EDITOR’S NOTE: Job creation has become a major focus for the international development community lately, and there’s a lot of interest in an “employment goal” as part of the post-2015 agenda, writes Charles Kenny, senior fellow at the Center for Global Development. But crafting such a goal is easier said than done.
There’s a lot of interest in an “employment goal” as part of the post-2015 agenda. That makes sense. Ask people what they’re most concerned about worldwide and it is jobs and the economy. Ask politicians what they’re most concerned about and employment will come high up the list.
So what measure would we use? We can’t use “reduced unemployment” as the goal, because it doesn’t really capture the full scale of the problem. The great majority of working-age people are “employed” worldwide, because if they weren’t doing something to earn money or grow food, they’d be reduced to begging to survive – in most countries, there just isn’t much in the way of a safety net to support them.
What we want to increase, then, is the percentage of the working age population in a “good” job. Of course there isn’t really a perfect measure of that, partially because what counts as good is considerably subjective. But if you’ve read ”Poor Economics,” you’ll know at least that what most people seem to want is paid employment. Subsistence farming and micro-entrepreneurial activity are both decidedly second-best options. And, of course, increasing people in paid employment is also a good way to reduce unemployment where that really is the major concern. So, as a first approximation, maybe we could use increasing paid employment as a percentage of the total working-age population as our goal.
Next problem: We don’t have great data on that. But the ILO does have information for a few countries. And it will come as no surprise that the data suggests a pretty close link between paid employment rates and GDP per capita (see figure). Gallup has poll data pointing the same direction: The proportion of people over the age of 15 who report they are in full time paid employment varies between 12 percent in sub-Saharan Africa and 41 percent in northern America. That raises the fear that an employment goal would just be an economic growth goal. “Nothing wrong with that,” you might say – more on that in a minute.
But first, this is just cross-country data – it might miss important trends in employment at a given income level. After all, a lot of other development indicators are very closely tied to income per capita at any one time, but we’ve still seen massive progress over time at the same income level. Take health indicators –richer is better, to be sure. But at an income of $1,000, infant mortality would have been around 199 per thousand births in 1900, about 140 per 1,000 births in 1940 and just 73 in 2000, for example.
Sadly, we don’t appear to have enough historical data to see if there’s been similar progress in terms of paid employment as a percentage of the working age population across the world over the last 50 years. But we can speculate. And I’d guess that there has been a change over time in the relationship between paid employment and GDP per capita, but not nearly as dramatic as that in health.
On the side of more paid employment at a given income level: Even very poor countries have pretty large governments nowadays. Final consumption expenditure by Ethiopia’s government accounts for 8 percent of GDP, for example, and a lot of that will take the form of salary payments. And, in fact, about 40 percent of all paid employees in Ethiopia work for the government. Beyond that, even poor countries are increasingly urban – and that’s reducing the percentage of population engaged in agriculture.
But on the side of stasis, the poorest countries still see the majority of their working-age population employed in small-scale agriculture, and the majority of non-agricultural employment informal. There just still aren’t very many people in paid employment even with the bigger governments and larger urban areas. So for all there is an active jobs agenda to be pursued by countries (see the 2013 World Bank WDR), it appears that if the agenda is a success, it will almost inevitably be accompanied by economic growth.
And that suggests we do know something about likely rates of progress in the jobs agenda. Looking at the figure, if you want to go from 20 percent paid employment as a percentage of the working-age population to 40 percent, the best thing to do would be to follow policies associated with increasing your GDP per capita from $400 to $15,600. That’s a little bit hard to imagine in an MDG-friendly twenty years, given a country at $400 today that grew at 10 percent a year would still only have an income of $2,691 after two decades. Still, you could imagine a reasonable, maybe, jobs goal along the lines of “increase paid employment as a percentage of the workforce by 5 percent worldwide by 2030” – which would probably sound better as “add 500 million new paying jobs worldwide by 2030.”*
One final worry to try to forget: that Goal might be hard to translate into policy action. We know how to rapidly reduce child mortality, for example – we’ve had immense success using vaccines, bednets, oral rehydration and other very simple technologies. We know how to get kids in school (although we have more trouble with making sure they learn). But the policy package that guarantees growth continues to elude us.
Of course, exactly the same complaint applies to poverty goals. And that hasn’t stopped everyone (including me) getting excited by getting to zero absolute poverty by 2030. So here’s to a half-billion-jobs goal, I guess.
*The 500 million figure is a back-of a-ripped-envelope-using-a-broken-crayon calculation assuming we go from a working-age population of somewhere around 4.5 billion today to 5.4 billion in 2030 and increase the paid proportion of the working age population from 27 percent to 32 percent of the total – the first numbers estimated from here, the second from Gallup.
Edited for style and republished with permission from the Center for Global Development. View the original article.