20% of workers in developing countries are
•
•
•
•
•
poor.
Only a reduction of <1% in 8 years.
Reduction is explained mainly by China and SouthEast Asia.
Middle Income countries have also reduced working
poor (12% to 5%).
But low income countries have increased (88% to
95%)
However poverty is measured at household level.
Does the increase of employment offset a reduction
in salary at household level? No clear answer.
7
Challenge 1: Increasing employment
opportunities
• Employment elasticity very stable during the last 14 years:
•
•
1/3 of growth into employment and 2/3 into productivity gains
Persistently elasticity female>male workers.
Growth does not create employment for the young
 14.4% youth unemployment rate compared to mean 6.2%
• Growth should reach
• 4.2% simply to cope with the expected labor force growth,
• Additional 3.5% to absorb female labor force increase and
• Additional 5.7% to occupy young labor force increase.
• But WB annual growth forecast to 2015 is only 2.1%
 Not enough jobs will be created.
8
Challenge 1: Increasing employment
opportunities
1.60
World Elasticity and Forecast Labor Force Annual Growth
Rate (2004-15)
Elasticity and expected Labor Force growth
1.40
1.20
1.00
0.80
0.60
GDP Grow th: 2.8%
GDP Grow th: 3.6%
GDP Grow th: 3.6%
0.40
0.20
0.00
total
-0.20
female
youth
job elasticity 1991-95
total
female
youth
job elasticity 1995-99
total
female
youth
job elasticity 2000-04
total
female
youth
Forecast Labor Force
Annual Growth Rate (200415)
9
Challenge 2: Great variation
between regions
• East Asia, ECA, LAC and OECD countries will
require additional labor force (or higher
productivity) to keep their output growth
• North America can make it provided it goes back
to elasticity of the 90’s, instead of the last years
“jobless” growth
• North Africa is around there.
• The prediction for South Asia and Sub-Saharan
Africa is cause of concern.
10
Challenge 2: Great variation between
regions
GDP Required Vs GDP Forecasted to Absorb Labor Force Increase
Labor Force
GDP required
GDP forecasted
6.00
Annual Growth, (2004-2015)
5.00
4.00
3.00
2.00
1.00
0.00
World
-1.00
Australia & East Asia
N. Zealand & Pacific
Europe &
Central
Asia
Japan
Latin
North
America & Africa & M.
Carib.
East
North
America
South Asia
SubSaharan
Africa
Western
Europe
11
-2.00
Source: ow n estimates based on EAPEP data version 5 (ILO) ,Kapsos, ILO (2005),Forecasts: WB and EIA
Challenge 2: Mind the gap in SA and
SSA!
Excess Net Job Creation over Labor Force Increase (2004-15)
Surplus job creation (+) or Deficit job creation (-) (2004-15),
Millions
20
10
0
Australia & East Asia & Europe &
N. Zealand
Pacific
Central Asia
-10
Japan
Latin
North Africa
America & & M. East
Carib.
North
America
South Asia
SubSaharan
Africa
Western
Europe
-20
-30
-40
-50
-60
-70
-80
Source: ow n estimates based on EAPEP data version 5
12
Challenge 3: Employment is not
enough
What counts is not employment per se’ but the labor income derived from
that employment  need for ‘good’ jobs.
• But ↑ wages require ↑ productivity or
↑ labor market efficiency
BUT in many countries:
• ↑ productivity  ↓ employment (esp. of the unskilled);
• labor market regulations are a barrier to growth
 ↓ employment (esp. of the unskilled);
 How can ‘good jobs’ be combined with ↑ job opportunities?
In order to achieve pro-poor growth labor market regulations need to ensure
workers’ rights but also be conducive to growth and formal job creation, and
consistent with overall development level (Pro-Poor Growth in the 1990s).
13
Is there a solution?
We need to think differently and creatively
about:
• The role of labor market as an agent of
development;
• The potential role of mobility to improve the
transition mechanisms.
This is the biggest challenge.
Example: In a highly segmented labor market, efficiency
and productivity may ↑ by reducing the amount of
fragmentation. This may ↑ both employment
opportunities and wages for the poorest segments of the 14
labor market.
A cross-country analysis
15
Main question and coverage
•
What are the cross-country differences in
– the way growth translated in employment
increases and productivity enhancement and
– the sectoral impact of growth?
•
•
To what does the sectoral pattern of
growth and the employment/productivity
split matters for poverty reduction?
What is the role of labor market
conditions and institutions in explaining
cross-country differences in growth
16
patterns?
Employment and Shared Growth:
the Link
Business
Environment
Access to land
Access to
capital
Labor market
Segmentation
Labor market
institutions
Infrastructure
GDP Growth
Labor Demand
Trade
Liberalization
Growth in labor
productivity
Employment growth
↑ Household Labor
Income on Average
and to the Poor
Wage increase
Shared Growth
17
Theoretical framework
Two basic concepts:
•
Structural change (Chenery and Syrquin): The
economy consists of a number of different sectors and
economic growth is to a large extent driven by the
relative size and productivity of these sectors
•
Creative destruction (Schumpeter): birth and death of
firms and jobs is a natural process and a certain
amount of churning is needed to generate economic
growth
 Labor mobility play a key role
 The structure of the economy, labor institutions and
regulations affect labor mobility
18
Beyond the single and dual labor
market
•
•
•
The labor market does NOT exists as a single entity
What does exist is a number of different labor markets
(segments) offering qualitatively distinct types of
employment to workers with similar endowments
All workers seek employment in the ‘good’ segments but
‘good’ jobs are rationed
Not everyone gets access the good jobs
Workers with similar endowments have different earnings
depending where they work
•
Beyond dualism: therefore at least three sectors,
possibly more
 Need to analyze
o The functioning of each labor market segment (wage setting
mechanism)
o The link between the different segments
19
Underlying Analytical Framework
E(Wu)>E(Wr)
Decision to migrate
Urban LM:
Segmented
Rural LM:
Subsistence
Agriculture
Wr
‘Bad’ Job
Sector
Wb=Wu+min
Eb residual
‘Good’ Job
Sector
Wg=Wc
Eg determined
labor demand
20
Zooming on some of the findings
so far
In the short run:
• overall employment intensity of growth does
not matter for poverty reduction, but
• the sectoral pattern of employment growth
and the relative impact on productivity and
labor intensity is important.
–
–
–
•
↑ employment in manufacturing ↓ poverty but
↑ employment shares in agriculture ↑ poverty.
↑ productivity in agriculture ↓ poverty.
The impact of labor market conditions on
employment v/s productivity intensive growth
21
is still in the process of being analyzed.
-.2
-.1
0
.1
% change in Y/E
.2
Inverse of Dependency Ratio
-4
-2
0
2
4
Employment rate*
-6
Total Output per worker
-2 -1
0 1 2 poverty
3
% change in headcount
-.1
.3
.3
.08
.4
.1
.2
.3
% change in Y/N
-.1
-.2
0
.1
.2
% change in Y/E
.02
.04
.06
% change in A/N
Inverse of Dependency Ratio
.2
-.1
0
.1
% change in Y/N
.2
.1
0
-.2 -.1
-.1
0
Employment rate*
.3
Total Output per worker
0
.1
.2
% change in E/A
0
-2 -1
1 2 poverty
3
% change in 0headcount
Poverty and GDP per capita vs.
Labor and Demographic Components
-.1
-.05
0
.05
% change in E/A
.1
-.02
0
.02
.04
% change in A/N
.06
22
* The employment rate is defined as the ratio of total employment and working age population
Poverty and GDP per capita vs. Sectoral Output per Worker
Construction
-2
-1
0
1
2
3
-1
1
2 poverty
3
% change0in headcount
Manufacturing
Agriculture
Manufacturing
Construction
-.4 -.2
0
.2
.4
.6
% change in Y/E agriculture
-.2
0
.2
.4
% change in Y/E manufacturing
.2
0
-.2
-.4
.2
.1
0
-.1
-.2
.4
-.5
0
.5
1
% change in Y/E construction
% change in aggregate Y/N
-.2
0
.2
.4
% change in Y/E manufacturing
.3
-.4 -.2
0
.2
.4
.6
% change in Y/E agriculture
% change in aggregate Y/N
-.2
-.1
0
.1
.2
.3
-1
1
2 poverty
3
% change 0in headcount
Agriculture
-.5
0
.5
1
1.5
% change in Y/E construction
23
Poverty and GDP per capita vs. sectoral shares of the Labor Force
Construction
-2
-1
0
1
2
3
-2 -1
0
1
2poverty
3
% change in headcount
Manufacturing
Agriculture
Manufacturing
Construction
-.4
-.2
0
.2
.4
% change in E/A agriculture
-.2 -.1
0
.1
.2
.3
% change in E/A manufacturing
.1
0
-.3 -.2 -.1
.3
.2
.1
0
-.1
.2
-.5
0
.5
1
% change in E/A construction
% change in aggregate Y/N
-.2 -.1
0
.1
.2
.3
% change in E/A manufacturing
.4
-.4
-.2
0
.2
.4
% change in E/A agriculture
% change in aggregate Y/N
-.2
-.1
0
.1
.2
.3
-2 -1
1
2poverty
3
% change in0headcount
Agriculture
-.5
0
.5
1
% change in E/A construction
24