Worldwide, labor income is the main source that actually lifts people out of poverty. So, we really care deeply quantitatively about jobs, but we care about them also qualitatively because they provide identity, there's a source of dignity. They actually help build social cohesion in countries.   

  

Birgit Hansl:  

Creating more, better and inclusive jobs is critical for reducing poverty and improving lives. More so in low-income countries which face additional challenges for job creation. For example, the size of informal employment in these countries is significantly higher than informal employment and workers in the informal economy often lack job security, social protection, and they often accept poor working conditions. Tackling these multiple challenges requires a multipronged approach, including engaging with the private sector. Since 2014, the World Bank funds for the poorest countries, the International Development Association, IDA, has made jobs a particular focus in its projects. How can the World Bank better support low-income countries in creating more, better, and inclusive jobs?   

Welcome to What Have We Learned? The Evaluation podcast. I'm your host, Birgit Hansl, a manager in the economic management and country program unit of the World Bank Group's Independent Evaluation arm, IEG. In this episode, we aim to unpack the challenges that low-income countries face in creating better jobs. We ask how the World Bank can help address some of these challenges focusing especially on the role of the private sector. We will also discuss lessons from the recent independent evaluation group report that assesses World Bank support on jobs. To discuss this, I'm joined by Oscar Calvo-Gonzalez, regional director of the World Bank's Economic Policy Global Practice in the Latin America and the Caribbean region, and Rashmi Shankar, lead Economist in the Independent Evaluation Group and co-author of the report. Welcome, Oscar and Rashmi, to What Have We Learned?  

Oscar Calvo-Gonzalez:  

Thank you, Birgit. Pleasure to be here.  

Rashmi Shankar:  

Thanks very much, Birgit.  

Birgit Hansl:  

Oscar, please let me begin by asking you about the major challenges to job creation in low-income countries. In particular, what is the role of the private sector in creating jobs?  

Oscar Calvo-Gonzalez:  

I think that's a good place to begin, but if you allow me, I think we want to start by saying a little bit more about why jobs… You started by saying it's a source of income and well-being. I think we want to unpack that a little bit. So, just to give one number, in a region like Latin America and the Caribbean, which is where I'm currently working, about three quarters of all poverty reduction is due to labor income. And this is just for one region, but worldwide labor income is the main source that actually lifts people out of poverty. So, we really care deeply, quantitatively about jobs, but we care about them also qualitatively because they provide identity, there's a source of dignity. They actually help build social cohesion in countries. So, we've long recognized that this is quite important. They're even a source of productivity increases. The way that people work with each other is you exchange views, exchange ways, you learn from each other. So, jobs are a lot more than just a source of income, even though it's a super important, it's the most important source of income for the poor and for everyone.  

So, we talk about the private sector, as you said, because we want most jobs to be created in the private sector and by necessity we need a vibrant private sector. And then the challenges are going to be very different according to each country. So, maybe I'll stop here, and we can unpack a little bit more of those challenges for the private sector to grow.  

Birgit Hansl:  

Thank you, Oscar. So, could we maybe look more at what are these challenges that the World Bank is trying to address in job creation?  

Oscar Calvo-Gonzalez:  

Yeah, so I was saying of course it's going to be different in different countries, and that's a little bit of like a generic answer, but the reality, even though they are different in different countries, there's like some common patterns that you see. So, you see countries where there's going to be a lot of informality, and you basically want to be tackling those. You want to understand the sources of those outcomes that you observe on the labor market. By and large, you need firms that grow to be able to generate more formal income that has the type of wages and benefits that we want. We want to see firms that are like employing more. One of the things that we see in a lot of developing countries is that firms are born small and remain small and remain with a lot of informal workers.   

And so why is this? And there could be constraints that are attached that are as simple as basic infrastructure. They don't have access to transportation, electricity, energy, etc. It could be regulatory issues. In a lot of countries, I was recently in Peru and there you see like a huge divide. Firms up to 20 employees. They grow, relatively, up to 20 employees. And after that you see like a huge drop in the number of firms above 20 employees. Why? Because there are regulatory burdens that well-intentioned were put in place to try to protect the workers of larger firms, but they have the unintended consequence that they discourage the growth of firms. And we see this like a missing middle - firms that are not necessarily growing in a lot of countries.  

So, we talked about infrastructure, we talked about regulation and also the supply of labor. The skills that people bring to the labor market is often subpar. And so, there's an agenda on skilling that has to do with education systems but also has to do with on-the-job re-skilling. So, those are like some of the more basic challenges. In individual countries you will see like, okay, maybe there's like a bigger issue on say female labor force participation than in others that may actually have other connotations, but a version of all these challenges basically seen in most of our client countries.  

Birgit Hansl:  

Thank you, Oscar. Reflecting on these challenges, Rashmi, let me ask you about the World Bank's successes in its engagement on job creation. What do they look like?  

Rashmi Shankar:  

Thanks very much, Birgit, for that question. So, I'm actually going to draw on a recent evaluation that the independent evaluation group of the World Bank Group produced in which we really focused very much on low income and low middle income countries that receive support from the International Development Association or IDA. So, essentially the evaluation was called IDA's support to jobs. And it finds broadly that there were four successes and some of this relates quite closely to what Oscar just mentioned. So, the four successes were really that IDA was able to set an agenda on jobs and to operationalize it, and this is very important. Second, IDA was able to introduce evidence-based research on jobs at the country level, which could dig into some of these complex challenges that Oscar just highlighted. Third, IDA was able to support better country strategies that focused more specifically on jobs. And fourth, IDA was also able to improve the kind of activities it supported.   

So, I'll unpack each of these a little bit if I might. So, first on the issue of putting jobs on the agenda, for the longest time we all were very focused on growth. We said the most important thing is that poor countries must grow. The size of the pie must get bigger and that will take care of a lot of issues and growth is critical, no doubt. But then people noticed that countries were growing very fast, but you still had a lot of inequity within the country. You didn't have sufficiently inclusive growth. And jobs were not growing very quickly, at least not the kind of jobs that Oscar was just talking about. Better paying, better quality, more organized sector work that is typically produced by the private sector. So, IDA refocused attention on jobs as a specific agenda. Second, IDA noticed that while we have done a lot of work on growth, we have less understanding at a very granular level of what might be interfering with the relationship between growth and jobs.   

So, IDA made this commitment that for a bunch of pilot countries, we are going to produce evidence-based research that tells us how to grow jobs better. The third thing that happened was now that we had some sort of jobs agenda that could be operationalized and some evidence-based research, the country strategies started to take on more of a jobs focus. There were more purposive on jobs, there was much more of a private sector focus. There was much more thought given to how does the private sector get its financing, what are the constraints on investment and so on. And this was facilitated of course by the fact that we now had better research. And I say better research, let me give you a specific example. So, for example, if research was done on a particular country saying, look, you need to improve the agribusiness sector in a country because this has the potential to grow jobs. What the work would also have to do is say how? How will you do this? Will you address the regulatory obstacles that Oscar was talking about? Do you need specific investments?   

Do you actually need to train up the farmers so they can start to improve their productivity, access markets and so on? So, all of this also informed these country strategies and in turn, this led to much better project design. So, now we see starting about 2014, '15 that IDA financed projects in these low-income and low-middle-income countries are starting to do a bunch of different things. They might look at regulation, they might look at how to unlock finance. They may take a sector view supporting small businesses in tourism or in agriculture, both of which are labor-intensive sectors in our target countries, or they might combine that with skills training, the reskilling that Oscar was just talking about. So, we see some big impacts of this shift in focus towards jobs on the part of the World Bank Group, but IDA in particular.  

Birgit Hansl:  

And can you, Rashmi, share a few recommendations of this report?  

Rashmi Shankar:  

Yes, absolutely. And I think the recommendations are anchored in two main challenges that we also found. And I'm going to try and be very careful to not use World Bank speak over here. Please pull me back from the edge if I start using acronyms. But two main challenges really are the first relates to data and how we capture the impact of projects. And the second really relates to the complexity of the agenda. And again, Oscar touched on this earlier, it's different in every country. It is complex, there are some common features, but it touches on a lot of different things. So, on the first point on data and results, in part because the focus is so much at the project level, usually it's very hard to discern sort of the longer run or the medium run impact of an activity supported by IDA on jobs.   

You can look at the impact on a fairly small group of beneficiaries perhaps, but it's very hard to disentangle the direct and indirect impact at the project level. And I'll come back to this a little bit later if I might, if we have time. And the second challenge really refers to the fact that the way the bank organizes itself is by sector. And this is very similar to how governments organize themselves. Governments are ministries and departments, but jobs are complex, cross sector. You need to look at markets as a whole.   

So, that poses some challenges because you don't really see in a lot of projects that we are looking at things across different types of activities with one exception. We do see a lot more focus on agribusiness. And so we see a lot of joint work between our teams that cover private sector, financial sector, agriculture.    

But in general, we see that projects remain quite siloed by area of expertise. So, our recommendations really pertain to these two challenges, to keep strengthening how we capture results, how do we gather data and to keep thinking about how we can incentivize a more integrated view on jobs.  

Birgit Hansl:  

Great, thank you, Rashmi. Oscar, may I ask you another question related to your region, the Latin America and Caribbean region, and can you share with us any new directions you see in the jobs agenda?  

Oscar Calvo-Gonzalez:  

Yeah, so very much like Rashmi was saying, I think that there's a growing awareness that in a way, what is a jobs intervention? It can be anything from a regulatory change in the electricity market to extending the opening hours of daycare centers. And that's actually, by the way, an example in Santiago, Chile, and in Albania, the bank actually supported an expansion of the daycare centers because that's the way you actually get more women into the labor force. So, we are being more deliberate about trying to map the causal paths into the outcomes that we want to achieve. Our projects in a way have always been aimed at creating the conditions for jobs. So, I'll give you one example. In Jamaica where Rashmi used to work as well, we have a project that recently closed and we have a completion report, I guess being reviewed right now, on a foundations for competitiveness and growth project, which is specifically aimed at building up the capacity of middle and small enterprises.   

So, the productivity of those, ultimately that's essential. We need to increase productivity. Productivity trends across the world are not great. And there's some sort of striking facts about not only the lack of growth in some regions like Latin America, but also the heterogeneity within these countries. So, if you want one data point on this, the productivity within manufacturing firms in the US, the ratio from the top 90th, the best performing firm on the bottom 10th is less than 10. In India it's more than 20. So, the spread on the productivity among manufacturing firms is gigantic. There's huge opportunities for improving the productivity within the existing firms.   

So, we want a lot of those interventions. But guess what, in that project in Jamaica, we were stopping there. We were not measuring how does this lead to increased outcomes for these firms in jobs. So, if we were designing that project today, we would be putting a lot more effort into coming up with a robust monitoring and evaluation framework to think about, okay, what did this achieve? Because right now we have a sense of we achieved a lot in terms of even sales data of these firms, but we were not tracking employment. So, that's one big difference. And the other one goes back to the point of anything can be a jobs intervention. And so more than jobs projects, what we have is a jobs lens in most projects.    

And by a jobs lens, all that we mean is that in every project we need to think about is there an opportunity for contributing to better outcomes in terms of jobs that pay better, that have greater benefits, or that you employ more people, that you increase the productivity. So, for example, you could even use the procurement in a particular project. So, it's not necessarily just about project design, but about how you are implementing the project. So, it's a bit of a catch-all phrase, but it's meant to reflect this recognition that development happens through jobs.    

Birgit Hansl:  

Back to you Rashmi. What's the next phase in the independent evaluation groups program of evaluating the World Bank's jobs agenda?  

Rashmi Shankar:  

I think that's a really interesting question. So, I mentioned earlier that with a very project-based approach, it's difficult to really discern jobs impacts because jobs is a complex agenda, medium-term agenda and the near term jobs may go down before they go up. So, the plan in the next phase is to really take a more country-based approach to look at how the programs complement each other and how they have impact at the country level. So, that's one thing. The second thing we would like to do is really look very much at the relationship between jobs growth and how economies transform, how they develop over time and how this leads to better jobs being created and workers moving across different parts of the economy across different industries and different sectors. And that would also be something quite different from work done previously. And that's going to be the second area of focus.  

Birgit Hansl:  

Oscar, as we wrap up, please let me ask you about the World Bank Group and IMF spring meetings that will be taking place towards the end of this month. The theme this year is the jobs agenda. What are the one or two things you would like to see coming out of these meetings?  

Oscar Calvo-Gonzalez:  

So, my sense is that all these gatherings are always a huge opportunity for us to actually listen to the countries. So, what I really want is for the countries to tell us how things are going and what do they see as the big challenges.    

Birgit Hansl:  

How about you Rashmi? Any thoughts?  

Rashmi Shankar:  

I agree with Oscar. I think it's really important for us to listen to what our client countries are telling us. They know best their challenges. And I think where we play a role is really bringing all the different experiences from across the world and creating a forum for also for the clients and countries to talk to each other and learn directly from each other.  

Oscar Calvo-Gonzalez:  

Yeah, that's the best part actually when you as an observer in these meetings, when you see the different delegations getting together and it's almost like if we didn't have a spring meetings or annual meetings, they would have to be invented because they actually do serve a purpose. And it's that purpose. It's the delegations talking to each other. That is the best.  

Birgit Hansl:  

Many thanks for joining me, Oscar and Rashmi. It's been a fascinating conversation. To learn more about the Independent Evaluation Group's recent work on evaluating the World Bank's support to low income countries in creating jobs, please visit ig.worldbank.org.   

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