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Jobs, growth and the private sector: beware the false syllogism

Brendan Martin, 6 November 2012

A regressive false syllogism crept into the impressive new premises of the Overseas Development Institute during the London launch of the World Bank’s 2013 World Development Report (WDR) yesterday, but was quickly shown the door. At least, I think that’s what happened, but on this occasion I’d be happier to be wrong.

The WDR is the World Bank’s annual flagship publication. Each year it has a particular theme, and the latest is captured with refreshing economy in the report's title, Jobs. World Bank economists Kathleen Beegle and Dena Ringold introduced the report at the ODI, followed by comments from Stefan Dercon, chief economist at Britain’s Department for International Development (DFID), and ODI research fellow Pedro Martins.

It was in Stefan Dercon’s contribution that I thought I detected the false syllogism, and it wouldn’t matter much except that its effect would have been to turn the core message of the WDR on its head -- and take policy backwards.

The WDR begins with this sentence: “Jobs are the cornerstone of economic and social development.” It goes on to argue that what it defines as “good jobs” -- those that benefit wider society as well as their holder -- contribute to development not only by enabling livelihoods but also by improving productivity and strengthening social cohesion.

The report also notes -- among the huge volume and scope of information it offers -- that 90 per cent of jobs are created by the private sector, a point that prompted Stefan Dercon to make the rather reductive comment: “Ultimately it is about private sector growth”.

Well, yes -- but then again, no. By placing jobs front and centre, the WDR actually repudiates the idea that if development policy and practice focuses on supporting private sector development good jobs will follow. Rather, it argues, the creation of good jobs must be the objective of development policy and practice, and that must shape public policy about the nature of growth and of private sector development.

The difference between these propositions is not only important but fundamental. It might seem logical, if we agree that jobs are the objective and that the private sector creates the vast majority of them, to conclude that supporting private sector investment is a sufficient public policy intervention. But as World Bank president Jim Yong Kim states in his foreword to the WDR: “The problem for most poor people in (developing) countries is not the lack of a job or too few hours of work; many hold more than one job and work long hours. Yet, too often, they are not earning enough to secure a better future for themselves and their children, and at times they are working in unsafe conditions and without the protection of their basic rights.”

That is not to say that the quality of jobs matters more than their quantity. As the WDR points out, we will need 600 million new jobs over the next 15 years just to maintain today’s employment rate, let alone tackle today’s growing unemployment. Among the more shocking statistics offered by the report is that 621 million youth are neither working nor studying.

So we certainly need more jobs, and combining quality and quantity is far from straightforward, not least in view of the fact that -- another killer number from the WDR -- half the world’s working people are in the informal economy.

But if jobs are indeed the “cornerstone of economic and social development”, policy and practice must surely be aimed at building economies and societies in which everyone has a good job with ‘decent work’ standards.

Getting there will be a struggle, and measuring progress won’t be easy either. The employment data are so poor in many countries that practical as well as ideological considerations will keep nudging development policy and practice back towards hoping that more easily measurable growth and private sector investment brings good jobs, rather than focusing deliberately on that objective.

But that pressure must be resisted, because, while it’s true there is much we do not know about how to shape growth and investment decisions towards improving livelihoods, productivity and social cohesion, one thing we do know is that growth and private sector investment do not necessarily create more jobs, let alone good ones.

The ODI’s Pedro Martins pointed a way out of the chicken-or-egg trap when he argued yesterday that “inclusiveness should be the new development benchmark”. That was a rather different message from Stefan Dercon’s.

While I am glad that the latter denied my suggestion that his response to the WDR amounted to proposing ‘business as usual’, I left the ODI’s fine new home even more convinced than when I arrived there that, as discussion of the post-2015 development agenda gathers pace, the good jobs challenge will be a key battle line.

  • To download Brendan Martin's commentary on the 2013 WDR please go here.
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