More than growth, jobs are the main driver of development, a new World Bank report argues, while urging governments to pursue policies that remove obstacles to private-sector-led job creation, particularly by small and medium-sized businesses – the private sector remains the source of almost nine of every ten jobs in the world.

The ‘World Development Report (WDR) 2013’, which adopted jobs as its main theme for the year and draws it conclusions from over 800 surveys and country censuses, was released in Washington DC, in the US, on Monday.

It shows that jobs are vulnerable to economic downturns, with the recent financial crisis having created 22-million new unemployed in a single year. However, it also stresses that growth alone will not be sufficient to stimulate job creation and support development.

Currently, more than three-billion people are working globally, with 1.65-billion of those individuals receiving regular wages or salaries. Another 1.5-billion work in farming and small household enterprises, or in casual or seasonal day labour.

Worryingly, some 200-million people, 75-million of them being youth, are unemployed, while actively looking for work. A further two-billion working-age adults, the majority of them women, are neither working nor looking for work. Strikingly, more than 620-million young people are neither working nor studying.

Equally concerning, particularly in the current low job-growth environment, is a calculation showing that, by 2020, there needs to be around 600-million more jobs than was the case in 2005 simply to keep employment as a share of the working-age population constant. The majority of these jobs would also have to be created in Asia and sub-Saharan Africa.

Growth in total employment, which was around 1.8% a year before 2008, fell to less than 0.5% in 2009 and, by 2011, had not yet reached its pre-crisis level.

World Bank president Dr Jim Yong Kim says there is a pressing desire across the world for “good jobs”, which are not only important for allowing people to live, but also in fostering human dignity and greater social cohesion.

Governments need to place particular emphasis on creating the conditions needed to encourage job-generating investments by the private sector, especially small and medium-sized enterprises.

“The private sector is the key engine of job creation, accounting for 90% of all jobs in the developing world,” Kim notes, adding that governments can support, or hinder, the private sector in creating jobs.

The WDR shows that, between 1995 and 2005, the private sector accounted for 90% of jobs created in Brazil, and for 95% in the Philippines and Turkey.

“The most remarkable example of the expansion of employment through private-sector growth is China. In 1981, private-sector employment accounted for 2.3-million workers, while State-owned enterprises (SoEs) had 80-million workers. Twenty years later, the private sector accounted for 74.7-million workers, surpassing, for the first time, the 74.6-million workers in SoEs,” the report notes.

JOBS & DEVELOPMENT

WDR director Martin Rama says the finding that “development happens through jobs” also has important implications for economists and policymakers, who have typically focused on growth as the key driver of job creation and development.

The implication, Rama avers, is that policies can no longer focus solely on growth, but rather on “how to direct people towards jobs that have a high development pay-off”. This is because jobs have emerged as the best insurance against poverty and vulnerability.

The report proposes a three-stage approach to help governments raise the number and the quality of jobs in an economy, namely:

• Solid fundamentals – including macroeconomic stability, an enabling business environment, human capital and the rule of law – have to be in place.
• Labour policies should not become an obstacle to job creation.
• And, that governments identify which jobs would do the most for development given their specific country context, and remove or offset obstacles to private sector creation of such jobs.

But remedies to the jobs problem will differ from region to region, and from country to country and will be influenced by other mega trends, such as changing demographics, urbanisation and migration rates, and technological innovation.

The WDR also argues that the “centrality of jobs for development should not be interpreted as the centrality of labour policies and institutions”, as nearly half the people at work in developing countries are farmers or self-employed and, thus, fall outside the labour market.

“Often, the most relevant obstacles lie outside of the labour market. The catalysts for job creation may be policies that make cities work better, help farmers access and apply appropriate agricultural techniques, or allow firms to develop new exports. Jobs are the cornerstone of development, and development policies are needed for jobs.”