When my team and I started working on the World Development Report 2013, slightly more than a year ago, we were puzzled. We had been asked to write about jobs, and there was no doubt that they were a major concern around the world. Events such as the global crisis or the Arab spring had put jobs center stage. In developing countries, finding employment opportunities for massive numbers of youth entering the labor force was urgent. Middle-income countries were struggling to move up the value-added ladder in production and to extend the coverage of social protection. Technology and globalization were changing the nature of work worldwide. In all cases, jobs were at stake. And they were clearly one of the main preoccupations of policy makers everywhere.
Yet, the analytical tools at hand to think about jobs, powerful as they are, didn’t seem to match the overwhelming importance jobs had in the public debate. The organizing concepts circled around wage employment and a labor market, where households and firms meet, an equilibrium price for labor emerges, and full employment prevails. And if this doesn’t happen, then the assumption is that some misguided regulation or powerful interest is probably getting in the way. A clear agenda emerges from this way of thinking about jobs. It involves investing in skills so that the labor supply curve shifts up, improving the investment climate so that the labor demand curve does the same, and making sure that matching mechanisms work, so that both labor earnings and labor productivity increase.
All of this is perfectly fine. But policy makers seem to have more in mind when they say that jobs are their main concern. Vocational training agencies, competition authorities and labor ministries can certainly contribute to job creation. But most often the decisions that most affect jobs lie elsewhere, whether it is with ministries of finance allocating budgets, planning commissions making strategic development choices, cities deciding land-use plans and infrastructure investments, or ministries of agriculture undertaking land reforms. Concepts such as a labor market, households and firms, useful as they are, didn’t seem to apply in all circumstances. What is the relevant labor market for the large numbers of farmers in developing countries? Don’t differences between women and men, or between adults and youth, matter on the household side? And are the myriad self-employed and microenterprises of developing countries really firms?
Throughout the consultations we held in dozens of countries, it also became clear that the non-income dimensions of jobs were extremely important. Regardless of the language, the words used to express the lack of a job almost invariably have a negative connotation, close in spirit to deprivation; at times they even carry an element of stigma. People often identify themselves with what they do at work. Jobs can lead to new knowledge, whether it is acquiring technical or managerial skills when working in a foreign firm, or simply shaping norms and behaviors such as punctuality and reliability. Jobs provide networks, and these are all the more valuable to those who tend to be left out, such as rural migrants. The lack of fairness in access to employment opportunities can easily make people feel alienated and disengaged from society. For an institution whose mandate is to help alleviate poverty, it is also clear that a pro-poor allocation of jobs is preferable. But can the labor market alone handle identity, networks, or poverty alleviation?
This is how, as we worked on this report over the last year, we drifted away from a labor economics approach towards a development economics approach. We made jobs, not the labor market, the center of our analysis. We started from the premise that a job has several dimensions –some affecting living standards, others relevant for productivity, and yet others influencing social cohesion. And we explored the possibility that institutional failures and market imperfections (not just labor market imperfections) could leave some of the potential payoffs from jobs unexploited. This helped us think beyond wage employment, including farming and self-employment in our definition of jobs. It also helped us keep a distance from common debates about how flexible or decent working conditions need to be.
Shifting perspectives—beyond treating employment as derived demand--didn’t require new analytical tools – but it did imply building on many more disciplines than we are generally used when thinking about labor markets: from identity economics to gender studies and from urban economics to the analyses of networks, just to name a few. We had been given much intellectual freedom from the onset and obtained a lot of support from throughout the World Bank--but we felt that we needed much outside advice in thinking about such a framework.
This is how we ended up enlisting a wonderful advisory panel, with Ravi Kanbur to help us on the job- and-living-standards connection, John Haltiwanger on jobs and productivity, and George Akerlof on jobs and social cohesion. We also enrolled fantastic people from every region in the world, from Ela Bhatt, the founder of India’s Self-Employed Women’s Association to Ricardo Paes de Barros, who plays the chief economist role for the government of Brazil. Ernest Aryeetey, Ragui Assaad, Cai Fang and Gordana Matkovic were also part of this great group of advisors. And dozens of Bank colleagues and external experts contributed rich background papers and insightful comments throughout the year. We are truly grateful to them all… and absolve them from any responsibility!
As we started putting the pieces of the puzzle together, it became increasingly clear that much of what we care about in development happens through jobs. Poverty falls as people work their way out of hardship and as jobs empowering women lead to greater investments in children. Efficiency increases as workers get better at what they do, as more productive jobs appear, and less productive ones disappear. Societies flourish as jobs bring together people from different ethnic and social backgrounds and provide alternatives to conflict. Jobs are thus more than a byproduct of economic growth. They are transformational —they are what we earn, what we do, and even who we are. Jobs are created mainly by the private sector, but public policy sets the stage to enhance job creation, and especially the creation of good jobs for development.
Now, as this great year working on the report comes to an end, we feel much less puzzled. As we finish the report, under the leadership of President Jim Kim the World Bank is embarking on an exciting campaign to identify “What Will It Take?" What will it take to reduce extreme poverty? What will it take for everyone to have a decent living? As jobs drive development - and because they can be transformational for living standards, productivity and social cohesion- we strongly believe that they must be part of the answer.