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For the developing countries as a whole, the most critical question is how to create quickly hundreds of millions of jobs for the poor with limited purchasing power and limited capital for investment. The idea that most of these jobs could be created in the corporate sector or by government-sponsored activities has been put to rest. Currently, there are nearly one billion self-employed and unpaid family workers in the world, most of them self-employed farmers in developing countries. The self-employed represent 48 per cent of the workforce in low-income economies (less than $500 per capita GDP). For any strategy to be successful, it must give central importance to self-employment and entrepreneurship, with emphasis on agriculture, agro-industry and small firms in the informal sector. While a single approach will not be applicable to countries and regions of the world in different stages of development, a number of common principles and strategies are widely applicable.
Agriculture as an engine
Slightly more than half the world’s workforce, of whom 30 per cent are women, are still engaged in agriculture. Agriculture will remain the largest single occupation for the foreseeable future. For too long this sector has been regarded by planners primarily as the source of essential food production. Historically, agriculture has also played a major role as an engine for economic growth and employment. The Industrial Revolution in nineteenth-century England was spawned by rising productivity and incomes in agriculture that increased demand for manufactured goods. In post-war Japan, South Korea, and more recently Thailand, rising agricultural productivity and a shift to commercial crops have been dynamic engines for economic growth, job creation, higher incomes and rural purchasing power, wider markets for produce, and the growth of downstream industries. In Taiwan, this was the result of a conscious strategy to utilize agriculture to stimulate job creation and domestic demand.
The vast technological gap between the levels of agricultural productivity achieved by most developing countries and the highest yields achieved globally represents an enormous untapped potential for stimulating economic growth and job creation. The reduction in agricultural subsidies to farmers in industrial nations called for in the recently signed GATT trade agreements will generate far higher international demand for agricultural exports from developing countries. In the next chapter, we argue strongly for an agriculture-led job creation strategy and cite evidence to show how it can generate sufficient jobs to eradicate poverty in many countries.
New deal for the self-employed
Excluding agriculture, there are 104 million self-employed and unpaid family workers in developing countries, representing 37 per cent of the non-agricultural workforce. Self-employed persons and the small firms which they establish have enormous potential for rapidly generating large numbers of new jobs and raising productivity to increase incomes, provided the right policy measures are in place to support them. Japan’s economic growth has relied heavily on the proliferation of small rural enterprises. Today, 74 per cent of the Japanese workforce is employed by small and medium-sized firms. China created 101 million jobs between 1985 and 1991, 70 per cent in ‘township and village enterprises’, of which nearly half are privately owned. In many countries, a large proportion of small enterprises is established by women and employ predominately women. An appropriate mix of policies focusing on access to technology, training, credit, marketing and distribution channels can substantially accelerate self-employment, particularly in the informal sector and rural areas, and among women.
The service sector represents only 25 per cent of the labour force in developing countries compared with more than 67 per cent in the industrial nations. Contrary to common conception, services can be a major contributor to job growth even in countries at earlier stages of development. This sector is as amenable to stimulation by government policies as agriculture or manufacturing, and it also provides impetus for the growth of other sectors. Supportive policies have enabled trade, transport and other services to generate more than 50 per cent of all jobs in Japan, Hong Kong, South Korea and Singapore. Services have produced more than half of all job growth in many other Asian nations, including private day-care centers, nursery schools and computer training institutes, which are multiplying rapidly in many countries, but can be expanded much further. India has adopted an innovative, low-cost, self-employment strategy to expand availability of long-distance telecommunications services by setting up small private telephone and fax centers throughout the country. Informal private service enter prises in construction, commerce, food catering, repair and transport have vast growth potential. Rapid expansion of education, training and public health, especially rural health and education, can also serve as a conscious strategy for employment generation.
Technology of organization
Much emphasis is placed on the widening gap in technology between North and South, but the gap in the technology of organization is even greater. Creation of new types of systems and organizations can create markets and jobs in many ways. The Dutch system of flower auction co-operatives is so successful that 68 per cent of the entire world’s exports of cut flowers pass through markets in the Netherlands. The franchise system has led to a rapid proliferation of new businesses and new jobs in the West in such widely diverse fields as food services, home remodeling, dry cleaning and real estate. Industrial estates, export processing zones, export promotion councils, export insurance, warehouse receipts, quality standards, and thousands of other organizational innovations have been either created or borrowed by developing countries to accelerate social progress. A comprehensive study of successful systems and institutions that can be transferred and adapted to local conditions will document the enormous untapped potential for stimulating faster economic and job growth by inventing, imitating and further improving social systems.
Action Plan to Stimulate Employment in Developing Countries
Employment generation is a product of multiple factors that combine together. Stimulating job creation requires a comprehensive approach, rather than partial policies or piecemeal strategies. The achievements of the Newly Industrializing Economies (NIEs) of East Asia demonstrate that tremendous increases in employment generation can be achieved based on comprehensive strategies. While broad prescriptions should not be indiscriminately applied to the widely disparate situations confronting different countries, the availability of a number of tested methods under lines the fact that effective and proven policy measures can be formulated to meet the employment needs of every developing country. A number of the strategies briefly listed below are enlarged upon in sub sequent chapters of the report, but listed here for the purpose of comprehensiveness.
Utilize agriculture as a source of economic growth and job creation by a shift to high value-added, commercial crops, supported by policy measures to upgrade technology, improve skills, raise productivity, ensure the supply of essential inputs, establish marketing and distribution channels, create linkages between agriculture and industry, and cater to export markets.
Promote small enterprises
Promote small enterprises by policies to make technology, training, credit, marketing and distribution channels more easily accessible to small business, and by forging linkages between universities, research institutes and small enterprises. The creation of micro-enterprise banks and credit unions specifically designed to cater to the needs of the self-employed and small firms can be especially effective. There are a growing number of these institutions targeting clients that lack access to commercial lending institutions, particularly women, providing unsubsidized loans, and achieving very low levels of default.
Absorbing new technology, raising productivity, improving the quality and competitiveness of exports – all depend on the skills of the workforce. Labour productivity has been increasing in East Asia by 10 per cent a year, half of which is attributable to investment in education and technical skills. Training institutions and programmes in most developing countries provide only a narrow range and low level of skill acquisition to a small portion of the population. Raise skills to increase productivity by vastly expanding the lower tiers of the agricultural, craft, technical and vocational training systems at the local level to provide practical training in job-related skills to the saturation point. Imbalances between supply and demand for skills exist at all levels in developing economies. Make a careful assessment of present supply and demand for key skills. Compare the density of different types and levels of skill in countries at the next higher stage of development and evolve programmes to raise the quantity and quality of skills to that level.
The organization of marketing is typically one of the weakest links and, therefore, one of the greatest barriers to economic growth and job growth. Brazil set up a distribution system for the export of citrus fruits that has enabled it to become the world's largest exporter of this commodity. Improve distribution and marketing systems, especially for agricultural produce, by identifying missing links and establishing successful model programmes that bridge the gap between rural producers and urban or overseas markets.
Actively encourage and support growth of the service sector through programmes similar to those utilized to support the expansion of small industry.
The new GATT treaty ensures that, contrary to earlier projections, export-led growth is far from over. After agriculture, the textile and clothing industry is one of the largest employment sectors in developing countries. The industry's global exports are $250 billion a year, of which Asian countries command 40 per cent. Trade in clothing is expected to rise by 60 per cent and textiles by 34 per cent over the next ten years. As labour costs have risen in East Asia, greater opportunities are emerging for lower-wage developing countries to take a larger share in growing international markets. In order to take advantage of the increasing opportunities opened up by liberalization of world trade, developing countries should accelerate steps to expand export-oriented markets by forging foreign collaborations and overseas subsidiaries, acquiring technology, creating an attractive commercial environment for foreign investment, and continuously building the skills of the labour force.
Significant improvements in the competitiveness and growth of businesses in developing countries can be achieved through raising organizational efficiency and dynamism through better internal management practices and better commercial systems in the marketplace. Conduct a comprehensive study of successful management practices, systems and institutions from both developing and developed countries that can be transferred and adapted to local conditions in order to accelerate development in each field of activity. Evolve new organizational patterns for existing industries based on adaptation of new technologies in small, geographically decentralized, labour-intensive production units in order to make these industries more responsive, flexible, efficient and competitive.
Extend basic education
A distinguishing feature of the East Asian countries has been their emphasis during the early stage of industrialization on primary and secondary education, especially in rural areas. This strategy increases the productivity of the mass of the workforce, helps promote income equality, consumer spending power and broad support for high growth and pro-business policies. Raise the educational qualifications of the workforce to the level pertaining in more economically advanced nations. Place particular emphasis on primary and secondary education, rural education and education of young girls.
Encourage the establishment of new institutions, programmes and systems to speed and extend the dissemination of practically useful information as a powerful catalyst for more rapid social progress. Encourage a national climate of open-mindedness to foreign ideas, influences and success stories.
Increase the velocity of money and other transactions
Increase the speed of commercial transactions, especially money flows, in the economy by streamlining government and banking procedures, ensuring rapid utilization of funds by all government agencies, setting strict limits on the time taken for bank transfers, introducing agencies for credit verification and collection of unpaid bills, and improving the telecommunications infrastructure.
Revamp higher education
Educational systems which 'manufacture graduates' compound the problem rather than alleviating it. The problem of the educated unemployed is not so much the amount of education they receive, but the type of knowledge and attitudes imparted. Reorient the educational curriculum at all levels, especially higher education, to impart the knowledge and attitudes needed to promote self-employment and entrepreneur ship rather than salaried employment.
Studies of Japan and the NIEs indicate that conscious employment planning is an essential requirement for generating full employment. Place the employment objective high on the national agenda and evolve a comprehensive plan to achieve full employment by identifying untapped growth potentials in agriculture, industry, exports and services. Launch a nationwide programme to implement all employment-related strategies on a highest priority basis.
While most of the prescriptions listed above are known to all, very few are systematically and efficiently applied. Africa can benefit enormously by applying strategies that have worked in Asia. The ‘Prosperity 2000’ programme evolved by ICPF for India and presented in the next chapter seeks to utilize a combination of these strategies to generate 100 million new jobs within a decade or less, which will be sufficient to raise 25 per cent of the world’s poorest billion people above the poverty line. Given a comprehensive approach, the right mix of policies, good government and a conducive international environment for trade, technology transfer and investment, every nation has the capacity to develop and meet the employment needs of its people within the next one or two decades.
This article is an excerpt from chapter 4 of the ICPF's report.