There is increasing evidence that labor markets in developed countries are polarizing or hollowing out. On the one hand, the share of employment in high-skilled, high-paying occupations (managers, professionals and technicians) and low-skilled, low-paying occupations (elementary, service, and sales workers) is growing. On the other hand, the share of employment in middle-skilled, middle-paying occupations (clerks, plant and machine operators) is being squeezed. There is ample evidence of polarization in the United States (see Acemoglu and Autor, 2011; Autor and Dorn, 2013; and Autor (2014) for a less technical discussion), and also in Western Europe (Goos, Manning, and Salomons, 2014). Harrigan, Reshef and Toubal (2016), more recently, document the same phenomenon in France, using firm-level data.
Some jobs do more than others to help reduce poverty, but perhaps more importantly, they increase overall expertise within an economy. If we accept this premise, developing countries should focus not only on creating jobs, but on creating good jobs.
With William Kerr and Alexander Segura.
Developing countries have become much more globally integrated. On a global dimension, they now trade a lot more with other countries than they did two decades ago. Domestic connectivity at the country level has been helped through investments in road networks as urban and rural areas are becoming better connected not just through roads but phones lines and faster flows of knowledge.
How global and local connectivity influence spatial development and distribution of jobs is a tricky question. A naïve approach might look industry-by-industry at their exposure to trade or highways and ask what happens to the average wage in the industry as highways form. This approach, however, risks confounding several forces. It could be, for example, that a decline in the average wage represents a positive outcome if 1) those firms and workers who were already in the industry are experiencing wage growth, and 2) the industry overall expands to pull in workers from subsistence agriculture. A declining average wage can signify the second factor is dominating the first factor, but this might be cause for celebration by policy makers rather than a source of concern.
How have China and other countries resolved the binding constraints in light manufacturing to create jobs and prosperity? This vital question is answered in a new book based on unprecedented access and detailed interviews at hundreds of Chinese firms in more than 15 cities (including the coastal regions that have fuelled the export boom), as well as visits to a dozen countries in Africa and Asia. The book, Tales from the Development Frontier: How China and Other Countries Harness Light Manufacturing to Create Jobs and Prosperity, focuses on labor-intensive manufacturing (apparel, leather goods, agribusiness, woodworking, and metal products). It is part of the Light Manufacturing in Africa Project being undertaken by a World Bank team in the Development Economics Vice Presidency. We draw from analytical reviews, case studies, and the testimony of individual entrepreneurs to show how developing countries can grow manufacturing to create jobs and foster prosperity.
At his Sabanci lecture yesterday on ‘Emerging Nations and the Evolving Global Economy’, Kaushik Basu predicted that sluggish growth will likely prevail overall for the next two years, as the baton of economic growth is handed over from industrialized countries to developing countries. He cautioned that countries have bought time with liquidity injections and other stimulus measures, but that will not do anything to fix deeper structural problems.
To hear his talk, along with his views on the recent austerity debate that reached a fever pitch over the past 10 days, listen to the audio of the full lecture and question and answer session here.
Kaushik elaborated on some of his ideas for getting the world out of the current ‘time-buying’ phase in an April 23 piece in Project Syndicate op ed ‘Two Policy Prescriptions for the World Economy.’ Dani Rodrik was especially taken with Kaushik’s opening line that “One thing that experts know, and that non-experts do not, is that they know less than non-experts think they do.” This pointed to the hard truth that the austerity debate has revealed that policy setting in today’s world is a highly uncertain business and that humility should be the order of the day.
From the World Development Report 2013.
Looking through the jobs lens and focusing on the key features of the different country types can help identify more clearly the kinds of jobs that would make the greatest contribution to development in each case. This focus allows for a richer analysis of the potential tradeoffs between living standards, productivity, and social cohesion in a specific context.
In “How Cities Can Save China” Henry Paulson, former US Treasury Secretary and current head of the Paulson Institute, argues in this week’s New York Times that better city planning will allow China’s investments to be more balanced, debt levels to be lowered, pollution to be eased, and a consumption windfall to be realized.
From the World Development Report 2013.
Quantitative analysis confirms that changes in labor earnings are the largest contributor to poverty reduction. In 10 of 18 countries, changes in labor income explain more than half the reduction in poverty, and in another 5 countries, more than a third. In Bangladesh, Peru, and Thailand, changes in education, work experience, and region of residence mattered, but the returns to these characteristics (including labor earnings) mattered most. Just having work was not enough, given that most people work in less developed economies. What made a difference for escaping poverty was increasing the earnings from work.
From the World Development Report 2013
621 million young people are “idle”—not in school or training, not employed, and not looking for work. Rates of idleness vary across countries, ranging between 10 and 50 percent among 15- to 24-year-olds.
How do you measure unemployment? By counting the number of people looking for work but unable to find it. However, this measure overlooks people willing to work and not necessarily looking for jobs. In an interesting chart, The Economist illustrates how a broader measure makes unemployment in Europe look even worse.