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Labor and Social Protection

Economic marginalization of minorities: Do laws provide the needed protections?

Elaine R.E. Panter's picture

Never in recent history has anti-minorities rhetoric — anti-immigrants, anti-religious-minorities, anti-LGBTI — been so pronounced in so many countries around the world. Those groups, we are told, are the cause of our current economic crisis because they steal our jobs, fuel criminality and threaten our traditional way of living. And yet, the causes of our economic crisis are probably more nuanced, and initial research seems to suggest that more and not less social inclusion will help us overcome the instability of our times.

The exclusion of minorities from the labor force is becoming politically and economically unsustainable for many states that are struggling to retain their legitimacy and strengthen their competitive potential in an increasingly global marketplace. As a consequence, governments, international development agencies and academic institutions are now looking seriously at ways to develop policies that guarantee a more equal and sustainable form of economic development — development that addresses both short- and  long-term economic goals.

The World Bank’s Equality Project attempts to address this problem. The idea driving the project is that institutional measures that hamper the access of ethnic, religious and sexual minorities to the labor market and financial systems (such as legal and policy restrictions, or the absence of appropriate, positive nondiscrimination actions) directly affect their economic performance and, as a consequence, represent a cost for the economy: If a sizeable percentage of the population is not given the opportunity to acquire a high-quality education, a good job, secure housing, access to services, equal representation in decision-making institutions and protection from violence, human capital will be wasted, income inequality will grow and social unrest will ensue. The World Bank’s widely cited Inclusion Matters report puts it succinctly: “Social inclusion matters because exclusion is too costly. These costs are social, economic and political, and are often interrelated.”

The project collected and validated data on the legal framework of six pilot countries: Bulgaria, Mexico, Morocco, the Netherlands, Tanzania and Vietnam. The methodological approach of collecting cross-country comparable data according to key indicators yielded some general but interesting results, published in a research working paper in March 2017.

Looping in local suppliers rather than forcing out international firms

Anabel Gonzalez's picture



An instructor at the Savar EPZ training center in Dhaka, Bangladesh, helps young women being trained to make shirts. Photo Credit: © Dominic Chavez/The World Bank


Increasing economic prosperity for developing countries is related not only to rising trade, but also – and more important – to transforming the traditional composition of what they produce and export. In the world today, many developing countries strive to diversify away from exporting commodities toward higher-value-added goods and services.

The evolution of trade and investment flows over the last three decades shows that foreign direct investment (FDI) can be a powerful driver of exports, a creator of well-paid new jobs and a crucial source of financing. More important, FDI may become a very rapid and effective engine to promote the transfer of technology, know-how and new business practices, helping to raise productivity and setting a country on the course of convergence. This is particularly the case of efficiency-seeking FDI – that is, FDI that locates productive processes in a country seeking to enhance its ability to better compete in international markets-.
 
The benefits of FDI are further leveraged when local firms can catalyze the presence of foreign investors to connect to global and regional value chains (GVCs). As a result of new international firms investing in a host country, great new opportunities arise for local enterprises to supply the inputs – be it goods or services – that their international counterparts need.

This has been the experience of Bangladesh, where local suppliers have grown in tandem with foreign investors in the garment sector. It is through linkages with international investors that local firms can gradually be lured into producing new goods and services that, until then, were not produced in the host country.  This is how economic diversification and greater value added are generated.

Multinational enterprises (MNEs) and their key partners (Tier 1 suppliers) are generally keen to source locally if a competitive local supplier can be found. However, they are also reluctant to absorb high search-and-find costs, and they will typically not invest in assisting local suppliers with upgrading efforts. Likewise, local firms are generally keen to supply to foreign firms, but are often not ready to make the necessary investments in technology and in processes to meet strict quality standards without a clear line of sight on potential payoff for such investment.

The Apprentice

Ganesh Rasagam's picture

Graduating university students in Kazakhstan. Photo: Maxim Zolotukhin / The World Bank
 


Just to be clear, this is not about the American TV show formerly hosted by President-elect Donald Trump and recently taken over by actor and former California Governor Arnold Schwarzenegger. This is about apprenticeships in the real world.

Being an apprentice is a great way to enter the job market, especially if you are just out of school and unsure what the future holds. For employers, an apprenticeship program is a relatively low-cost and low-risk option to discover talent and establish a pipeline of future employees.

So, why is there not a booming apprenticeship industry? The challenge is often the lack of a reliable marketplace for matching demand and supply. Several start-ups are aiming to fill that gap.

GetMyFirstJob does exactly that in the United Kingdom. This online tool helps job seekers identify and explore apprenticeship and training opportunities based on their skills and interests. Potential candidates are then matched with partnering employers, colleges and training providers.

Fuzu — Swahili for "successful" — is a Kenyan-Finnish employment platform that aims to bring the best of Finland’s education and innovation systems to job seekers in Africa. Their motto is, “Dream. Grow. Be Found.” Fuzu works with a diverse range of partners, such as M-Kopa and Equity Bank, to provide job seekers with career opportunities and insights on the job market. Employers have at their disposal an effective recruitment system and pay-for-performance solutions. In a short time, Fuzu has established a community of more than 180,000 users and more than 100 companies.

Last week, Andela received the U.S. Secretary of State’s Corporate Excellence Award for SMEs. The U.S. Executive Director of the World Bank Group is hosting a “brown-bag lunch” discussion with their CEO this Wednesday at the Bank's headquarters.

Toward a more durable form of globalization, beyond 'neoliberal' negligence

Christopher Colford's picture

“Globalization and technological change create huge challenges for modern economies, but they are not uncontrollable forces of nature. The economy we have is the economy we choose to build. It is time to make different choices, and show that capitalism can be remade.” — Prof. Mariana Mazzucato of the University of Sussex and Prof. Michael Jacobs of University College London, the editors of “Rethinking Capitalism.”

The shadows lengthen and the daylight shortens amid these elegiac end-of-summer evenings — but there’s a palpable feeling nowadays, in Washington and other capitals, that we’re approaching not just the sunset of a season, but the twilight of an era.

The sudden change in the policy discourse over the past year has shattered the familiar old contours of the globalization debate, with a “populist explosion” in the world’s developed economies forcing policymakers everywhere to reconsider the boundaries of “the art of the possible.” In many of the world's developed economies, a recalibration of globalization is under way.

In this insolite interim, the fraught phrase of Antonio Gramsci comes to mind: “The crisis consists precisely in the fact that the old is dying and the new cannot [yet] be born. In this interregnum, a great variety of morbid symptoms appear.”

Three incisive recent analyses illustrate the impassioned arguments that underscore this end-of-an-era feeling. Together, the analyses set the stage for the imminent publication of a new book of essays by a group of eminent economists, whose ideas may chart the way toward a more durable, more inclusive approach to globalization.

 
  • Second: Diagnosing how a phase of economic history may have run its course, Nobel Prize-winner Joseph Stiglitz (a former Chief Economist of the World Bank) in Project Syndicate asserts that the laissez-faire approach to globalization has reached its (il)logical conclusion: “The failure of globalization to deliver on the promises of mainstream politicians has surely undermined trust and confidence in the ‘establishment.’ . . . Neoliberals have opposed welfare measures that would have protected the losers [of globalization]. But they can’t have it both ways: If globalization is to benefit most members of society, strong social-protection measures must be in place. The Scandinavians figured this out long ago; it was part of [their] social contract. . . . Neoliberals elsewhere have not – and now, in elections in the US and Europe, they are having their comeuppance.”  
 
  • Third: A series of insightful columns by Martin Sandbu in The Financial Times – tracing an “insurrection [that] has been a long time coming” – explores the links among economic stress and social-class anxiety that provoked this year’s social eruption: “Over the past generation, the trajectory of the white working class has no doubt changed the most for the worse, compared with the previous generation.”


The history-minded reflections of Jacques, Stiglitz and Sandbu underscore the fact that many economists are still pondering how so many of their policy prescriptions went so badly wrong, opening the way for the global financial crisis.

'Making the case for trade': Winning voters’ trust by strengthening social safety nets

Christopher Colford's picture

Policy persuasion is most effective when it draws on the evidence base of all the social-science disciplines. Every strand of the social sciences – not just the mathematical precision of economics, but also the nuanced interpretations of history and the subtle trajectories of sociology – has a great deal to contribute as policymakers balance competing priorities.

That multidisciplinary approach – emphasized in such recent works as The History Manifesto, in which Harvard and Brown University historians call for policymakers’ greater reliance on the combined reasoning of all the social sciences – was thoroughly borne out in the recent Development Economics Series lecture by economist David Autor of MIT (who is a scholar at the National Bureau of Economic Research). Presenting a research paper on trade policy, and underscoring the importance of public opinion in shaping policymakers’ approach to it, Autor’s presentation used the logic of political science to highlight the electoral mood swings that help shape countries’ position on international trade.

Using the perspectives of political science – in the paper, “Importing Political Polarization? The Electoral Consequences of Rising Trade Exposure” (co-authored with colleagues from the University of Zurich; the University of California, San Diego; and Lund University) – was a valuable way to help remind Autor's economics-focused World Bank Group audience that policymaking does not occur in an academic vacuum. Even though the Bank’s economics-heavy analyses may try to distill policy options into quantifiable formulae, the policymakers whom the Bank advises get their political mandate from their countries’ volatile voters – who do not always follow homo economicus’ coldly rational approach to decision-making.

Amid the topsy-turvy 2016 electoral cycle in many countries – in which voters’ fears about job losses due to international trade have been inflamed amid an upsurge of populism and protectionism – you don’t have to be a public-opinion pollster to affirm Autor's assertion in his analysis of recent U.S. voting patterns: “We detect an ideological realignment that is centered in trade-exposed local labor markets and that commences prior to the divisive 2016 U.S. presidential election. Exploiting the exogenous component of rising trade with China and classifying legislator ideologies by their congressional voting record, we find strong evidence that congressional districts exposed to larger increases in import competition disproportionately removed moderate representatives from office in the 2000s.”

Translation: If you’re a pro-trade lawmaker in a district that has a high degree of imports from overseas, in a region that has endured what Autor calls “economic scarring,” then you’re likely to pay a heavy price at the ballot box – and, if you’re defeated, your successor just might be a strident protectionist. The Autor analysis shrewdly underscores the adjective “political” in the anodyne textbook phrase, “political economy.”

Stalled productivity, stagnant economy: Chronic stress amid impaired growth

Christopher Colford's picture

Call it “secular stagnation,” or the disappointing “New Mediocre,” or the baffling “New Normal” – or even the back-from-the-brink “contained depression.” Whatever label you put on today’s chronic economic doldrums, it’s clear that a slow-growth stall is afflicting many nation’s economies – and, seven years into a lackluster recovery from the global financial crisis, some fragile economies seem to be lapsing into another slump.

As policymakers struggle to find a plausible prescription for jump-starting growth, a tug-of-war is under way between techno-utopians and techno-dystopians. It’s a struggle between optimists who foresee a world of abundance thanks to innovations like robot-driven industries, and pessimists who anticipate a cash-deprived world where displaced ex-workers have few or no means of earning an income.

To add a bracing dose of academic rigor to the tech-focused tug-of-war, along comes a data-focused realist who adds a welcome if sobering historical perspective to the debate. Robert J. Gordon, a macroeconomist and economic historian at Northwestern University, takes a longue durée perspective of technology’s impact on growth, wealth and incomes.

Gordon’s blunt-spoken viewpoint has caused a sensation since his newest book, “The Rise and Fall of American Growth,” was launched at this winter’s meetings of the American Economic Association. His analysis injects a new urgency into policymakers’ debates about how (or even whether) today’s growth rate can be strengthened.

When Gordon speaks at the World Bank on Thursday, March 31 – at 11 a.m. in J B1-080, as part of the Macrofiscal Seminar Series – economy-watchers can look forward to hearing some ideas that challenge the orthodoxies of recent macroeconomic thinking. His topic – “Secular Stagnation on the Supply Side: Slow Growth in U. S. Productivity and Potential Output” – seems likely to spark some new thinking among techno-utopians and techo-dystopians alike.

To watch Gordon’s speech live via Webex – at 11 a.m. on Thursday, March 31 – click here. To dial in to listen to the audio, dial (in the United States and Canada) 1-650-479-3207, using the passcode 735 669 472. For those telephoning from outside the United States and Canada, the appropriate numbers can be found on this page.

Does competition create or kill jobs?

Klaus Tilmes's picture

Greater competition is crucial for creating better jobs, although there may be short term tradeoffs.

Job creation on a massive scale is crucial for sustainably ending extreme poverty and building shared prosperity in every economy. And robust and competitive markets are crucial for creating jobs. Yet the question of whether competition boosts or destroys jobs is one that policymakers often shy away from.

It was thus valuable to have that question as a central point of discussion for competition authorities and policymakers from almost 100 countries – from both developed and developing economies – who recently gathered in Paris for the 14th OECD Global Forum on Competition (GFC).

According to World Bank Group estimates the global economy must create 600 million new jobs by the year 2027 – with 90 percent of those jobs being created in the private sector – just to hold employment rates constant, given current demographic trends.
Yet the need goes further than simply the creation of jobs: to promote shared prosperity, one of the urgent priorities – for economies large and small – is the creation of better jobs. This is where competition policy can play a critical role.
 
Competition helps drive labor toward more productive employment: first, by improving firm-level productivity, and second, by driving the allocation of labor to more productive firms within an industry.
 
Moreover: Making markets more open to foreign competition drives labor to sectors with higher productivity – or, at least, with higher productivity growth. Making jobs more productive, in turn, generally increases the wages they command.
 
That’s in addition to cross-country evidence on the impact of competition policy on the growth of Total Factor Productivity and GDP, and the fact that growth tends not to occur without creating jobs. Thus there’s compelling evidence that – far from being a job killer, as skeptics might fear – competition (over the long term) has the potential to create both more jobs and better jobs.



The key question then becomes whether such long-term benefits must be achieved at the expense of short-term negative shocks to employment – especially in sectors of the economy that may experience sudden increases in the level of competition.
 
Progress toward better jobs is driven partly by the disappearance of low-productivity jobs, as well as the creation of more productive jobs in the short run. Competition encourages that dynamic through firm entry and exit, along with a reduction in “labor hoarding” in firms that have previously enjoyed strong market power.
 

Making cities competitive – What will it take?

Megha Mukim's picture



Cities are the future. They are where people live and work. They are where growth happens and where innovation takes place. But they are also poles of poverty and, much too often, centers of unemployment.

How can we unleash the potential of cities? How do we make them more competitive? These are urgent questions. Questions, as it turns out, with complex answers – that could potentially have huge returns for job creation and poverty reduction.

Cities vary enormously when it comes to their economic performance. While 72 percent of cities grow faster than their countries, these benefits do not happen uniformly across all cities. The top 10 percent of cities increase GDP almost three times more than the remaining 90 percent. They create jobs four to five times faster. Their residents enjoy higher incomes and productivity, and they are magnets for external investment.
 
We’re not just talking about the “household names”among global cities: Competitive cities are often secondary cities, many of them exhibiting success amidst adversity – some landlocked and in lagging regions within their countries. For instance, Saltillo (Mexico), Meknes (Morocco), Coimbatore (India), Gaziantep (Turkey), Bucaramanga (Colombia), and Onitsha (Nigeria) are a few examples of cities that have been competitive in the last decade.
 
So how do cities become competitive? We define competitive cities as those that successfully help firms and industries create jobs, raise productivity and increase the incomes of citizens. A team at the World Bank Group spent the last 18 months investigating, creating and updating our knowledge base for the benefit of WBG’s clients. In our forthcoming report, “Competitive Cities for Jobs and Growth,”* we find that the recipe includes several basic ingredients.

In the long term, cities moving up the income ladder will transform their economies, changing from “market towns” to “production centers” to “financial and creative centers,” increasing efficiencies and productivity at each stage. But economic data clearly shows there are large gains to be had even without full-scale economic transformation: Cities can move from $2,500 to $20,000 in per capita income while still remaining a “production center.”  In such cases, cities become more competitive at what they already do, finding niche products and markets in tradable goods and services. Competitive cities are those that manage to attract new firms and investors, while still nurturing established businesses and longtime residents. 
 
What sort of policies do competitive cities use? We find that leading cities focus their energies on leveraging both economy-wide and sector-specific policies. In practice, we see how successful cities create a favorable business climate and target individual sectors for pro-active economic development initiatives. They use a combination of policies focused on cross-cutting issues such as land, capital markets and infrastructure, while not losing focus on the needs of different industries and firms. The crucial factor is consultation, collaboration and partnerships with the private sector. In fact, success also involves building coalitions for growth with neighbors and other tiers of government.

To meet the jobs challenge, maximize the impact of SMEs

Klaus Tilmes's picture

The urgent challenge of generating jobs and incomes – as the world’s working-age population is poised to soar – will require making the most of all the job-creating energies of the private sector and the strategy-setting skill of the public sector. Today in Ankara, Turkey, the World Bank Group renewed its commitment to strengthen the global economy’s most promising and inclusive source of job creation: small and medium-sized enterprises (SMEs).

At a signing ceremony at the B20 conference of global business leaders – coinciding with the G20 forum of government leaders from the world’s largest economies – the Bank Group joined in a partnership with a new organization promoted by the B20: the World SME Forum (WSF), which is to become the global platform to coordinate practical assistance and policy support for SMEs.

Based in İstanbul, WSF has been founded through a partnership between the Union of Chambers and Commodity Exchanges of Turkey (TOBB), the International Chamber of Commerce (ICC), and ICC’s World Chambers Federation.



World Bank Group President Jim Yong Kim – in Ankara, Turkey, on September 4, 2015 – signs a Memorandum of Understanding to confirm the Bank Group's partnership with the World SME Forum. Also signing the document, along with President Kim, is Rifat Hisarciklioglu, the Chairman of B20 Turkey and the President of TOBB (the Union of Chambers and Commodity Exchanges of Turkey).

SMEs are a vital engine of innovation and entrepreneurship, and the success of the SME sector is central to every country’s prospects for job creation and economic growth. Providing support for SMEs is a fundamental priority for the World Bank Group, as we pursue our global goals of eradicating extreme poverty by the year 2030 and boosting shared prosperity.

SMEs are crucial to every economy: They provide as much as two-thirds of all employment, according to a recent survey of 104 countries – and, in the 85 countries that showed positive net job creation, the smallest-size enterprises accounted for more than half of total net new jobs.

Activism and Advocacy 'Sans Frontières': Mobilizing Lawyers to Champion Development and the Rule of Law

Christopher Colford's picture
The challenge of global development is so vast, and the need to deliver high-impact services is so urgent, that the drive to create a social movement to build shared prosperity must enlist people with every type of skill – marshalling all of the many kinds of expertise that drive the private sector as well as the public, academic, social and philanthropic realms.

“We need everybody,” as World Bank Group President Jim Yong Kim has passionately argued. “We need writers who can write about this. We need engineers. We need doctors. We need lawyers. We need artists. We need everybody who can capture the imagination of the world to end poverty." There’s a role in development for public-spirited people from every profession who seek to contribute to the cause.
 
Take It On: Enlisting In The Development Cause



Deep legal knowledge and deft legal reasoning are certainly part of the skill set needed to eradicate poverty and promote development. That’s because “you can’t have justice without advocates for justice,” as the Justice Community of Practice at the World Bank Group recently learned from the leader of an energetic initiative to link public-spirited legal practitioners with the nonprofit and non-governmental organizations (NGOs) that need their skills.

The legal acumen that helps for-profit law firms succeed in the marketplace is often sought by nonprofits, human-services groups and human-rights advocates. Lawyers' skills can often make a crucial difference for organizations that deal with social prorities – whether it’s by tackling complex challenges like protecting refugees or defending prisoners of conscience, or by pursuing routine tasks like negotiating an office-space lease or reviewing an employment contract.

Matching the needs of social organizations with the capacity of lawyers who have a bit of time to commit to pro bono publico ideals – and thus to “strengthen the global pro bono community” for the long term – is the goal of PILnet, the Global Network for Public Interest Law. PILnet president Edwin Rekosh recently told the Bank’s justice-focused group that “promoting voluntarism among lawyers” often starts with the simple question, “Do you care about doing something good with your free time?” If so, “What do you care about?”

Lawyers within some of the world’s largest international law firms, in particular, often find that they have some spare capacity when they're in-between client assignments. Putting those flexible hours to good use for a pro bono client can both satisfy the lawyers’ altruistic aspirations and reflect well on their firms’ commitment to devote time and talent free of charge to worthy social causes.

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