There is great pressure on African governments to produce inclusive patterns of economic growth. Levels of inclusivity in Africa lag those of other developing regions. Part of this gap is due to the fact that the majority of the labour force is not participating in the formal economy in these countries. But the informal labour market absorbs the more vulnerable groups in the economy, including women and youth. Further, most people in informal employment are better off than they would be in unemployment or outside the labor force. So whether informality is good or bad for inclusive growth overall depends on the type of informal employment.
We recently completed a Jobs Diagnostic in Kenya to look at ways that the country can create better jobs, especially for young Kenyans. Skills development is fundamental to the transition to better jobs as we found that firm creation is low and that more productive firms do not create more jobs. This lack of growth of the more productive firms is the real challenge. Better, more productive, transformational jobs will be key helping the country meets its goals of Vision 2030.
A key theme in this year’s IDA replenishment is the need to improve jobs through accelerated economic transformation. Generating more jobs and increasing productivity by creating stronger market linkages is a challenge everywhere in the developing world. But it is both particularly important and difficult in countries facing fragility. Sierra Leone had hardly emerged from the effects of a long civil war when the Ebola crisis struck. Around the same time, the commodity super cycle began winding down in 2014, negatively affecting revenues. The Jobs Group is working with the Government in Sierra Leone to meet this challenge. A team recently visited Sierra Leone to see how World Bank Group operations are helping and to find out what more can be done to improve the outlook for jobs in the country.
There is an undeniable link between urbanization and job creation – but what exactly is the relationship, and how could the potential of unprecedented urbanization growth most benefit the world’s urban poor looking for jobs? Urbanization can lead to more, better and inclusive jobs in cities around the world. But recent urbanization trends, particularly in Africa, show that in many cases urbanization is taking place without job creation. Focusing on issues such as reducing spatial mismatches may provide policy options to affect positive labor market outcomes. This is the first in a series of upcoming blogs looking at the connections, the dynamics and the interactions between urbanization and jobs.
Job creation is a crucial aspect of development. And broad-based, high-quality education is crucial for inclusive development. Worryingly low levels of education quality and quantity show that there is a crisis of education in some West African countries. If inclusive growth is to pull people into the labor market and out of poverty, this must be addressed. Getting education right is a crucial first step on the road to creating better employment and reducing poverty. It must be considered a priority by national governments and donors alike.
Rigid labor markets prevent formalization, especially when labor costs are high relative to the productivity of the workforce. Evidence from around the world, from developed and developing countries, shows that employers have a number of ways they adjust to the costs imposed by onerous labor policies. One of the main lessons that policy makers should learn, is that adopting measures that reduce rigidity and costs can help mitigate the negative impacts on unemployment and informality.