Title: The Role of Employment for Growth and Poverty Reduction
1The Role of Employment for Growth and Poverty
Reduction
- PREM learning week 2007
- Catalina Gutierrez
- Pieter Serneels
2Employment, poverty and growth
- Growing consensus growth translates into poverty
reduction through employment - Poor people live from their earnings from labor
- At the individual level, one can move out of
poverty by - Working more hours (for a constant level of
earnings/hour) employment generation - Increase effort per hour worked increase labor
productivity in order to increase hourly earnings - Moving to a job that gives higher earnings for a
given level of productivity mobility
3- But
- Policies emphasize (1) employment generation, not
(2) changes in productivity or (3) labor mobility - There is limited analysis on the links between
growth, labor and poverty - Why?
- Lack of data?
- No unifying theoretical framework for analysis
- segmented versus perfect labor market
4How to proceed?
- Identify a useful theoretical framework
- Carry out empirical within-country analysis
- Carry out empirical cross-country analysis
5How to proceed?
- Identify a useful theoretical framework
- Carry out empirical within-country analysis
- Carry out empirical cross-country analysis
6Theoretical framework
- Two basic concepts
- Structural change (Chenery and Syrquin)
- Creative destruction (Schumpeter)
- Importance of
- The structure of the economy
- Labor mobility
- Labor institutions and regulations
7Starting point multisector labor market
- The labor market exists of different segments
offering qualitatively distinct types of
employment - Not everyone (with similar characteristics) gets
access to the same type of job - Segmentation can occur along different lines
economic sector, formal / informal, rural / urban - Need to go beyond dualism because of
heterogeneity within a sector - Analyze
- Each sector
- The link between the sectors
8An operational framework for within-country
analysis
- Using aggregate data
- decompose growth
- decompose poverty
- Using household and firm data
- Employment and labor income profile
- How the labor market works segmentation, labor
supply and demand and skills mismatch
9An operational framework for within-country
analysis
- Using aggregate data
- decompose growth Ghana and Nicaragua
- decompose poverty Nicaragua
- Using household and firm data
- Employment and labor income profile Nicaragua
- How the labor market works segmentation, labor
supply and demand and skills mismatch
10Ghana Macro analysis
11Ghana what we know
- Poverty has been reduced substantially
- Poverty reduction comes from growth, not from
re-distribution (1991-98)
12Ghana what we dont know
- How sustainable is growth and poverty reduction?
- What is the long term perspective?
- What is the role of the structure of the economy?
- What is the role of labor markets?
- We analyze what happened to
- productivity
- employment
- changes in the decomposition of the population
13(No Transcript)
14Decompose growth
- Y/N Y/E E/A A/N
- ?(Y/N) ?(Y/E E/A A/N)
- ?(Y/N) ?S(Y/E) ?S(E/A) ?S(A/N)
15Decompose growth
16Decompose growth
17(No Transcript)
18Conclusion
- Per capita growth is accompanied by
- an increase in output per worker (but
contribution ?) - a decrease in the dependency ratio (and
contribution ?) - a decrease in the employment share of the working
age population in the first spell (and
contribution now )
19Decomposition by sector
20Share of the sectors
21Decomposition by sector
22Decomposition by sector
23Conclusion
- Classic growth story movement out of primary
into secondary and tertiary sectors - But output per worker in both secondary and
tertiary sectors is decreasing.
Informalization? - And is increase in productivity in the primary
sector due to out-movements only or due to
technological change?
24Nicaragua Macro and micro analysis
25Value added growth
26Nicaragua Aggregate Employment and Productivity
Profile of Growth
27Nicaragua Employment and productivity profile of
growth by sector of economic activity
28Sectoral contribution to growth
29Linking employment and productivity growth with
poverty
- Identify sectors where the poor are
- Zoom into key employment/growth sectors
- Sectoral regression or decomposition approach
30Nicaragua Employment shares by sector and
poverty level
31Incidence of poverty by sector
32Sectoral decomposition of changes in poverty by
household head
33Zoom in
- Manufacturing Employment generated at very low
wages. Maquila employment not for the poor - Agriculture despite increases in income and
prices, returns in agriculture still remain the
lowest
34Conclusions from macro analysis
- Demographic change presented a window of
opportunity for poverty reduction - Growth was mainly concentrated in the
manufacturing sector - Employment growth in manufacturing and
Agriculture - Employment generated in manufacturing did not
benefit the poor. - Employment in agriculture contributed to increase
poverty, since the lowest returns are in this
sector
35Using Micro data the employment and labor income
profile of the population
- How important is labor income in total income,
and how does this importance differ between
income groups? How important are transfers in
reducing poverty? - How does the labor and demographic profile of
households shape per capita labor income? - Is poverty a result of a low earnings rate or of
unemployment or underemployment?
36Stylized facts
- Employment categories and earnings which type of
employment do the poor have? - Employment status by poverty level are the poor
unemployed, employed or inactive? - Structure of total income by quintile which is
the main source of income of the poor?
37Employment categories and earnings
38Employment status by poverty level
39Income structure
40Growth in per capita household income by
quintiles in 2001 (panel)
41Decomposition of changes in labor income
42Conclusions from Nicaragua
- The demographic change presented an opportunity
for poverty reduction but - Despite the fact that the new population found
jobs.. - Employment growth did not benefit the poor
- Growth was accompanied by increases in
manufacturing and agricultural employment but by
decreases in productivity in these sectors. - Lowe productivity was reflected in lower wages in
both sectors. Higher prices in agriculture
increased income of self employed partially
counteracting this negative effect in the income
of the poor self employed in agriculture - The poor have no access to manufacturing
employment in maquila, which offers good wages
43Policy implications
- Low education is restricting access of the poor
the most dynamic sector in the economy
manufacturing. It should become a policy priority - Some evidence of segmentation agriculture/non
agriculture suggests that rising productivity in
agriculture should be at the forefront of policy
initiatives