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How do we achieve sustained growth? Through human capital, and East Asia and the Pacific proves it

Michael Crawford's picture
Students at Beijing Bayi High School in China. Photo: World Bank


In 1950, the average working-age person in the world had  almost three years of education, but in East Asia and Pacific (EAP), the  average person had less than half that amount. Around this time, countries in  the EAP  region put themselves on a path that focused on growth  driven by human capital. They made significant and steady investments in  schooling to close the educational attainment gap with the rest of the world. While  improving their school systems, they also put their human capital to work in  labor markets. As a result, economic growth has been stellar: for four decades  EAP has grown at roughly twice the pace of the global average. What is more, no  slowdown is in sight for rising prosperity.

High economic growth and strong human capital accumulation  are deeply intertwined. In a recent paper, Daron Acemoglu and David Autor explore  the way skills and labor markets interact: Human capital is the central  determinant of economic growth and is the main—and very likely the only—means  to achieve shared growth when technology is changing quickly and raising the  demand for skills. Skills promote productivity and growth, but if there are not  enough skilled workers, growth soon chokes off. If, by contrast, skills are abundant and  average skill-levels keep rising, technological change can drive productivity  and growth without stoking inequality.

Finding employment for young people of all abilities

Matt Hobson's picture
Young women from family with members with disabilities being taught to use a sewing machine.
India. Photo: © John Isaac / World Bank

Today is the International Day of Persons with Disabilities.
 
In every society globally, unemployment rates for persons with disabilities are higher than for people without disabilities. The International Labor Organization reports that, in some Asia-Pacific countries, the unemployment rate of people living with disabilities is over 80%. 

Does competition create or kill jobs?

Klaus Tilmes's picture

Greater competition is crucial for creating better jobs, although there may be short term tradeoffs.

Job creation on a massive scale is crucial for sustainably ending extreme poverty and building shared prosperity in every economy. And robust and competitive markets are crucial for creating jobs. Yet the question of whether competition boosts or destroys jobs is one that policymakers often shy away from.

It was thus valuable to have that question as a central point of discussion for competition authorities and policymakers from almost 100 countries – from both developed and developing economies – who recently gathered in Paris for the 14th OECD Global Forum on Competition (GFC).

According to World Bank Group estimates the global economy must create 600 million new jobs by the year 2027 – with 90 percent of those jobs being created in the private sector – just to hold employment rates constant, given current demographic trends.
Yet the need goes further than simply the creation of jobs: to promote shared prosperity, one of the urgent priorities – for economies large and small – is the creation of better jobs. This is where competition policy can play a critical role.
 
Competition helps drive labor toward more productive employment: first, by improving firm-level productivity, and second, by driving the allocation of labor to more productive firms within an industry.
 
Moreover: Making markets more open to foreign competition drives labor to sectors with higher productivity – or, at least, with higher productivity growth. Making jobs more productive, in turn, generally increases the wages they command.
 
That’s in addition to cross-country evidence on the impact of competition policy on the growth of Total Factor Productivity and GDP, and the fact that growth tends not to occur without creating jobs. Thus there’s compelling evidence that – far from being a job killer, as skeptics might fear – competition (over the long term) has the potential to create both more jobs and better jobs.



The key question then becomes whether such long-term benefits must be achieved at the expense of short-term negative shocks to employment – especially in sectors of the economy that may experience sudden increases in the level of competition.
 
Progress toward better jobs is driven partly by the disappearance of low-productivity jobs, as well as the creation of more productive jobs in the short run. Competition encourages that dynamic through firm entry and exit, along with a reduction in “labor hoarding” in firms that have previously enjoyed strong market power.
 

Partnerships and opportunities for digital jobs

Saori Imaizumi's picture

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What are ‘digital jobs’? If you have access to a computer, Internet and online or mobile payment, can you get a job? The answer is yes, but having basic literacy and computer skills are essential. Knowledge of English is also a big plus.  
Earlier this year, the World Bank and the Rockefeller Foundation organized a “Digital Jobs Africa Forum” to discuss the potential of digital jobs in creating employment in Africa.
 
Digital Jobs Africa is a seven-year, US$100 million dollar initiative of the Rockefeller Foundation that seeks to impact the lives of one million people in six African countries (South Africa, Kenya, and Nigeria, Ghana, Morocco, and Egypt) by catalyzing ICT-enabled employment and skills training for high-potential African youth who would not otherwise have access to sustainable employment. Launched in 2013, the initiative works in close partnership with stakeholders from the private sector, government, civil society, and the development community.
 
In partnership with the Digital Jobs Africa Initiative, the World Bank has undertaken a number of activities to increase and enhance opportunities for digital job creation in Africa, including development of an information technology (IT) park in Ghana, capacity building for digitization of public records, and online work/microwork awareness building and training in Nigeria. Recently, the global online outsourcing study was also released to analyze the holistic picture of rapidly growing online outsourcing market (please visit www.ictforjobs.org for more information).
 
These successful collaborations have resulted in a renewed commitment to a strengthened partnership between the Rockefeller Foundation and the World Bank on the digital jobs agenda to develop skills for youth, as well as to create digital jobs across sectors including agriculture, e-commerce, education, and transport through co-financing catalytic and innovative activities.

To meet the jobs challenge, maximize the impact of SMEs

Klaus Tilmes's picture

The urgent challenge of generating jobs and incomes – as the world’s working-age population is poised to soar – will require making the most of all the job-creating energies of the private sector and the strategy-setting skill of the public sector. Today in Ankara, Turkey, the World Bank Group renewed its commitment to strengthen the global economy’s most promising and inclusive source of job creation: small and medium-sized enterprises (SMEs).

At a signing ceremony at the B20 conference of global business leaders – coinciding with the G20 forum of government leaders from the world’s largest economies – the Bank Group joined in a partnership with a new organization promoted by the B20: the World SME Forum (WSF), which is to become the global platform to coordinate practical assistance and policy support for SMEs.

Based in İstanbul, WSF has been founded through a partnership between the Union of Chambers and Commodity Exchanges of Turkey (TOBB), the International Chamber of Commerce (ICC), and ICC’s World Chambers Federation.



World Bank Group President Jim Yong Kim – in Ankara, Turkey, on September 4, 2015 – signs a Memorandum of Understanding to confirm the Bank Group's partnership with the World SME Forum. Also signing the document, along with President Kim, is Rifat Hisarciklioglu, the Chairman of B20 Turkey and the President of TOBB (the Union of Chambers and Commodity Exchanges of Turkey).

SMEs are a vital engine of innovation and entrepreneurship, and the success of the SME sector is central to every country’s prospects for job creation and economic growth. Providing support for SMEs is a fundamental priority for the World Bank Group, as we pursue our global goals of eradicating extreme poverty by the year 2030 and boosting shared prosperity.

SMEs are crucial to every economy: They provide as much as two-thirds of all employment, according to a recent survey of 104 countries – and, in the 85 countries that showed positive net job creation, the smallest-size enterprises accounted for more than half of total net new jobs.

Weekly wire: The global forum

Roxanne Bauer's picture
World of NewsThese are some of the views and reports relevant to our readers that caught our attention this week.

 
Exporting corruption: Progress report 2015: Assessing enforcement of OECD Anti-bribery Convention
Transparency International
Transparency International’s 2015 Progress Report is an independent assessment of the enforcement of the Organisation for Economic Co-operation and Development’s (OECD’s) Anti-Bribery Convention. The Convention is a key instrument for curbing global corruption because the 41 signatory countries are responsible for approximately two-thirds of world exports and almost 90 per cent of total foreign direct investment outflows. This is the 11th annual report. It has been prepared by Transparency International’s International Secretariat working with our national chapters and experts in the 41 OECD Convention countries. This report shows that there is Active Enforcement in four countries, Moderate Enforcement in six countries, Limited Enforcement in nine countries, and Little or No Enforcement in 20 countries. (Two countries were not classified.)

The Science of Inequality- What the numbers tell us
Special issue of Science Magazine
This special issue uses these fresh waves of data to explore the origins, impact, and future of inequality around the world. Archaeological and ethnographic data are revealing how inequality got its start in our ancestors. New surveys of emerging economies offer more reliable estimates of people's incomes and how they change as countries develop. And in the past decade in developed capitalist nations, intensive effort and interdisciplinary collaborations have produced large data sets, including the compilation of a century of income data and two centuries of wealth data into the World Top Incomes Database.  It is only a slight exaggeration to liken the potential usefulness of this and other big data sets to the enormous benefits of the Human Genome Project. Researchers now have larger sample sizes and more parameters to work with, and they are also better able to detect patterns in the flood of data.