Employment and people’s incomes constitute the most important link between economic development and poverty reduction. The interaction between governments and markets must therefore work.
Growth is a pre-condition for, but does not necessarily lead to, increased employment and higher incomes among the poor. If growth is to lead to more jobs, there has to be interaction between market forces and government initiatives that affect supply and demand in the labour market.
Education and good health necessary for work
Creating more jobs is not enough. Resources are also needed in the areas of education, health care, capital and natural resources that make it possible for both poor men and women to participate in productive work in similar conditions. Opportunities for entrepreneurship are also needed.
Creating more jobs in poor areas of the world is a high priority for Sida, the World Bank, the World Trade Organization (WTO), the International Labour Organization (ILO), the Organisation for Economic Co-operation and Development (OECD) and many other organizations. Halving the proportion of extremely poor people in the world is also one important part of achieving the UN’s Millennium Development Goals.
Securing jobs and creating a belief in the future, particularly among unemployed youths, can also be the key to continued stability and security in countries where there are, or have recently been, conflicts.
Reforms for commerce
The aim of the projects that Sida supports to develop commerce and improve trade or facilitate economic reforms is to increase productive employment and create higher incomes for citizens. However, unfortunately reforms can have both positive and negative effects.
For example, having fewer trade obstacles in the short term does not automatically mean more customers for all companies; some could lose out if competition becomes fierce. In this case, measures have to be taken to alleviate the negative effects, such as offering employees opportunities for retraining.
Support for industries that are expected to grow
It is also important that a country supports the industries and sectors that have a good chance of expanding. This could be done through subsidies for vocational training and coaching unemployed people in how to apply for jobs. It could also include informing them about possible job opportunities or about industries that are expected to grow. Above all, people who apply for jobs must have access to education, so that they can meet the knowledge and skills requirements of the labour market.
Other ways of promoting employment include developing contacts between companies and institutions for vocational training and universities, improving equality in the labour market and investing in industries with major labour requirements, such as infrastructure development. This could also involve supporting the start-up and development of business enterprises, including access to financial resources.
Better working environment increases productivity
Improving working conditions in poor countries is a particularly important issue for vulnerable groups such as women and youths. One way is to co-operate with global companies that run major Corporate Social Responsibility (CSR) projects. At Sida we have not yet decided how and whether we will become engaged in this type of project.
One of Sida’s partners in these issues is the International Labour Organization (ILO). The organization works to produce tools to analyse the connection between enterprise development and improved working conditions; increased competitiveness through a boost in productivity; and, as a result, increased incomes for employees.
The ILO also trains workplace inspectors. Their task is to examine workplaces and train companies in how they can improve their working environment and increase productivity.
Working conditions in the informal economy
Many people in poor countries provide for themselves through the “informal economy”; they work in markets or on farms, in the home or for the family. They buy, manufacture and sell goods or different types of services – but their businesses are not registered. Sida wants to improve their working conditions. This work is closely linked with investments in equality and education. Sida and the ILO also help those who want to develop small businesses. Enterprise for Pro-Poor Growth is one such project, which is run under the direction of the ILO. Women in Informal Employment: Globalizing and Organizing (WIEGO), which works for the situation of women in the informal economy, is another of Sida’s partners in this work.