What does it take to sustain job creation? Lessons from five countries

The global jobs challenge

Emerging market and developing economies (EMDEs) face a jobs challenge of historic proportions. Between 2025 and 2035, around 1.2 billion young people in these economies are expected to reach working age, the largest youth cohort the world will likely ever see, according to a new World Bank Group study. In Sub-Saharan Africa and the Middle East and North Africa, the coming wave of young people will be the largest these regions have seen to date. Creating sufficient job opportunities for these young women and men is therefore an urgent development policy priority.

Figure 1.

There is no “silver bullet” solution for durably generating jobs at scale. Yet country experiences show that sustained job creation is achievable. The five case studies examined here highlight how complementary reforms helped these economies create the conditions for sustained and strong employment growth. Although country circumstances differ, these diverse episodes show some common themes and suggest that well-designed domestic policies can make a meaningful difference.
 

Five episodes of sustained job creation

The experiences of five countries offer useful lessons on sustaining job creation. Australia (1994-2008), Chile (1979-92), Colombia (2002-08), the Republic of Korea (1986-97), and Singapore (2004-14) all experienced prolonged periods of strong employment growth, identified using an algorithm based on several criteria, including prioritizing sustained increases in the employment-to-population ratio over at least seven years.

During these episodes, employment grew by an average of 3.4 percent a year, roughly twice the pace recorded in other years, typically accompanied by rising labor force participation and falling unemployment.

Figure 2.

Three common policy themes supported these episodes: building foundational infrastructure, strengthening the business environment, and mobilizing private capital.
 

Three policy pillars

Building foundational infrastructure

Sustained investment in physical and human capital gave firms a platform to expand and  create jobs. In Chile and Colombia natural resource development was facilitated by robust infrastructure networks. Singapore's emergence as a regional logistics and financial hub rested on investment in transportation, digital connectivity, education, and public services. Korea and Singapore moved up the value chain through innovation and workforce skills , with rising education attainment helping align workers' skills with firms' demands as growth strategies evolved.
 

Strengthening the business environment

Sound macroeconomic management, more effective regulation, credible institutions, and greater labor market flexibility reduced uncertainty and created conditions for firms to invest and hire. Institutional and regulatory reforms preceded or coincided with strong employment growth in Chile, Colombia, and Korea, while Australia and Chile increased labor market flexibility. In Chile, fiscal reforms and stronger central bank autonomy helped improve macroeconomic credibility and price stability. Colombia adopted inflation targeting, improved tax administration, induced debt sustainability guidelines, and implemented labor market reforms. Together, these measures helped to reduce informality and underemployment, shorten unemployment spells, and accelerate job creation, especially among young people.
 

Mobilizing private capital

Mobilizing private capital to finance investment supported job creation at scale. Across the five episodes, investment growth averaged nearly 10 percent a year, almost four times higher than in other years. Chile's pension reform deepened domestic capital markets; Korea’s National Pension Scheme channeled assets into public infrastructure and capital markets; Singapore expanded public-private partnerships; and Colombia privatized banks and strengthened corporate governance.
 

A framework, not a formula

These experiences do not offer a single formula. Starting conditions, institutions and growth models differed and today’s policy makers fac challenges not directly comparable with those of earlier decades. Yet a consistent framework emerges: sustained job creation was supported by complementary, mutually reinforcing policies. Investment surged, output growth was roughly 50 percent higher than outside these episodes, and productivity growth was solid. 
 

Figure 3.

The global jobs challenge is daunting, but it is not destiny. With the right opportunities, the record cohort of young people approaching working-age in EMDEs can strengthen domestic demand, support development progress, deepen international links, and contribute to global prosperity. Realizing that potential will require comprehensive policy packages centered around foundational infrastructure, a strong business environment, and the mobilization of private capital. The case studies offer grounds for optimism that today’s jobs challenge can become an opportunity for transformation.

For further details, please see The Global Jobs Challenge.