One of the biggest challenges in building a jobs programme is understanding why job growth is not happening. Take Zambia as an example. It has many of the fundamentals right. There is political stability and an economy that has grown by over 7% a year for more than a decade. It has wonderful natural resources, including abundant land and water, and it is rich in commodities, especially copper. It has attracted major international companies, such as Parmalat, Lafarge and Airtel that are selling their goods and services both domestically and regionally. And yet, the country still suffers from 62% poverty and job growth that is not keeping pace with population growth.
What helps small businesses grow? In January 2009, two colleagues (David McKenzie and Chris Woodruff) and I began an experiment that examined the effects of general business training on current and potential female small business owners in urban Sri Lanka.We found that small business training helps potential owners to open businesses more quickly and helps to improve their business outcomes. But generating re-investable profit growth in subsistence-level female-run businesses remains a challenging task.
Last month, Carmen Pages and I launched our book Social Insurance, Informality and Labor Markets at the InterAmerican Dialog. The book covers new approaches and policies to expand the coverage of social insurance programs such as pensions, health and unemployment benefits. It also looks at how to make these programs more equitable and reform the rules that compromise the creation of formal sector jobs – either because employers cannot afford to offer formal contracts or workers prefer not to take them.
- Jobs and Development
The 2013 reforms of non-standard employment contracts in Slovakia transferred the full payroll-tax burden to workers and their employers regardless of their income. This caused a rapid decrease in their net income and forced some of them into the informal sector, although overall unemployment numbers did not change. To rectify these problems, in 2014 the Ministry of Finance presented a new proposal known as a health insurance allowance. This frees minimum wage employment contracts from paying health insurance contributions. The ministerial proposal came into effect from 2015. The goal is to increase motivation to work for low wages and thus to help to decrease unemployment. Early indications suggest that it will increase the net income of more than 500,000 people and cost €146 million in 2015, although its overall impact on unemployment is so far unclear.
In China, the number of skill intensive jobs versus brawn intensive jobs has increased. While this is generally a hallmark of development, in China it is happening much faster than in other countries. This trend favors women who have a comparative advantage over men in these endeavors. It could also lead to the end of the boy bias in Chinese fertility patterns.
As a professional economist for 25 years, I’m intrigued to see academic thinking towards growth and development swing back to where it was when I was a boy; structural change. As development partners, we need to re-think structural policy priorities to achieve shared prosperity by looking at countries through a jobs lens. The Bank has developed a jobs diagnostic tool kit to help with that process.
A surprising feature of the informal sector in West Africa is the existence of large, informal firms. This goes against the widely-held belief that informal firms are small, family-run enterprises. These small firms do exist. But they coexist with a smaller number of very large enterprises. Understanding this heterogeneity of the informal sector is crucial for designing appropriate policies. The existence of successful, large, informal firms is testimony to the entrepreneurial potential of West African economies. This dynamism is throttled, however, by weak business climates and lack of enforcement of regulations, which encourage and allow large informal operators to operate with near impunity. It also impacts the jobs picture in these countries. Governments should promote policies that assist small informal firms to improve productivity and raise incomes while enforcing fiscal and regulatory obligations for large informal actors.