Like every other development institution, The World Bank Group's International Finance Corporation (IFC) is deeply concerned with how to create more and better jobs. There’s no question that jobs are the key issue in any discussion about ending poverty. The 60,000 poor people who participated in Deepa Narayan's Voices of the Poor study 13 years ago were right—jobs are the surest way out of poverty for people across the world.
Today, IFC publishes a report on the findings of a study about how jobs are created by the private sector. Given the private sector provides 90 per cent of jobs, the estimated 600 million that need to be created by 2020 will inevitably have to come from the private sector.Our report looks at the constraints that stop companies from creating jobs, and thus gives a sense of where IFC and others with IFC have to focus, if we are serious about making more of a dent on current unemployment figures and also, just as importantly, creating the millions of good quality jobs that will be needed for the young people who are entering the labor market.
It’s important to state upfront that IFC is not a research institution, and so our intention in carrying out the study is very much about how we can implement what we learn in our strategy and operations.
So what’s particularly striking? Here’s my own, personal take:
1) The firm size issue-- IFC gets lots of pressure to work with SMEs; but if our overriding goal is poverty eradication, the report suggests we should focus on larger firms (they’re more productive, pay higher wages, create more and better jobs). At the same time, we need to help address the SME ‘stunted growth’ problem by tackling the obstacles preventing good SMEs from growing. And then, yes, continue to support SMEs through Financial Intermediaries.
2) Our focus on the number of direct jobs created by our clients is misleading. Far more jobs are indirect, meaning they get created in supply chains and distribution channels. This suggests we should focus much more systematically on how to strengthen these channels through our investments and advice. There’s one case study on multipliers I thought was fascinating – in a mine in Ghana, 28 jobs were created in the surrounding economy for each job created in the mine itself.
3) Training and skills are vital. 45 million people enter the work force each year, but more than a third of companies studied across the globe were unable to find employees with the skills they needed. Our current approach is investments in education providers and on-the-job training support, but it is a tiny amount of IFC's work. This gives support to our MAS colleagues who want a more ambitious strategy on this, and a scale up of management attention.
4) The nature of the jobs challenge varies by region and country. The unemployment rate is highest in MENA (10%), more than double EAP and South Asia. Youth unemployment is also highest in MENA; vulnerable employment and working poor are the major challenges in South Asia and Africa. This suggests we should consider a ‘jobs lens’ systematically applied in every operational strategy. We have a high priority to design and test that tool, and also to put in place an implementation support team that can work with operational departments as they think through ways to strengthen their tailored jobs strategy.
5) Finally, it’s important to note that not all jobs are created equal. Jobs that don't meet environment and social standards have lower development impact, even negative development impact.
My job is to oversee IFC’s results measurement system and to help tease out the lessons for our work going forward. We have a robust standardized system of measuring inputs, outputs and outcomes but, if we are honest with ourselves, it’s still a struggle to fully understand the sustained impact of our work.
As we launch the jobs study, I’m wondering if jobs might be the best proxy indicator of impact for IFC. Should we put job creation center stage in our strategy? What would that mean? It certainly doesn’t mean we should try to count the total number of jobs IFC has created, which both internal and external experts have warned us against; nor does it mean setting ourselves a numerical target for job creation.
And how could we align this with our clients’ interests? A successful firm is looking to maximize profits rather than the number of jobs it provides: can we see how to successfully link these two perspectives? How many of our clients are interested in the job creation effects of their business, and why? If we can understand this better, it might give us the key to the way forward.
I’d be interested in your thoughts.