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Employment, both formal and informal, is a key route out of poverty for poor women and men. Creating more and better jobs and sustainable self-employment opportunities contributes to pro-poor growth by enabling poor people to participate in the growth process, increase their incomes and so sustain their livelihoods and improve their access to a wider range of goods and services. Employment and labour market policies and institutions play an important role in determining employment outcomes. But in many developing countries, creating more, better and more productive jobs is a challenge because labour markets are weak and have to absorb large numbers of young people in a short timeframe. In addition, poor women and men have limited access to productive resources and skills.
A key issue for improving employment outcomes in developing countries is underemployment and the “working poor”, rather than “only” unemployment. Underemployed people typically have low productive and exhausting jobs outside the formal economy that do not give them the means to escape from poverty and offer no or insufficient social protection. We thus need to move beyond traditional labour market concepts in order to have a better understanding of the dynamics and interplay in developing countries between growth, employment and poverty reduction.
In the past, the public sector, especially state-owned enterprises, was the major employer in the formal sector. Structural adjustment programmes and fiscal austerity policies have led to massive job losses that have exacerbated poverty and increased underemployment in the private sector, which showed little capacity to offer productive jobs to take up this slack. This shows the critical role of the private sector in creating jobs, but in developing countries and within the donor community, employment creation outside the public sector has not featured prominently in sector policies.
Employment is often considered as a by-product or outcome of development strategies and policies in other areas. This is related to the cross-cutting nature of this theme, which has links to several traditional “aid sectors” such as education, health, private sector development, agriculture and infrastructure. However, evidence shows that productive employment has not always been an automatic consequence of growth, at least in the scale hoped for, so the employment outcomes of policies also need to be considered. For instance, many bilateral donors do not place employment at the centre of their efforts to promote pro-poor growth and do not have comprehensive policy packages that connect up different sector interventions. Similarly, the first generation of poverty reduction strategies (PRSs) paid little attention to the quantitative and qualitative aspects of job creation. However, employment issues are now being given more prominence in the second generation of PRSs that have explicitly increased their attention to such decent work issues as employment and social protection.
To help move issues related to creating more, better and more productive jobs towards the centre of the debate on pro-poor growth, POVNET is examining employment and labour market issues as a major part of its 2007-08 work programme.
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