Jobs key to ensuring ‘virtuous cycle’ – WB

Jobs in developing countries such as the Philippines is a cornerstone of development and critical for reducing poverty, making cities work, and providing youth with alternatives to violence, a new World Bank report said on Tuesday.

According to the World Development Report (WDR) 2013, jobs stresses the role of strong private sector-led growth in creating jobs, and outlines how jobs that do the most for development can spur a virtuous cycle.

“A good job can change a person’s life, and the right jobs can transform entire societies. Governments need to move jobs to center stage to promote prosperity and fight poverty,” World Bank Group President Jim Yong Kim expressed,

He said that it’s critical that the governments work well with the private sector, which accounts for 90 percent of all jobs.

“Therefore, we need to find the best ways to help small firms and farms grow. Jobs equal hope. Jobs equal peace. Jobs can make fragile countries become stable,” Kim added.

Meanwhile, the report stated that in such rapidly changing times, the private sector is the main engine of job creation and the source of almost nine of every 10 jobs in the world, adding that between 1995 and 2005, the private sector in the Philippines accounted for 95 percent.

It also finds that poverty falls as people work their way out of hardship and as jobs empower women to invest more in their children.

Best payoffs

On the other hand, the World Bank disclosed that the report’s authors highlighted jobs with the greatest development payoffs, particularly those that raise incomes, make cities function better, connect the economy to global markets, protect the environment, and give people a stake in their societies.

“Jobs are the best insurance against poverty and vulnerability,” said Kaushik Basu, World Bank chief economist and senior vice president.

Basu added that governments play a vital enabling role by creating a business environment that enhances the demand for labor.

“The youth challenge alone is staggering. More than 620 million young people are neither working nor studying. Just to keep employment rates constant, the worldwide number of jobs will have to increase by around 600 million over a 15-year period,” said Martin Rama, WDR director.

The report added that for a long period, public sector jobs were offered to young college graduates, but as the fiscal space for continued expansion in public sector employment shrank, “queuing” for public sector jobs became more prevalent, leading to informality, a devaluation of educational credentials, and forms of social exclusion.

“A fairly well-educated and young labor force remains unemployed, or underemployed, and labor productivity stagnates,” it asserted.

However, the WOR 2013 also observed that overall, countries have been successful at creating jobs with more people having jobs now than ever before, and those jobs provide generally higher earnings.

“Indeed, amid rapid social and economic change, poverty has declined in developing countries. The share of the population of the developing world living on less than $1.25 a day [in purchasing power parity] fell from 52 percent in 1981 to 22 percent in 2008, or from 1.94 billion people to 1.29 billion,” it affirmed.

The report also remarked that the reduction is the result of multiple factors, but the creation of millions of new, more productive jobs, mostly in Asia but also in other parts of the developing world, has been the main driving force.

However, the WOR 2013 observed that in many developing countries, where farming and self-employment are prevalent and safety nets are modest at best, unemployment rates can be low.

In those places, most poor people work long hours but cannot make ends meet. And the violation of basic rights is common. Therefore, the quality and not just the number of jobs is vitally important, it mentioned.

“Many people in developing countries work in very small and not very dynamic economic units—family farms, microenterprises, and household businesses. Although microenterprises are often defined as firms employing ten or fewer workers, many among them are actually one-person businesses,” the report said.

It maintained that given their contribution to total employment, these small economic units cannot be ignored, adding that understanding their dynamics is crucial to deciphering the relationship between jobs and productivity.

The report mentioned that family farms dominate even in high-income countries, and owner cultivation is the most common form of land tenure, especially in Asia where farmers typically own land plots, which they supplement through tenancy contracts that facilitate transfers from relatively land-abundant to relatively labor-abundant households.

Thus, the World Development Report 2013 said that there are some exceptions to this pattern. It cited for instance the colonial governments which created large farms in some developing countries, such as estates in southern Africa, haciendas in Latin America and the Philippines, and plantations in the Caribbean.

The report also elaborated a three-stage approach to help governments improve the quality and not just the number of jobs: first, solid fundamentals—including macroeconomic stability, an enabling business environment, human capital, and the rule of law- have to be in place; second, labor policies should not become an obstacle to job creation, or they should also provide access to voice and social protection to the most vulnerable; and third, governments should 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. –MAYVELIN U. CARABALLO REPORTER, Manila Times