The enormity of the global job-creation challenge is underscored in a comprehensive new analysis by the International Finance Corporation, which issued a wide-ranging Jobs Study at a recent IFC forum on the urgency of the unemployment crisis. More than 200 million people are now unemployed worldwide – with another 1.5 billion people only marginally employed, and with an additional 2 billion working-age adults neither working nor seeking a job.
The need for stronger and more sustainable job creation will intensify with the approach of a global demographic surge. More than 600 million people will enter the work force – just in the developing world – within the next 15 years. And that figure, quantifying the painful withering of human capital caused by the unemployment crisis doesn’t even count the job-growth needs in the crisis-stricken wealthy nations.The IFC Jobs Study reinforces the urgency of creating high-quality and enduring jobs – a priority also emphasized in the World Bank’s World Development Report 2013 and the International Labor Organization’s recent report on the need for stronger job creation.
An array of experts at the IFC forum warned that only a resilient private sector can satisfy the world’s growing demand for jobs. Private-sector firms will have to generate about 90 percent of the jobs needed in the coming half-century, since the public sector will be able to productively employ only about 10 percent of job-seekers.
That stark reality puts private sector development at the forefront of the global economic policy agenda. Fortunately, there are better ways to promote job growth than the shot-in-the-dark aimlessness of laissez-faire theories. Through more activist approaches-- with focused public-sector policies helping promote sectors and industries that will be competitive for the long term – a faster pace of sustainable job creation indeed seems achievable.
Combining analytical rigor with targeted policy interventions, the Competitive Industries practice of the World Bank aims to help the Bank’s client countries take a market-driven approach: focusing investment in higher-value industries that show the greatest promise for future job growth. In tandem, a related Bank practice – on Innovation, Technology and Entrepreneurship – advises client countries on ways to encourage innovators and risk-takers, whose new ideas may create entirely new industries.
Realistically, not every country is poised to create new high-growth hubs like Silicon Valley or the Research Triangle – or the “Silicon Roundabout” cluster now being established in London. It’s not necessary, however, for every country to try to leapfrog Apple or Samsung or Google: The experience of many fast-developing countries that have spurred growth in precisely targeted sectors – like Morocco in automobile parts and aeronautics, Malaysia in electrical equipment, South Korea in electronics, and Chile in high-value agricultural products – show that economies can identify and establish a more promising place for themselves in the global value chain.
As they plan to invest in industrial sectors with a proven or potential comparative advantage, and to promote the innovators who will invent the future, policymakers need no longer proclaim their fealty to laissez-faire fundamentalism. That idea once commanded governments to shun any activist interventions in the economy. Mercifully, the public debate is no longer diverted by last-gasp rhetoric about unfettered and self-regulated markets, which has finally evaporated with the end of the U.S. presidential campaign of 2012. A renewed discussion about rational and rigorous decision-making – focused on building competitiveness - replaced the discredited dogma of passively awaiting some sort of miracle from the “invisible hand” of the market.
The recent series of analyses – by the IFC, the World Bank and the ILO – all underscore the magnitude of the jobs challenge. Taken together, they provide compelling evidence that constructive public-private cooperation can help fulfill the job-creation imperative.
Having produced the analytical foundation for forceful pro-growth action, development institutions – in partnership with governments, corporations, labor unions, investors and innovators – can now tackle the intricate task of applying their know-how, aiming to help lift the world’s unemployed millions out of the trap of long-term joblessness. Policymakers and job creators can now move from analysis to action, with such energetic drivers as the Competitive Industries and Innovation programs ready to contribute rigorous thinking about building competitiveness. Reviewing the vast and persuasive body of research on the urgency of job creation, the dictum of a long-ago economic theorist comes to mind: “Philosophers have only interpreted the world. The point is, to change it.”