Duty- and quota-free access for exports to global markets is something developing country trade negotiators have demanded for years. Few other “stroke-of-the-pen” measures could boost employment and reduce poverty in low income countries in such large numbers. For instance if the US removed tariffs on Bangladeshi garments – which average around 13%, but for some items are as high as 33% – then exports to the US could rise by $1.5 billion from the FY13 level of $5 billion, in turn generating employment for at least an additional half a million, primarily female, workers. Examples of other countries facing US tariffs include Cambodia (12.8% average tariff rate on its exports to the US), India (4.01%), Indonesia (5.73%), and Vietnam (7.41%). Progress in trade facilitation would likely have even greater pay-offs to growth and employment, but these require structural reforms and investments, while the decision to remove tariffs is a simpler, “stroke-of-the-pen” measure.
Labor and Social Protection
When one part of the local economy fails, it spills over into other parts of the economy. Maybe this isn't so surprising. However, recent research in Zambia highlights a less obvious link: farmers who can't get access to credit during the hungry season (January to March) increase their off-farm labor supply, drive down wages, and maybe even undermine their own agricultural yields.Fortunately, there is new evidence that providing consumption loans can help farmers invest in their own fields, and — we hope — boost their productivity.
When economists think about price shocks, they consider how a change in price will affect the supply and demand of a product. But when that product is human – i.e., a worker – interpreting the impact of a price – or wage – shock is no longer cut and dried.
Just consider: If your wage was suddenly cut, would you remain in your current job despite the loss in earnings? Would you quit immediately, or look for a new job while continuing to work? How long could you survive on your lower earnings? Would you be forced to sell your house or other assets? How much money and effort would you invest in finding a better job? Would your personal circumstances allow you to take a better job in a distant location? Would you uproot your family for this job?
Education and employment are key problems for young people in Egypt, who say they need to see changes—in terms of more jobs and better education—in the present, not in the distant “future”, the word they always hear used in promises of change in Egypt.
Why do labor regulations matter and should they protect workers or jobs, especially in developing countries? Carmen Pagés — Chief of the Labor Markets and Social Security Unit at the Inter-American Development Bank (IDB) — tells the JKP that labor regulations matter for jobs and productivity, including which types of jobs get created (formal or informal) and in which sectors.
As governments debate labor market regulations — a highly controversial topic, sometimes for ideological reasons — it is vital to base decisions on empirical evidence. Thus, a welcome addition to the debate is the work of Gordon Betcherman — a Professor in the School of International Development and Global Studies, University of Ottawa — who contends that the key challenge for policy makers is to avoid the extremes of over- and under-regulation.
In many economies of the Balkans high formal unemployment is often blamed on insufficient skills in the labor force. But this intuitive diagnosis glosses over two fundamental questions, namely: why are workers not training themselves to find jobs, and why aren’t firms investing in upgrading the skills of their employees? In other words, the market seems to be failing by not allocating resources where high returns can be found. In this blog post, we cast doubt on the diagnosis and look beyond the skills gap explanation to high unemployment in the Western Balkans. But this is not unique to the Balkans. Take the US construction industry, which is among the most productive in the world even though it employs many relatively low skilled workers, often immigrants from Mexico and other Latin American countries, who improved their individual productivity several fold by migrating – not upgrading skills.
There is no doubt about the problem as throughout the region unemployment – particularly formal – remains unacceptably high. Serbia is a case in point: Out of a population of 7.2 million people and a workforce of 4.5 million, only 710,000 Serbians have a formal, private sector job. If you add some 380,000 ‘sole proprietors’ – basically people who run mini-shops – you get to around 1.1 million people in the formal private sector. That means that the livelihood of the whole country is built around this 15 percent of the population. Can it really be that firms are still not able to find sufficiently skilled employees in the large remaining pool, especially given that Serbia has decent education results? If finding skilled workers in Serbia is like looking for needles in a haystack, there are surely a lot of needles to be found.