How can South Asia spread the gains from exports more equally?

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Exports Wanted
Higher exports can translate into benefits for workers such as rising wages and a shift to formal employment. Photo: Shutterstock.com

South Asia faces a seeming paradox: It boasts substantial economic growth, but job creation remains weak and is often of poor quality. 

Some groups, like women or workers in rural areas, who make up the majority of workers in the informal economy where wages are often lower, are the most vulnerable.

In this context, can greater exports boost job growth and raise the quality of new jobs across the region? 

Our report, a joint product of the World Bank and the International Labour Organization (ILO), finds that higher exports can translate into benefits for workers such as rising wages and a shift to formal employment.

This scenario comes with a caveat, however: The gains from higher exports benefit some groups more than others, notably male, more-educated workers, and urban workers. 

To expand and share more widely the benefits of exports, the report recommends three policies. 

The gains from higher exports benefit some groups more than others, notably male, more-educated workers, and urban workers.

  • Policy #1: Increasing the volume of exports can benefit local labor markets

Our results show that higher exports per worker in India boost wages on average between Rs 1,000 and Rs 8,000 and reduce informality for several workers ranging from 2.1 million to 12.3 million. In Sri Lanka, a similar pattern is evident for wages.

In that sense, policies should prioritize improving business conditions, such as infrastructure, digital and electricity connectivity, and better governance.  Domestic firms would also benefit from help in identifying foreign market opportunities.

  • Policy #2: Changing the composition of exports can help disadvantaged groups

An increase in labor-intensive—vs. capital-intensive—production will increase the wages of workers regardless of their educational background, even in rural areas.  It will also reduce the number of informal jobs, particularly for those with educational levels secondary and below and in rural areas.

Therefore, policies should focus on removing distortions that limit the flexibility of labor, capital, and land markets and thus enable more productive firms to grow.  One step in that direction would entail increasing the ability of workers to move to areas and into occupations where new jobs are being created.

Exports Wanted Figure

 

  • Policy #3: Greater participation of women and disadvantaged groups in export-oriented industries could lower informal-sector employment

To that end, we recommend policies including raising skills and helping groups such as women and youth, who face disadvantages, enter the labor force.  Greater participation of women in export-oriented industries also could improve labor market outcomes. This would require reducing economic and social obstacles to women joining the workforce, such as changing potentially discriminatory regulations now in place.

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