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Market development


Updated: 12 June 2014

Creating more jobs and improving working conditions in low-income countries has high priority, as productive and decent work is the key link between economic development and poverty reduction. Sida contributes not only by supporting enhanced entrepreneurial opportunities and developed markets, but also through education, decent working conditions, social dialogue and well-functioning labour markets for both men and women.

Contributing to increased job-creation in low-income countries is also an important part of efforts to fulfil the UN Millennium Development Goal to reduce world poverty by half by 2015. Jobs and belief in a better future, particularly among unemployed young men and women, might be crucial for maintaining stability and security in countries where conflict is ongoing or has recently occurred.

Sida believes that employment is both a goal and a mean to reduce poverty, as it is the key link between economic development and reduction of income poverty. Sida's work on employment, with a rights- and poverty perspective, focuses on productive and decent employment and follows the ILO's Decent Work Agenda. This means that Sida does not only look at the number of jobs created, but also at their quality. All jobs must meet certain requirements in terms of income, labour rights and working conditions. If the goal is long-term sustainable development, then there cannot be any distinction between quality and quantity, as there is an interaction and interdependence between the two.

By promoting decent employment for all, we can contribute to the three relevant aspects of sustainable development:
1. Economic – by increasing purchasing power, productivity and improved utilisation of resources.
2. Social – by including marginalised groups such as women and youth. Depending on a number of factors, women, for example, don’t participate in the labour market on equal terms as men. This also means that there is an untapped economic and productive potential.
3. Environmental – if environmental aspects of job-creation efforts on different levels are taken into consideration, including climate change adaptation.

Laying foundation through poverty analysis

In order to be able to contribute to employment and support the relevant efforts, there must be a basic understanding about how labour markets work in low-income countries. Analysis of bottlenecks and barriers to employment is paramount, whether it is the lack of education, financial support for establishment of private companies or infrastructure. Without analysis, there is a great risk that problems and their causes remain unresolved, and that actions intended to change them focus on symptoms rather than causes. This is why the Swedish support is governed by the analysis of causes in combination with priorities in recipient countries, donor coordination and the value for Sweden.

Importance of business sector for increased job creation

Actors from the business sector create nine out of ten jobs in low-income countries. This is why it is important for Sida to contribute to a favourable business environment and strengthened value chains, to foster start-up businesses and improve capital markets. Small- and medium-sized enterprises constitute the majority of employers in our partner countries. This is why we want to help increase endurance and productivity of these actors, see them grow and contribute to creating decent employment.

Businesses play an important role in identifying and implementing solutions that can lead to productive job-creation, as they have an own interest. Business sector has complementary resources and capabilities, and Sida believes that cooperation between business -, public and civil society actors can provide effective and sustainable ways to find solutions to development challenges.

Sida’s partnership with business sector actors is about solving common challenges (in areas where corporate goals overlap with development goals), collaborating where partnerships can provide added value to parties involved and lead to systemic change. Partnership entails sharing knowledge and jointly contributing resources to overcoming common development challenges, such as committing to increased job-creation, functioning industrial relations, economic growth and poverty reduction.

Economic development and growth are prerequisites for, but don’t necessarily lead to, increased employment and increased incomes among people living in poverty. If growth is to lead to more jobs, then there must be an interaction between supply and demand in the labour market.

Education and good health – preconditions for ability to work

For an increased job-creation, it is not only enough to contribute to a competitive business sector. There must also be resources available in the form of, e.g. good-quality education and health care, which make it possible for both poor men and women to equally participate in the labour market. People need education and knowledge in order to obtain employment and establish their own businesses. They need to be in good health in order to work and benefit from education.

Companies need trained manpower to be able to benefit from new information and technology and thereby grow. Both individuals and companies need financial capital to invest in themselves or in a company, in the form of social security systems and financial markets.

Infrastructure for economic development and job opportunities

Infrastructure is an important basis for economic development and growth. Without adequately developed and functioning infrastructure, it might be difficult for some sectors to competitively operate and thus establish themselves and contribute to job creation. The actual investments in and improvements of infrastructure may themselves create jobs.

Importance of good working conditions

Improved working conditions in poor countries is an important issue, particularly for vulnerable groups such as women and youth, but also for increased productivity and profitability for companies. Substandard working conditions can lead to waste of resources, high number of sick leaves and decreased productivity. High number of strikes can also lead to high absence from work and reduced production. A company that engages in productive employment and in creating decent working conditions for its employees is therefore also important from a business perspective. Women and men do not just benefit from growth but also create growth, both as producers and as consumers. If companies in the private sector don’t create jobs with decent wages and working conditions, then workers and people are not able to buy the products that the private sector produces.

Engaging and interacting with business sector, including both employers' and workers' organisations, is important for reducing poverty. There are many examples of how business can contribute to productive employment when it joins forces with public institutions and civil society. It can be about offering young entrepreneurs start-up capital, mentorships, access to markets and networks, leading a dialogue with ministries and institutions about labour market needs or difficulties regarding entrepreneurship, providing education and internships, and helping facilitate the ability of women to enter the labour market, especially in traditionally male-dominated professions.

Supporting industries that are expected to grow

It is also important to support industries and sectors that have a good chance to expand. This can happen through contributions to professional training and coaching the unemployed on how to search for a job. It can also be about providing information about possible jobs, or about sectors that are expected to grow. Most importantly, people looking for jobs get the opportunity to educate themselves so that they can meet the needs for knowledge and skills that exist in a labour market. Other ways to boost employment opportunities are developing links between enterprises and institutions offering vocational training and universities, improving gender equality in the labour market and investing in industries with strong demand for labour, such as development of infrastructure. It can also involve supporting the creation and development of private businesses, including access to financial resources.

Better working environment for viable growth

The created jobs must also be safe for both humans and the environment. Only then can growth be viable in the long run. One of Sida's partners in these issues is the International Labour Organisation, ILO. The organisation works to establish international labour standards, develop tools to analyse labour markets and training needs and runs programmes that foster business development and improved working conditions.

The ILO also educates workplace inspectors. Their job is to investigate working conditions in different companies and educate businesses on how to improve working environment and increase productivity. Other important partners in this area are labour market parties, employers' organisations and trade unions.

Working conditions in an informal economy

In low-income countries, roughly 60-80 per cent of the workforce is a part of the informal economy, with high costs for both individuals and the society. Individuals often live in situations of vulnerability and lack of rights. Informal economy also inhibits productivity and growth, which results in additional socio-economic costs and reduced tax base. At the same time, informal economy offers income opportunities for a large number of poor people where there is a lack of access to formal jobs and social safety nets.

In poor countries, many people earn their living through the "informal economy" and women are overrepresented. They work in marketplaces, on farms, at home, for the family. They buy, produce and sell goods or different types of services – but their work is not registered. Sida wants to improve their working conditions. These efforts are closely related to increasing support to gender equality and education. Sida and the ILO also help those who want to develop smaller businesses. Enterprise for Pro-Poor Growth is one such project, which is run under the auspices of the ILO. WIEGO, that works to improve the situation for women working in the informal economy, is another of Sida's partners in this effort.

Unpaid labour

Girls and women stand for the overwhelming extent of unpaid labour in and around home. It is a major impediment to their ability to access education and take part in the labour market on equal terms with men. Unpaid labour is not recognised as "employment"; it is undervalued and overlooked by policy-makers and the society at large. In fact, if given a monetary value, unpaid work at home would account for between 10 to 50 per cent of GDP.

The importance of understanding how unpaid work affects men and women's opportunities to participate in the labour market is crucial for maximising the effects of employment-related efforts.


Page owner: Communication Unit

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