Globalisation, growth and Globalisation, growth and employment:employment:

Development StakesDevelopment Stakes

Frédéric Lapeyre, Frédéric Lapeyre, Employment Specialist, Employment Specialist, International Labour International Labour

OrganisationOrganisation

Large dichotomies in development theoryLarge dichotomies in development theory

Development theory is marked by swinging Development theory is marked by swinging ideological debates and movements around big ideological debates and movements around big issues:issues:

1.1. State/Planning versus the MarketState/Planning versus the Market2.2. Internal versus external development dynamicInternal versus external development dynamic3.3. Import-substitution versus export promotionImport-substitution versus export promotion4.4. Critical position of growth or basic needs in Critical position of growth or basic needs in

development strategydevelopment strategy5.5. Convergence versus plurality in development Convergence versus plurality in development

modelsmodels

Three governance paths for globalisationThree governance paths for globalisation

Neo-liberalism:Neo-liberalism: Accumulation limits need to be pushed backAccumulation limits need to be pushed back Global utopia based on the logic of Global utopia based on the logic of

unhindered accumulationunhindered accumulationReformism/Social democracy:Reformism/Social democracy:

Globalisation needs to be humanisedGlobalisation needs to be humanised Reaffirming the principles of solidarity and Reaffirming the principles of solidarity and

redistributionredistributionAlternative:Alternative:

Another world is possibleAnother world is possible A fairer world based on people’s demands A fairer world based on people’s demands

and not on the logic of accumulationand not on the logic of accumulation

Short background on employment being Short background on employment being taken into account for growth modelstaken into account for growth models

No in-depth debate on the link between growth, employment No in-depth debate on the link between growth, employment and poverty in the 50-60s. 3 reasons:and poverty in the 50-60s. 3 reasons:

1.1. The hypothesis of ‘positive growth spin-offs’The hypothesis of ‘positive growth spin-offs’

2.2. Kuznets’ hypothesis on the development of inequalities in Kuznets’ hypothesis on the development of inequalities in periods of economic developmentperiods of economic development

3.3. Lewis’ hypothesis on labour transfer from the traditional to Lewis’ hypothesis on labour transfer from the traditional to the modern sectorthe modern sector

Good policies = accelerated economic growth = Good policies = accelerated economic growth = industrialisation industrialisation

Dominant development vision in the Dominant development vision in the 1950s1950s

Convergence

Mobilisation of savings and planning

Higher investmentrate

Industrialisation

GrowthLess poverty and more jobs

Global Tradeand

Movement of capital(IDE and Coop. for Development)

Import-substitution strategiesImport-substitution strategies

With regards to deterioration in exchange terms: The With regards to deterioration in exchange terms: The Singer-Prebisch thesis:Singer-Prebisch thesis:

Vision in terms of Centre / Periphery with power Vision in terms of Centre / Periphery with power asymmetryasymmetry

The Centre preserves productivity gains and, in The Centre preserves productivity gains and, in addition, it appropriates those from the Periphery due addition, it appropriates those from the Periphery due to:to:

1.1. The unfavourable insertion of Latin America in The unfavourable insertion of Latin America in international labour division. international labour division.

2.2. The interference of organisational factors – powerful The interference of organisational factors – powerful unions and supply oligopolistic structure – in market unions and supply oligopolistic structure – in market systems in industrialised countriessystems in industrialised countries

Solution = forced industrialisation so as to change the Solution = forced industrialisation so as to change the production structure in peripheral countries by making production structure in peripheral countries by making it less dependent on Centre demandit less dependent on Centre demand

Refusing to base growth on raw material exports which Refusing to base growth on raw material exports which

in the end causes lower accumulation capacity for in the end causes lower accumulation capacity for periphery countriesperiphery countries

Advantages of an internal dynamic to the Advantages of an internal dynamic to the industrialisation process and less dependence on industrialisation process and less dependence on growth rate vis-à-vis the exteriorgrowth rate vis-à-vis the exterior

The ‘industry in its infancy’ argument to justify The ‘industry in its infancy’ argument to justify resorting to protection for domestic industry against resorting to protection for domestic industry against foreign competitionforeign competition

Key role of the state as conductorKey role of the state as conductor

Dependence theoriesDependence theories

The dependence school is based on rejecting the The dependence school is based on rejecting the universalist vision of the school of modernisation universalist vision of the school of modernisation

Under-development as the result of an historic exploitation Under-development as the result of an historic exploitation process of the South by the Northprocess of the South by the North

The surplus generated is either largely expropriated by the The surplus generated is either largely expropriated by the

Centre or wasted on luxury consumerism by traditional Centre or wasted on luxury consumerism by traditional elites. Therefore, resources required for investment for elites. Therefore, resources required for investment for economic development are highly limited economic development are highly limited

In this context, the perspectives for economic growth in In this context, the perspectives for economic growth in dependent countries are highly limited dependent countries are highly limited

Three central hypotheses:Three central hypotheses:

– Latin America and other periphery regions have been Latin America and other periphery regions have been incorporated into the global capitalist economy from the incorporated into the global capitalist economy from the initial periods of colonisationinitial periods of colonisation

– The integration of these peripheral capitalist economies into The integration of these peripheral capitalist economies into the global economy is done via a metropolis-satellite the global economy is done via a metropolis-satellite relationship within the framework of which profits made in relationship within the framework of which profits made in the periphery are hijacked by the Centrethe periphery are hijacked by the Centre

‘‘Dependence is a situation where economies in a Dependence is a situation where economies in a group of countries are conditioned by the development group of countries are conditioned by the development and expansion of other groups of countries.’and expansion of other groups of countries.’

Contributions of the dependency trendContributions of the dependency trend

1.1. The biggest obstacle to development is not internal factors The biggest obstacle to development is not internal factors but rather the international division of labour inherited from but rather the international division of labour inherited from colonialism and imperialism, i.e., external factorscolonialism and imperialism, i.e., external factors

2.2. Development and sub-development could be seen as two Development and sub-development could be seen as two aspects of the same global processaspects of the same global process

3.3. These links must be broken; dissociating from the global These links must be broken; dissociating from the global market, breaking the mechanisms of surplus expropriation market, breaking the mechanisms of surplus expropriation and promoting a national strategy based on internal and promoting a national strategy based on internal resourcesresources

Problem: the static nature which meant transformations in Problem: the static nature which meant transformations in action could not be thought of for the periphery in the 1960s action could not be thought of for the periphery in the 1960s and 70sand 70s

The new international economic orderThe new international economic order

A change in the North-South power A change in the North-South power relationship in the 1970s after the first oil crisis relationship in the 1970s after the first oil crisis and economic restructuring in the North:and economic restructuring in the North:

Pressure for a fairer international trade systemPressure for a fairer international trade system Thesis of mutual interest and inter-Thesis of mutual interest and inter-

dependencedependence Internationalisation and industrialisation of the Internationalisation and industrialisation of the

SouthSouth

Restructuring the production sphere in Restructuring the production sphere in the North and internationalisationthe North and internationalisation

End of the 1960s: Signs of End of the 1960s: Signs of tension on social commitment in tension on social commitment in the North. the North. Strikes and conflicts in the Strikes and conflicts in the production sphere multiplied in production sphere multiplied in response to the alienating response to the alienating nature of work organisation. nature of work organisation. Worker frustrations turned into Worker frustrations turned into salary demands.salary demands.

Conflicts on the distribution of Conflicts on the distribution of income in a period marked by income in a period marked by slowing productivity gains due to slowing productivity gains due to the exhaustion of the Fordism the exhaustion of the Fordism work organisation model work organisation model

Profitability crisis and reduced Profitability crisis and reduced higher accumulation levelshigher accumulation levels

Worsening of the situation after Worsening of the situation after the 1the 1stst oil price shock in 1973 oil price shock in 1973

Breakdown of capital-work Breakdown of capital-work commitment commitment

Business strategyBusiness strategy

Restructuring of production organisation Restructuring of production organisation responding to a triple challenge:responding to a triple challenge:

International competition International competition The productivity crisisThe productivity crisisIncreasing resistance with regards to work Increasing resistance with regards to work organisationorganisation

=> The institutionalised commitments of Fordism => The institutionalised commitments of Fordism appeared in this new crisis context as a source appeared in this new crisis context as a source of problems due to the rigidity they involved. of problems due to the rigidity they involved.

The two main strategies adopted by businesses The two main strategies adopted by businesses to face up to the profitability crisis and harder to face up to the profitability crisis and harder competition were:competition were:

1.1. The transition to a model based on maximum The transition to a model based on maximum flexibility research with regards to work, flexibility research with regards to work, production and consumer models => production and consumer models => development of subcontracting and atypical work development of subcontracting and atypical work contracts contracts

2.2. The geographical restructuring of production The geographical restructuring of production whose aim was to profit from the cost and whose aim was to profit from the cost and legislation differences on a global scalelegislation differences on a global scale

Economic globalisation, competitiveness Economic globalisation, competitiveness and flexibilityand flexibility

The highly competitive international setting due to the The highly competitive international setting due to the movement of capital and mass internationalisation of movement of capital and mass internationalisation of markets contributed to making efficiency and markets contributed to making efficiency and competitiveness central business aims competitiveness central business aims Implementing territorial competition and for the Implementing territorial competition and for the populations living therepopulations living thereDue to a lack of political care, the problem posed by the Due to a lack of political care, the problem posed by the need for salary flexibility experienced negative need for salary flexibility experienced negative points=>Defensive flexibilitypoints=>Defensive flexibilityThe new accumulation system no longer took into The new accumulation system no longer took into account social progress and the preservation of a social account social progress and the preservation of a social link as part of its own logiclink as part of its own logic

The years of SAPThe years of SAPIn the early 1980s: debt crisis in the South and neo-liberal In the early 1980s: debt crisis in the South and neo-liberal counter-revolution in the Northcounter-revolution in the North

Social adjustment programmes dominated by:Social adjustment programmes dominated by:1.1. Macro-economic balancing aimsMacro-economic balancing aims2.2. Micro-economic transformationsMicro-economic transformations3.3. State withdrawal from the economic sphere State withdrawal from the economic sphere

Aim: start sustainable growthAim: start sustainable growth

Emphasis placed on internal factors: Putting an end to the Emphasis placed on internal factors: Putting an end to the distortions caused by States’ voluntarist development distortions caused by States’ voluntarist development policiespolicies

Liberalisation and integration processLiberalisation and integration process

Globalisation and the logic of performance centresGlobalisation and the logic of performance centres

Deep reforms in OECD countries during the 1980s so Deep reforms in OECD countries during the 1980s so as to kick-start growth driven by the private sector:as to kick-start growth driven by the private sector:

1.1. Restrictive monetary and budgetary policy to beat Restrictive monetary and budgetary policy to beat inflationinflation

2.2. Deregulation of the labour market and financial Deregulation of the labour market and financial markets, privatisation, support for the private sectormarkets, privatisation, support for the private sector

3.3. Redefining the role of the State which becomes a Redefining the role of the State which becomes a guarantor of competitiveness in the national areaguarantor of competitiveness in the national area

4.4. Speeding up integration into the global economySpeeding up integration into the global economy

=> Emergence/ maintenance of growth centres=> Emergence/ maintenance of growth centres

Competitiveness, flexibility and Competitiveness, flexibility and employabilityemployability

Virtuous circle:Virtuous circle:Adaptation to global economy norms: Adaptation to global economy norms:

competitiveness-flexibility-stability-employabilitycompetitiveness-flexibility-stability-employability

Integration into the globalised economyIntegration into the globalised economy

GrowthGrowth

Employment and reducing povertyEmployment and reducing poverty

The dominant model of virtuous The dominant model of virtuous circlecircle

Liberalisation:•Price

•Commerce •Financial Sector

•Job Market

Integrating into the globalised economy

Growth

Reducing poverty

Strengthening the private sector

Creating jobs

Redefining the role of the State

Attractiveness for IDE

The logic of accumulation centresThe logic of accumulation centres

Priority: Emergence and maintenance of Priority: Emergence and maintenance of competitive accumulation centres competitive accumulation centres

Constraints of the globalised economy are Constraints of the globalised economy are imposed onto national structuresimposed onto national structures

Principles of harmonisation with regards to Principles of harmonisation with regards to globalisation constraintsglobalisation constraints

From then there are two levels of From then there are two levels of responsibility within the framework of the responsibility within the framework of the globalised economy: globalised economy:

1.1. One regarding the responsibility of each One regarding the responsibility of each country to adapt to globalisation normscountry to adapt to globalisation norms

2.2. One on the new world order for guaranteeing One on the new world order for guaranteeing good accumulation conditions on a global good accumulation conditions on a global level through the right to intervene or sanction level through the right to intervene or sanction aimed at bringing back into line those aimed at bringing back into line those disturbing the global order on which the disturbing the global order on which the dynamic of globalisation restsdynamic of globalisation rests

=> Vision of global and national governance => Vision of global and national governance proposed in the dominant doctrineproposed in the dominant doctrine

The consequences to economic The consequences to economic globalisationglobalisation

Increased unemployment and notably long-term Increased unemployment and notably long-term unemploymentunemployment

+ More insecure employment+ More insecure employment+ More poor workers+ More poor workers

Major consequences on living conditions for people in Major consequences on living conditions for people in the North and Souththe North and South

Loss of security and new povertyLoss of security and new poverty Crumbling of social cohesion and increased social Crumbling of social cohesion and increased social

exclusionexclusion

Dominant discourse loses Dominant discourse loses legitimacy in the 1990slegitimacy in the 1990s

Growing gap between the reality of Growing gap between the reality of regressive social phenomena and regressive social phenomena and supporting elements of the discoursesupporting elements of the discourse

Increased protest with regards to the Increased protest with regards to the integration project and the supremacy of integration project and the supremacy of the growth objectivethe growth objective

Increase of a wide indignation movement on a global scale amongst a growing section of the population

Stronger voiced condemnation – from Seattle to Genoa – of the unfairness of globalisation

Denunciation of globalisation that excludes the poorest from the benefits of growth that it creates or, in any case, proportionally less benefits (according to the radical nature of the discourse)

Greater poverty and inequalities in the world lead to the erosion of the ‘globalising utopia’

Strengthening of a pessimistic vision on globalisation and growth

The dominant doctrine in the face of The dominant doctrine in the face of proofproof

Development of a conflictive vision of the Development of a conflictive vision of the world between the winners and losers of world between the winners and losers of adaptation policies to globalisation normsadaptation policies to globalisation norms

Increased refusal to cooperate with proposed Increased refusal to cooperate with proposed reformsreforms

Weakening of accumulation conditionsWeakening of accumulation conditions The global order put into question The global order put into question Gloomier sustainable growth perspectivesGloomier sustainable growth perspectives

Growth is good for the poor and Growth is good for the poor and liberalisation is good for growthliberalisation is good for growth

At the end of the 1990s an intense debate At the end of the 1990s an intense debate opened up to determine how the poor opened up to determine how the poor benefitted from growth within the globalised benefitted from growth within the globalised economy economy

An intellectual counter-offensive aiming to An intellectual counter-offensive aiming to reaffirm the central place of growth through reaffirm the central place of growth through integration in the globalised economy in integration in the globalised economy in development strategy: Article by Dollar and development strategy: Article by Dollar and KraayKraay

Implications in terms of development policiesImplications in terms of development policies

Strategy based on the double relationship of:Strategy based on the double relationship of:

Growth is good for the poorGrowth is good for the poorLiberalisation/integration is good for growthLiberalisation/integration is good for growth

By transitivity, liberalisation is good for the poorBy transitivity, liberalisation is good for the poor

Whoever wants to deal with poverty must promote economic Whoever wants to deal with poverty must promote economic growthgrowth

Shift in development policies towards poverty reduction Shift in development policies towards poverty reduction strategy papers (PRSP) based around promoting growthstrategy papers (PRSP) based around promoting growth

The elasticity of poverty with The elasticity of poverty with regards to growthregards to growth

In general: strong link between income growth amongst the In general: strong link between income growth amongst the poor and GDP growth per capita:poor and GDP growth per capita:

Around a one-to-one relationship for the first quintile (David Around a one-to-one relationship for the first quintile (David Dollar and Kraay, Roemer and Gugerty) Dollar and Kraay, Roemer and Gugerty)

Income elasticity amongst the poor with Income elasticity amongst the poor with regards to GDP evolution per capitaregards to GDP evolution per capita

When the latter progresses, for example, at 10% then income When the latter progresses, for example, at 10% then income amongst the poor also increases by 10%amongst the poor also increases by 10%

Stakes in terms of developmentStakes in terms of developmentMain stake: the place of growth in development policies:Main stake: the place of growth in development policies:

– Central if the benefits of growth are distributed fairlyCentral if the benefits of growth are distributed fairly

– Re-inserted into an integrated policy if the benefits of Re-inserted into an integrated policy if the benefits of growth are unfairly distributedgrowth are unfairly distributed

Recreating a space for employmentRecreating a space for employment Growth as an element amongst other in development Growth as an element amongst other in development

strategy in the same way as:strategy in the same way as:1.1. Creating productive jobs Creating productive jobs 2.2. Fairer income distribution Fairer income distribution 3.3. Social protection Social protection 4.4. Meeting essential tangible and intangible needsMeeting essential tangible and intangible needs

Observed disconnection in the Observed disconnection in the 2000s2000s

Sustained growth in many African Sustained growth in many African countries produced disappointing results countries produced disappointing results in terms of:in terms of:

1.1. Reducing povertyReducing poverty

2.2. Creating jobsCreating jobs

3.3. Making headway in decent employmentMaking headway in decent employment

4.4. Reducing inequalitiesReducing inequalities

The return of sustained growth The return of sustained growth in sub-Saharan Africain sub-Saharan Africa

0,0

10,0

20,0

30,0

40,0

50,0

60,0

70,0

80,0

Centraland

SoutheastEurope

(outsideEU) and

CIS

East Asia SoutheastAsia and

the Pacific

South Asia LatinAmericaand the

Caribbean

Middle East NorthAfrica

Sub-Saharan

Africa

%

1997 2007

Source: ILO, Econometric models of trends, 2008

Decent employment and MDG: poor workers (1.25 USD per day) as part of

total employment

Vulnerable employment 2007Vulnerable employment 2007

0

20

40

60

80

100

WORLD DevelopedEconomies& European

Union

Central &South

EasternEurope

(non-EU) &CIS

East Asia South EastAsia & the

Pacific

South Asia LatinAmerica &

theCaribbean

Middle East sub-Saharan

Africa

NorthAfrica

Share of vulnerable employment

in total employment (%)

Male Female

(Vulnerable employment: own-account workers plus (Vulnerable employment: own-account workers plus contributing family workers)contributing family workers)

Growth performance in 80 countries, 1984-2001, Growth performance in 80 countries, 1984-2001, International Poverty Centre, UNDPInternational Poverty Centre, UNDP

Positive Positive GrowthGrowth

Negative Negative GrowthGrowth

TotalTotal

Pro-PoorPro-Poor 5555(23%)(23%)

5353(22%)(22%)

108108(45%)(45%)

Anti-PoorAnti-Poor 7676(32%)(32%)

5353(22%)(22%)

129129(55%)(55%)

TotalTotal 131131(55%)(55%)

106106(45%)(45%)

237237(100%)(100%)

Pro-poor growth when the income of poor households increases Pro-poor growth when the income of poor households increases quicker than that of non-poor householdsquicker than that of non-poor households

Nature of growthNature of growth

(%)(%) Pro-poorPro-poor Anti-poorAnti-poor TotalTotal

Countries with Countries with low incomelow income

2121 3333 5454

Sub-Saharan Sub-Saharan AfricaAfrica

2020 3434 5454

Different pathways: Different pathways: the growth model issuethe growth model issue

3 determining factors regarding side-effects of growth 3 determining factors regarding side-effects of growth benefits for the poor:benefits for the poor:

1.1. Initial income distribution – more or less unequalInitial income distribution – more or less unequal

2.2. Growth promotion policies – more or less redistributiveGrowth promotion policies – more or less redistributive

3.3. The employment promotion policy and, specifically, decent The employment promotion policy and, specifically, decent employment – more or less central in global strategyemployment – more or less central in global strategy

4.4. Growth based on more or less work-intensive sectorsGrowth based on more or less work-intensive sectors

The missing links between growth and The missing links between growth and poverty reductionpoverty reduction

Growth Reduced poverty

Income distribution

Promoting decentemployment

Demographic growth

Pro-employmentsectoral policy

Increased productivity

Public investments

Access to resources / vulnerable

groups

Two different development strategies to Two different development strategies to respond to the employment challengerespond to the employment challenge

Dominant approachDominant approach: Main growth objective provided by:: Main growth objective provided by:1.1. Market forces Market forces 2.2. Macroeconomic stabilityMacroeconomic stability3.3. Integration into the globalised economyIntegration into the globalised economy

Alternative approachAlternative approach: Central nature of employment : Central nature of employment based on:based on:

1.1. A macroeconomic framework favouring pro-poor and pro-A macroeconomic framework favouring pro-poor and pro-jobs growthjobs growth

2.2. Public investmentsPublic investments3.3. Industrial policy favouring key sectors in terms of job and Industrial policy favouring key sectors in terms of job and

income generationincome generation4.4. A mass strengthening programme for education and A mass strengthening programme for education and

healthhealth

Placing employment at the heart of Placing employment at the heart of development strategydevelopment strategy

Employment is the essential link between growth and Employment is the essential link between growth and reducing povertyreducing poverty

Growth in itself is not enough as seen in the different Growth in itself is not enough as seen in the different pathways pathways

Nonetheless, growth is an essential element for all Nonetheless, growth is an essential element for all development strategydevelopment strategy

Main issue = Growth modelMain issue = Growth model

Social project based on sharing the benefits of growth and Social project based on sharing the benefits of growth and promoting employmentpromoting employment

Three factors affecting employment and Three factors affecting employment and income amongst poor workersincome amongst poor workers

1.1. The growth factorThe growth factor: Growth rate: Growth rate

2.2. The elasticity factorThe elasticity factor: Quantitative and : Quantitative and qualitative impact of growth on employmentqualitative impact of growth on employment

3.3. The inclusive factorThe inclusive factor: The level at which the : The level at which the most vulnerable groups benefit from the most vulnerable groups benefit from the fruits of growthfruits of growth

Necessary conditions to make growth Necessary conditions to make growth more job incentivemore job incentive

Rapid growth rate based on:Rapid growth rate based on:

1.1. Growth of job intensive sectorsGrowth of job intensive sectors

2.2. Growth of sectors with a major driving effect on the Growth of sectors with a major driving effect on the domestic economydomestic economy

3.3. Growth in employment productivityGrowth in employment productivity

Education and training system improvement Education and training system improvement programme so as to increase job opportunities for the programme so as to increase job opportunities for the most vulnerable groupsmost vulnerable groups

Structural policies setting out growth Structural policies setting out growth and employment objectives:and employment objectives:

1.1. Fiscal and financial policy: incentive / Fiscal and financial policy: incentive / labour intensive sectorslabour intensive sectors

2.2. Policy for increasing capacities of the Policy for increasing capacities of the poorest (microfinance, training, access poorest (microfinance, training, access to basic resources and services, etc.)to basic resources and services, etc.)

Employment in South Africa in 2014 according to 3 Employment in South Africa in 2014 according to 3 scenariosscenarios

3 scenarios3 scenarios Total employment Total employment in 2014in 2014

(millions)(millions)

New jobs created New jobs created in 2014 (millions)in 2014 (millions)

Continuation of present Continuation of present trendstrends

9.89.8 0.90.9

Accelerated growth Accelerated growth without subsidies / without subsidies / Credits / key sectorsCredits / key sectors

10.810.8 1.91.9

Accelerated growth Accelerated growth with subsidies / with subsidies / Credits / key sectorsCredits / key sectors

12.412.4 3.53.5

Employment and reducing povertyEmployment and reducing poverty

Improving employment opportunities: towards shared Improving employment opportunities: towards shared growth (‘pro-poor’)growth (‘pro-poor’)

Three sections:Three sections:– Increase labour demand: to reduce underemployment Increase labour demand: to reduce underemployment

and declared unemploymentand declared unemployment

– Increased salaries and work productivityIncreased salaries and work productivity

– Improved workforce economic mobility: can a poor Improved workforce economic mobility: can a poor person benefit from new opportunities?person benefit from new opportunities?

Job market specificities in sub-Job market specificities in sub-Saharan AfricaSaharan Africa

High employment rate linked to:High employment rate linked to:1.1. Very high underemployment levelVery high underemployment level2.2. Employment centred on low-productivity jobsEmployment centred on low-productivity jobs3.3. Poor workersPoor workers

Employment as main income sourceEmployment as main income sourceJob market structure dominated by the agricultural Job market structure dominated by the agricultural sectorsectorWeak salaried employmentWeak salaried employmentNon-agricultural work structure dominated by the Non-agricultural work structure dominated by the informal sectorinformal sectorLarge number of under 25s in the population Large number of under 25s in the population

Implications of the job market Implications of the job market specificitiesspecificities

Even with high growth rates, formal salaried employment Even with high growth rates, formal salaried employment growth could never absorb the new entrants on the job marketgrowth could never absorb the new entrants on the job market

Priorities = increase work productivity in subsistence Priorities = increase work productivity in subsistence agriculture and micro and small enterprises in the informal agriculture and micro and small enterprises in the informal sector sector

But all too often = Weak priority levels in national But all too often = Weak priority levels in national development strategydevelopment strategy

The high priority level given to policies dealing with job market The high priority level given to policies dealing with job market rigidities does not match the constraints seen by the vast rigidities does not match the constraints seen by the vast majority of economic operatorsmajority of economic operators

MadagascarMadagascar

Burkina FasoBurkina Faso

Main factors determining income Main factors determining income levels of the poorlevels of the poor

Income amongst the poor will improve based on an Income amongst the poor will improve based on an increase in:increase in:

1.1. Salaried employment, mainly non-agriculturalSalaried employment, mainly non-agricultural

2.2. Real salaryReal salary

3.3. Income coming from self-employment linked to:Income coming from self-employment linked to:

i) Increased working timei) Increased working time

ii) Increased productivityii) Increased productivity

iii) Increased output pricesiii) Increased output prices

iv) Lower input pricesiv) Lower input prices

v) Easier access to non usurious creditv) Easier access to non usurious credit

0

10.000

20.000

30.000

40.000

50.000

60.000

70.000

WORLD DevelopedEconomies& European

Union

Central &South

EasternEurope

(non-EU) &CIS

East Asia South EastAsia & the

Pacific

South Asia LatinAmerica &

theCaribbean

Middle East NorthAfrica

SubSaharanAfrica

Output per worker (constant US$2000 at PPP)

1997 2007

Indicator 2: Change of Labour Indicator 2: Change of Labour ProductivityProductivity

Low productivity

Low income

High level of insecurity

Low expenditure level on education and health

Low investmentlevel

Low access to resources

Insufficient or badly targeted

public investments

Ways to improve productivity:Ways to improve productivity:

1.1. Private investment allowing new technology/know-how to be Private investment allowing new technology/know-how to be introducedintroduced

2.2. Increased public investment (electrification, irrigation, applied Increased public investment (electrification, irrigation, applied research, education, health, etc.)research, education, health, etc.)

3.3. Development of the non-agriculture sector and, specifically, Development of the non-agriculture sector and, specifically, manufacturing unitsmanufacturing units

4.4. Active industrial policy (tax incentives, targeting priority Active industrial policy (tax incentives, targeting priority sectors and priority access to credit, etc.)sectors and priority access to credit, etc.)

5.5. Financial policy favouring access to resources for micro and Financial policy favouring access to resources for micro and small enterprises in the agricultural and non-agricultural small enterprises in the agricultural and non-agricultural sectorsector

Distribution of productivity gains and Distribution of productivity gains and multiplying effectsmultiplying effects

1.1. Lower pricesLower prices2.2. Increased real salariesIncreased real salaries3.3. Increased income/household consumptionIncreased income/household consumption4.4. Increased profitsIncreased profits

A very different impact following the chosen growth modelA very different impact following the chosen growth model

More or less large multiplying effect on income and More or less large multiplying effect on income and employment from productivity gains according to sectors employment from productivity gains according to sectors involvedinvolved

Better health

Increasedhousehold income

Higher productivity

level

Development of salaried

employment in the non-agriculture

sector

Higher traininglevel

Increased decent

employment

Development of Microand small

enterprises

Public investment

Access to resources

( microcredit, Land, etc)

Improved legal and institutional

framework

Strategy ofintensive growth

in work

Support policy for sectors with

a high multiplying effect on jobs and

income

Investment

Priority sector policies Priority sector policies

Growth due to market forces and MDG in sub-Growth due to market forces and MDG in sub-Saharan AfricaSaharan Africa

Concentration of resources / Use of natural resourcesConcentration of resources / Use of natural resources

Technologically limited investment choicesTechnologically limited investment choices

Intensive investment in capital and weak integration Intensive investment in capital and weak integration into local / domestic economy into local / domestic economy

Example of the mining sector in Madagascar: ChéritExample of the mining sector in Madagascar: Chérit

Priority sectors and employmentPriority sectors and employment

Main aspect of identifying sectors with major Main aspect of identifying sectors with major multiplying effects on employment and income, multiplying effects on employment and income, specifically benefitting vulnerable groupsspecifically benefitting vulnerable groups

Formulating support policies for these sectorsFormulating support policies for these sectors Necessary condition for pro-poor and pro-Necessary condition for pro-poor and pro-

employment growthemployment growth Need to develop analysis methodology toolsNeed to develop analysis methodology tools

Restoring economic policy toolsRestoring economic policy tools Monetary and fiscal policy determines central Monetary and fiscal policy determines central economic variables for attaining the aim of economic variables for attaining the aim of reducing poverty:reducing poverty:

1.1. Real interest ratesReal interest rates2.2. Price levelsPrice levels3.3. Exchange rateExchange rate4.4. The level and nature of domestic investmentsThe level and nature of domestic investments

=> Required convergence effort between growth => Required convergence effort between growth objectives, employment and reducing povertyobjectives, employment and reducing poverty

By way of a conclusionBy way of a conclusionNeed to work on the emergence of a specific cooperative Need to work on the emergence of a specific cooperative global commitment for each country between:global commitment for each country between:

1.1. Economic growth Economic growth 2.2. Macroeconomic stability Macroeconomic stability 3.3. Employment Employment 4.4. Environmental protectionEnvironmental protection5.5. Reducing povertyReducing poverty

Sub-optimal solution for each criterion but optimal in terms of Sub-optimal solution for each criterion but optimal in terms of sustainable developmentsustainable development

Choice of society based on solid economic arguments and Choice of society based on solid economic arguments and social dialoguesocial dialogue

Autonomy in choosing the nature and speed of integration into Autonomy in choosing the nature and speed of integration into the globalised economythe globalised economy

Subordination to a desirable and sustainable social projectSubordination to a desirable and sustainable social project