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![Page 1: The Globalization Jackpot Jobs Dividends from a Multi-polar World Célestin Monga World Bank IEA-WB Roundtable, Pretoria, July 3, 2012.](https://reader035.fdocuments.in/reader035/viewer/2022062321/56649da65503460f94a90f85/html5/thumbnails/1.jpg)
The Globalization JackpotJobs Dividends from a Multi-polar World
Célestin MongaWorld Bank
IEA-WB Roundtable, Pretoria, July 3, 2012
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Outline
• 1. The theoretical focus on unemployment has often led to (mostly) ineffective policy recommendations
• 2. The economic magic of manufacturing has sustained growth and job creation—but not in Africa
• 3. Smart industrial policy can help Africa can reap job dividends from a multi-polar World—especially in labor-intensive manufacturing industries
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• The focus on unemployment has not yielded many policy insights
• Unresolved conceptual issues have led to policy tolerance for informality and underemployment– Unemployment should be situations where workers are unsuccessfully
looking for jobs at the prevailing wages when they are as qualified as those holding these jobs, or where workers are willing to work at less than the prevailing wages for jobs which they could usefully fulfill, but are unable to find such jobs
– Yet, governments and ILO only focus on people of “working age” (whatever they choose it to be), who are out of work (whatever is considered “work”) and capable of submitting evidence (whatever is deemed acceptable) of having looked for work in the recent past.
– What is unemployment in the African context?
1. The Elusive Theoretical Search for Jobs
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Traditional remedies to unemployment have been ineffective
• Changes in hiring and firing practices to reduce transaction costs for firms and give them more leeway—Assumption: strong employment protection makes employers reluctant to hire workers
• Changes in benefits (level of benefits, duration, coverage, and tightness of the implementation criteria), viewed as important factors affecting the reservation wage
• Reduction of the tax wedge (tax-related difference between the cost to employ a worker and the worker's take-home pay) to improve the supply and demand for labor
• Changes in the wage bargaining institutions—the coverage and strength of trade unions and their ability to bargain for higher wages or to organize strikes are seen as determinants of unemployment
• The implementation of active labor market policies (training, employment subsidies, help with job matching and job applications, etc.) to increase the chances of the unemployed finding employment.
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New policy recommendations are sensible but do not seem to address the problem
Summary by A. Krueger
Cyclical Policies• Labor retention in downturn (e.g., worksharing,
working time accounts)• Hiring subsidiesStructural Policies• Demand Side Policies (regulation)• Supply Side Policies (health; education; job training)• Entrepreneurship (start ups)• Infrastructure
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Unemployment: Are we looking at the wrong place?
Source : A. Krueger
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Perhaps the focus should be on Employment?
Source : A. Krueger
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• Unemployment statistics shed little light on the anatomy of African labor markets:– Types of jobs available– Fastest/slowest job-creating industries – Relative shares of full-time and part-time workers,
formal/informal sectors– Wage earners and self-employed– Social groups and gender balance in the labor force,
and their dynamics over time• Employment statistics are more useful
– Less complicated to measure– Offers better insights on the policies needed
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Few good jobs are being created in Africa
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Survey results indicate that Sub-Saharan Africa has performed poorly compared to other regions
Source: Gallup 2009-2010
% Unemployed % Underemployed% Employed
Full Time for an Employer
Worldwide 7 19 40
Former Soviet Union 16 15 59
Europe 9 20 56
Americas 10 24 52
MENA 10 21 48
Asia 5 16 35
Sub-Saharan Africa 9 31 19
Gallup classifies workers as underemployed if they are either unemployed or working part time but wanting full-time work. A respondent is unemployed if he/she reports not being employed in the last 7 days, either for an employer or for himself or herself. The respondent must also report actively looking for a job in the last four weeks AND being able to begin work in the last four weeks.
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A typical African story: agriculture and informal activities employ most of the labor force
Source: INS 2009
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Anatomy of the Labor Force in a Sample of African Good Performers
Source: Fox 2011
Tanzania 2006 Rwanda 2006
Uganda 2005
71.7
2.6
11.9
6.7
4.8
2.2
7.0
9.7
2.7
2.0
0.9
20 0 20 40 60 80
77.7
100 80 60 40
agriculture
non-ag family worker
HE without outside of HH employees
wage without permanent contract
wage with permanent contract
employer
67.9
0.7
10.3
14.9
5.1
1.0
85.7
2.3
5.7
3.7
2.3
0.3
100 80 60 40 20 0 20 40 60 80
agriculture
non-ag. family worker
HE without outside HH employees
wage worker without secure contract
wage worker secure contract
employer
67.0
0.5
14.3
11.5
6.4
0.2
81.2
2.1
10.0
4.2
2.6
0.0
100 80 60 40 20 0 20 40 60 80
agriculture
non-ag. family worker
HE without outside HH employees
wage temp/casual
wage permanent contract
employer
Female Male
63.2
0.4
12.6
1.5
18.9
3.4
85.7
2.3
5.7
3.7
2.3
0.3
80 60 40 20 0 20 40 60 80
agriculture
non-ag. family worker
HE without outside HH employees
wage temp/casual
wage permanent contract
employer
Ghana 2005
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Mal
awi
Burki
na F
aso
Moz
ambi
que
Rwan
da
Sier
ra L
eona
Tanz
aniza
Uga
nda
Camer
oon
Kenya
Cote
D'Iv
ore
Gha
na
Sene
gal
Zam
bia
Wei
ghte
d Ave
rage
0
10
20
30
40
50
60
70
80
90
100
67
8379
72 75 73 70
60
5259 56
5258
69
17
01
6 0 1 5
2
91
11
2
3
8 12
9 9 16 16 13
25
13
2626 31
23
15
53
8 10 4 7 9 9
23
1111 12 12
9
2 2 4 2 4 3 3 4 3 3 6 4 6 4
Wage PublicWage PrivateHousehold enterpriseWage AgricultureFamily farming
Dis
trib
uti
on
(%
)
Distribution of primary employment in Sub-Saharan Africa (%)
Source: Fox et al. 2012
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Wage and Salary Workers (% of Male Employed)
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• Most workers are trapped in very low productivity activities in subsistence agriculture and the informal sector
• About two-thirds of Africa’s population is under the age of 24 and is underemployed—including those with college and university degrees
• With population growth projected to be 2.2 percent in the next 25 years, the African private sector faces the challenge of creating employment opportunities to absorb the youth bulge.
• Sub-Saharan Africa will have to generate 7 -10 million jobs annually in order to accommodate the high rate of population growth
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Population by age groups and sex (absolute numbers)
Source: United Nations
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The UN projects dramatic demographic transitions
17
-15 -10 -5 0 5 10 15 20 25 30 35
-10
-5
0
5
10
15
20
25
30
35
LAC
Africa
Eastern Europe
East Asia
South Asia
Employment and Working Age Population Growth, 2010-2020
Employment Growth Rate
Wor
king
Age
Pop
ulati
on G
row
th R
ate
Note: Size of bubble is projected employment in 2020.Source: Population and Employment Statistics, UN and ILO
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2. The Economic Magic of Manufacturing
• Virtually all countries that have achieved sustained growth and moved from low- to middle- and high-income status have gone through industrialization—except perhaps a few with abundant natural resources or land
• Manufacturing has been a key factor to the prosperity of nations, with over 70 percent of the income variations of 128 nations explained by differences in manufactured product export data alone (Hausman et al. 2011)
• Economic growth is indeed a process of continuous industrial and technological upgrading that also affects the dynamics of institutional change (Lin 2012)
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• Manufacturing has evolved and changed the dynamics of the world economy
• Globalization of manufacturing due to:– Profound changes in geopolitical relations among world
nations– Widespread growth of digital information– Decline of transportation costs – Development of physical and financial infrastructure– Computerized manufacturing technologies– Proliferation of bilateral and multilateral trade agreements
• These developments have permitted the decentralization of supply chains into independent but coherent global networks that allow transnational firms to locate various parts of their businesses in different places around the world.
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Burkina FasoMozambique
MadagascarEthiopiaTanzania
UgandaZambia
Sierra LeoneMali
KenyaCameroonZimbabwe
NigerGhanaLiberiaNigeria
BeninSenegal
BotswanaNamibia
MauritiusSouth Africa
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Series NameEmployment in agriculture (% of total employment)Employment in industry (% of total employment)
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1951-1955
1956-1960
1961-1965
1966-1970
1971-1975
1976-1980
1981-1985
1986-1990
1991-1995
1996-2000
2001-2005
2006-2010
0%
5%
10%
15%
20%
25%
30%
35%
Western EuropeUnited States
Japan
Size-weighted share of global
growth
In the post war era, three poles have served as the engine of
global growth…
3. Opportunities in a Multi-polar World
Source: World Bank Prospects Group
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1956-1960
1961-1965
1966-1970
1971-1975
1976-1980
1981-1985
1986-1990
1991-1995
1996-2000
2001-2005
2006-2008
-20%
-10%
0%
10%
20%
30%
40%
LatAm-3*
Russia
ASEAN-4** India
China
Size-weighted share of global
growth
…with several EM countries beginning to join the ranks of superpowers
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USJapan
Germany UK
China0
5
10
15
20
25
30
1980-1990
China US India KoreaBrazil0
5
10
15
20
25
30
2000-2009
Top Five Contributors to Global Economic Growth by Decade (percentage)
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Main sector of employment (in 58 countries)
24
Community, social and personal services
Services Manufacturing and Construction
Primary0
5
10
15
20
25
30
35
40
45
1980s2000s
Source: ILO Statistics
The changing structure of employment: a potential jackpot for lower-wage countries
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Competing for good jobs?
.12
.14
.16
.18
.2th
eta_
man
4446
4850
5254
(sum
) man
_em
p
1990 1995 2000 2005Year
Manuf. Employment (millions)Manuf. share in tot. emp (%)
HI
.1.1
1.1
2.1
3.1
4th
eta_
man
4050
6070
80(s
um) m
an_e
mp
1980 1985 1990 1995 2000 2005Year
Manuf. Employment (millions)Manuf. share in tot. emp (%)
ASIA High-income countries Asia
Source: World Bank WDR Team--Data by Margaret McMillan
Going where now?
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Potential jobs benefits for African countries of a multi-polar world
120 million manufacturing jobs, most of them to be relocated
Brazil China India Indonesia Total
Population 192 1.324 1.140 277 2.934
Manufacturing Jobs (million)
13.1 85 8.7 12.6 119.3
Outward FDI ($, billion)
11.5 68 14.6 2.7 96.8
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The Dying Golden Goose? Questions about the future of manufacturing
• New export pessimism– Weak demand in HICs due to recession– Need for global rebalancing– New forms of protectionism– Existence of large and powerful industrial complexes
benefitting from agglomeration economies, particularly in China, which makes it difficult for new entrants to compete (H. Pack)
• Concerns about the viability of labor-intensive industries as an economic model of development—innovation and automation
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As a region, Sub-Saharan Africa has had limited structural transformation in 40 years
1965 1985 20050%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Sh
are
of s
ecto
r in
GD
P (
%)
GD
P p
er c
apit
a
(199
0 In
tl. G
eary
-Kh
amis
$)
Services Industry Manufacturing Agriculture
GDP per capita
![Page 29: The Globalization Jackpot Jobs Dividends from a Multi-polar World Célestin Monga World Bank IEA-WB Roundtable, Pretoria, July 3, 2012.](https://reader035.fdocuments.in/reader035/viewer/2022062321/56649da65503460f94a90f85/html5/thumbnails/29.jpg)
In nearly 50 years, the contribution of manufacturing to GDP in most SSA countries has been negligible
Source: Monga 2012
0
20
40
60
1960 2008
Cote d'Ivoire
0
20
40
60
80
1960 2008
South Africa
0
20
40
60
80
1960 2008
Kenya
0
20
40
60
80
1968 2007
Mali
0
10
20
30
40
50
1965 2005
Ghana
0102030405060
1960 2008
Botswana
0
20
40
60
1960 2005
Togo
0102030405060
1965 2008
Cameroon
0
20
40
60
80
1960 2007
Congo
Agriculture Industry ServicesManufacturing
Sectoral Composition of GDP, 1960-2008/2008
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Changing Patterns of Exports and Industrialization in China
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Average Monthly Wage Including Benefits, by Industry (USD) Sector Tanzania
All workers Ethiopia Unskilled-skilled
Nigeria Unskilled-skilled
Vietnam Unskilled-skilled
China Unskilled-skilled
Food 84 26-141 87-135 78-363 192-442 Garments 80 26-185 54-85 79-181 237-370 Textiles 61 71-120 Machinery &Equipment 60-151 125-163 Wood, wood products 67 37-119 67-102 85-259 206-442 Metal and Metal products 124 89-181 82-107 117-233 192-369 Other manufacturing 168 67-154 87-130 Average Manufacturing 181 Note: Since Tanzania Survey does not distinguish unskilled or skilled workers, we had to use the wages for both unskilled and skilled workers from other countries.
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Lessons from the WB Light Manufacturing Study (Ethiopia)
Input industries Land FinanceEntrepreneurial
skillsWorker
skillsTrade Logistics
ApparelSmaller Important Critical Critical Important Important
Large Important Important Critical
Leather productsSmaller Critical Critical Critical Important
Large Critical Important Important
Wood productsSmaller Critical Important Important Important Important
Large Critical Important Important Important Important
Metal productsSmaller Critical Important Important Important Important
Large Critical Important Important Important Important
Agribusiness
Smaller Critical Critical Critical Important
Large Critical Critical Important
Constraints in Ethiopia, by importance, size of firm, and sector
Source: Dinh et al. 2012.
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Practical Recommendations to addressconstraints
Source: Dinh et al. 2012. Note: Blank cells are not a priority.
Input industries
Land Finance Entrepreneurial skills
Worker skills Trade logistics
“Plug-and-play” industrial parks
X X X X X
(if close to port)
Bank collateral X
Immediate and free access to foreign exchange
X X X
Green channels at customs X X
Reduced cost of letters of credit
X X X
Zero tariffs on inputs for all firms
X X
Support to SME clusters X X X X
Support to strategic first movers
X X X X X X
Output and input agriculture markets liberalized
X
Access to agricultural land facilitated
X X X
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A Strategic Approach to Job Creation and economic transformation
Use of Industrial policy to foster competitive industries (consistency with comparative advantage)
Exploiting low wages, facilitating supply chains, and building logistics Taking advantages of industrial clusters — in which producers,
specialized suppliers, and workers huddle together to their mutual benefit
More strategically targeted infrastructure and skills formation
Pragmatic government intervention to overcome issues of coordination and externalities, which no individual firm can address alone effectively.
Key principles: