The International Labor Organization has one clear recommendation for developing countries that seek higher economic growth: invest in quality jobs – measured by the share of working poor, proportion of vulnerable workers and labor productivity. Countries that invested the most in quality jobs from the early 2000s grew nearly one percentage point faster every year since 2007 than other developing and emerging economies, says ILO’s annual World of Work Report released this week.
“Development doesn’t happen through such things as exports, open trade and foreign direct investment on their own,” said Guy Ryder, director-general of the ILO. “Social protection, respect for core labour standards and policies that promote formal employment are also crucial for creating quality jobs that raise living standards, increase domestic consumption and drive overall growth. Decent work opportunities for women and men help trigger development and reduce poverty.”
In countries that have made the greatest investment in quality jobs from the early 2000s, living standards (as measured by the growth in average annual per capita income) improved more than in developing and emerging economies that paid less attention to quality jobs.
Among those countries where working poverty – including workers earning less than $2 a day – declined most steeply from the early 2000s, overall per capita income grew by 3.5% on average, over the 2007–12 period. For those countries that made least progress in cutting working poverty since the early 2000s the figure is only 2.4%.
Likewise, countries that were particularly successful in reducing the incidence of vulnerable employment during the early 2000s enjoyed significant economic growth after 2007. In these countries, per capita growth was almost 3% per year between 2007 and 2012, practically 1 percentage point higher than in countries making least progress in reducing the incidence of vulnerable employment – which includes own-account employment as well as unpaid family work.
The report includes three case studies that illustrate this reality: Senegal, Vietnam and Peru.
Senegal showed a steady increase in the share of wage and salaried workers, from an estimated 12% in 1991 to 26% in 2013. The share of working poor decreased by 34 percentage points over the same period, while productivity (output per worker) increased by an average of 0.5% per annum. Agriculture accounted for 54% of total employment in 1991, declining to 35% in 2013.
Viet Nam also had a rapid and steady increase in the share of wage and salaried workers, rising 22 percentage points, accompanied by a dramatic decrease in the working poor, a high degree of structural transformation and a significant increase in productivity. In 1991, 76% of total employment was in the agriculture sector, compared to 46% in 2013. Between 1996 and 2004, the period for which data are available, the employment share in manufacturing increased from 8 per cent to 12% (source: ILO, 2013). The share of working poor dropped impressively, to one-third of the 1991 level by 2013, and productivity grew at an average of 5% per annum.
In Peru, the share of wage and salaried workers increased by an estimated 15 percentage points, from 34% in 1991 to 49% in 2013. In the same period, productivity increased significantly, growing by an average of 1.8% per annum, and the share of working poor decreased by 23 percentage points, estimated at 11% of total employment in 2013. Structural transformation has also taken place, increasingly in the 2000s, with the share of employment in agriculture at 26% of total employment in 2013 compared to 35% in 1991.