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How do we create jobs?
This is arguably the most pressing question for policymakers across the world today. According to the International Labour Organization, more than 200 million people in the world were unemployed in 2011—three-quarters of them in developing countries. The most affected are those between the ages of 15 and 24, who are three times more likely to be unemployed than adults.

There is reason for concern. Unemployed people are often unable to care for themselves and their families, and the lack of jobs has contributed to the recent social and economic unrest around the world.

The World Bank estimates that between 2005 and 2020, more than 700 million jobs must be created to halve the global unemployment rate, mainly to keep up with population growth.

So the question is: Why are there so many unemployed people in developing countries and how do we create large numbers of jobs (and not just any jobs, but good jobs with sound working conditions, benefits, and opportunities for advancement)?

Jobs are scarce for many reasons—inadequate policy making, poor infrastructure, and limited access to finance. For young people the mismatch between education and the needs of the labor market is a major hurdle. (For more detailed analysis, see the report by the Education for Employment (e4e) initiative, sponsored by the Islamic Development Bank and IFC)

When it comes to possible long term solutions for unemployment, the private sector—which provides about 90 percent of jobs in developing countries—offers an excellent starting point (World Bank 2005).

IFC works with private sector in developing countries and emerging markets. In 2010 our investment clients provided around 2.4 million direct jobs (IFC 2011). This may not appear to make a dent in unemployment figures, but jobs created by our clients between 2008 and 2010—net of job losses--increased by 10 percent, an important trend in an environment where job losses were the norm, and these only relate to direct jobs provided by IFC’s clients.

The indirect and induced effects on job creation of our investments and advisory are much harder to estimate--but also much larger. For instance, data from a gold mining company in Ghana—an IFC client—demonstrated that for every direct job provided in the mine, 28 more jobs were provided in the economy (Steward Redqueen 2011).

Another area where job creation effects are hard to determine is in projects that increase access to finance. Lack of finance is routinely cited by companies as one of the key constraints to growth, particularly for micro, small, and medium-sized companies (MSMEs). In 2010, IFC clients provided almost 10 million loans to MSMEs (IFC 2011). Estimating how many jobs these enterprises provided or created is much more difficult.

We also know that better investment climates have positive effects, for example on business entry, but there is much less evidence on how this translates into more jobs.

All this to say that the private sector is an important contributor to job creation in the developing world and our work with clients has taught us something about how jobs are created. But there is much more we need to learn. For instance, we need to better understand how investing in different sectors, strengthening supply chains, providing better access to finance and infrastructure, improving skills, and the investment climate help create jobs—and what works best under what circumstances.

To help answer some of these questions IFC is conducting a study to assess private sector contributions to job creation. Click here for more information. Using data from our clients, literature reviews, and case studies we aim to deepen our knowledge and use what we learn to influence decision making.

But we will not have all the answers. That’s why we are looking for active participation by people and institutions around the globe. Please share your thoughts and experiences, and help enrich our understanding through this blog. We look forward to your contributions.

Comments
Paul Nyambe - 3/7/2012 6:35:09 AM
SUSTAINABLE JOB CREATION AND POVERTY ALLEVIATION IN DEVELOPING COUNTRIES
PROMOTION OF SUSTAINABLE YOUTH ENTERPRISE DEVELOPMENT IS THE BEST WAY TO SUSTAINABLE JOB CREATION AND POVERTY ALLEVIATION.

THE ZAMBIAN CASE.

The Zambian business landscape as an example, is generally characterized by a number of structural and systemic enterprise development challenges and limitations that are in effect hindering sustainable youth enterprise development. The root causes of these challenges are numerous and may include among others the myopic and/or non-pragmatic economic and business planning methods whose emphasis is mostly survival-oriented, and the negative/non-appropriate cultural and educational backgrounds among others.

Sadly, these challenges and growth limitations are even immense in the perspective of youth enterprise development.
On the other hand, young people and in this case youth entrepreneurs are seen and factually regarded as the true living hope for sustained social and economic development of any progressive economy of the world today.

However, the same is not practically the case in Zambia as mostly, the natural enterprising efforts of these young and growth-oriented entrepreneurs are overwhelmingly stifled by a number of structural and systemic business development challenges and limitations. Prominent among these are;

(i) The difficulty associated with raising business finance as a youth entrepreneur for sustainable investment activities.

(ii) The non availability/inclusiveness of auto-business development, matching and networking facilities and services.

(iii) The general lack and/or ineffectiveness of a youth-enterprise-development enabling environment both in public trade policies and private sector service delivery systems respectively.

The effect of these business development challenges and limitations are far reaching and may not only include the effect of nurturing of these originally growth-oriented entrepreneurs to only start and develop survivalist enterprises as opposed to sustainable(scalable) business that later employ others, but represent to a greater scale the broader society's lost social and economic growth prospects. Realistically, this poses a danger of social and economic discontinuity in a society like ours especially in the wake of an unpredictable economic age.

WAY FORWARD
Ultimately, it is necessary for all stakeholders that believe in business or enterprise development promotion as an important element in the fight against poverty or under development and the attainment of sustained social and economic development, to seriously embrace and support inclusive, innovative, appropriate and sustainable efforts and strategies aimed at creating a responsive environment for sustainable enterprise development at all levels, with special emphasis given to the youth enterprise development perspective.
Importantly, one of the best strategies that may be useful in offsetting this imbalance towards the attainment of sustainable youth enterprise development hence sustainable job creation and poverty alleviation in Zambia and or indeed any other part of the world that may be facing similar challenges is to:
Embrace and Promote the Creation of inclusive Entrepreneur Support Networks/Associations That:

a. Foster practical and appropriate networking among entrepreneurs of various levels.

b. Facilitate and mediate for increased access to business financing opportunities for their members through strategic collaborations and partnerships with relevant stakeholders that may include commercial banks, venture capital institutions, the Government, local and international developmental financial institutions, donor agencies and the civil society.

c. Endeavor to enhance business and entrepreneurial knowledge development among entrepreneurs.

d. Act as entrepreneurial/business interest advocacy and policy dialogue platforms with various stakeholders including Government and other private sector players and,

e. Motivate and inspire the general population to take up entrepreneurship as a transformative practice that can unlock unlimited opportunities in the life of an individual or given society.

Indeed like Entrepreneur and Author Clifton Taulbert rightly put it in the introduction of his book - Who Owns The Ice House?-8 life lessons from an unlikely entrepreneur: ÔÇ£Now, more than any other time in history, the future we share together as humans will need our all-hands-on-deck commitment. And no one embraces the future like the entrepreneurÔÇØ.

It is therefore in view of the above highlighted major sustainable youth enterprise development prohibitory factors and in a quest to end poverty at personal and societal levels respectively, that led me as a one time victim but visionary-turned youth entrepreneur to initiate the creation of the Youth Entrepreneurs Network of Zambia (YENZ) in July 2010. After having been personally severely choked by these growth-threatening setbacks as a youth entrepreneur during the development of my first formal enterprise. The Youth Entrepreneurs Network of Zambia was hence created as an entrepreneur support network of choice and designed to be a collective platform for the availing of practical, innovative, appropriate and sustainable solutions to some of the major challenges hindering sustainable youth enterprise development in Zambia.
The Youth Entrepreneurs Network of Zambia therefore embraces in its programing and formation, the above suggested and inclusive strategies through the designing of its core operating systems as briefly outlined below:

i)Auto-Business Mentoring, Matching and Networking Facilities and Services-that aims to foster pragmatic partnerships and networking among entrepreneurs as a first line business development challenge alleviation strategy.

(ii) Business Finance Mediation and Facilitation- aimed at fostering increased access to affordable and appropriate business financing opportunities for the membership, through strategic partnerships and collaborations with various local and international stakeholders that may include Government, commercial and developmental financial institutions, donor agencies and other civil society groups.

(iii) Business and Entrepreneurial Knowledge Development facilities and services- aimed at fostering continuous business/entrepreneurial knowledge development among the membership.

(iv)Trade Policy Dialogue & Advocacy- aimed at influencing private and public trade policy direction locally and internationally.
This enterprise development thought was shared by Paul Nyambe, Founder of the Youth Entrepreneurs Network of Zambia. For more info, comments, linkages, partnerships or anything else. Please contact at +260 0977 164079 or email 'youthentrepreneurs@zambia.co.zm'. Facebook:http://www.facebook.com/pages/Youth-Entrepreneurs-Network-of-Zambia/111202065626312

Roland Michelitsch - 2/28/2012 6:28:51 PM
...what kinds of jobs are we creating and jobs drive needs rethink on finance and resources
Thank you for your comments.

IFC acknowledges the relevance and constraints that private sector firms face to create jobs, including access to finance and infrastructure, which will be addressed in the study.

Access to finance for small and medium enterprises (MSMEs) is a clear strategic priority: IFC helps to both build financial infrastructure by providing advice, for example by helping to establish credit bureaus, or collateral registries, which help MSMEs access finance. IFC also supports financial intermediaries through both investments and advice, and in 2010, IFC clients had almost 10 million outstanding loans to micro, medium and small enterprises (MSMEs) accounting over USD $140 billion. More information is at IFC's website under MSME finance (in the Financial Markets section of the Industries tab at www.ifc.org). For the study, we would like to better understand how these loans translate into jobs provided by, or created through, these MSMEs.

Infrastructure is also a key priority for IFC, and IFC's has financed projects including water distribution, power generation, highway construction, telecommunications, ports and alternative power generation, to name a few. On IFC's website under Infrastructure you will find more information (in the Industries section at www.ifc.org). We do track the direct jobs provided by these projects, but the numbers are relatively small (about one third of a million jobs were provided by our clients). The real development impacts come from millions of people and enterprises benefitting from improved services: For example, last year our clients provided over 110 million people with improved infrastructure. But estimating how improved infrastructure contributes to job creation is much more difficult.

There were also questions about extractive industries (EI), and whether and how they contribute to the development of surrounding communities -- including through providing jobs. Clearly EI projects can also have negative effects, but we are trying to mitigate the negative effects - for example through our environmental and social performance standards - and enhance the positive effects - for example by providing advice to strengthen local supply chains, improving community development programs and enhancing environmental and social performance. More information is at IFC's website under the name oil, gas and mining (in the Industries section at www.ifc.org). You may be particularly interested in the Community Development Fund (CommDev, see at www.commdev.org). Incidentally, the authors of the report on the Ghanaian mine attribute the strong results at least in part to the linkages program that IFC put in place together with the mine (see The Socio-Economic Impact of Newmont Ghana Gold Limited in the following link www.newmont.com/africa/ahafo-ghana/public-disclosure-documents).

Carmen Niethammer - 2/26/2012 4:16:49 PM
Some of the Poorest Countries Rely Heavily on Women Employees
Women are a formidable economic force across the world, making up 40 percent of the world's work force. Many of the sectors that are critical for economic growth in some of the poorest countries rely heavily on women employees. Yet smart employment practices that enhance productivity while creating better working conditions for women are often overlooked.

- Sectors critical for economic growth, such as agribusiness, textiles, and tourism typically employ large numbers of women. Often, these jobs are low in productivity with precarious contract situations and poor labor standards. Inadequate workplace conditions drive absenteeism and low productivity;

- In sectors where women are rarely employed, such as heavy manufacturing, mining, infrastructure, new research points to productivity increases when firms increase employment opportunities for women;

- Subsectors with high female employment and high quality products, such as ICT, hold lessons for workplace design and employment policies more appropriate for female workers.

Strong data-driven business case examples often originate from developed markets, leaving emerging market contexts understudied. This presents an opportunity to gather relevant information and test potential best-practices with IFC's unique client base and partners.

Website: www.ifc.org/gender

Prachi Agarwal - 2/26/2012 5:30:52 AM
Proper displacement Management for sustainable jobs
Private sector's contribution in job creation is beyond doubt. A passion to excel/innovate in the area of interest and a better risk taking ability could be the likely reasons why they do a better job at job creation than the public sector. A case study for this study could be that of Jamshedpur in India. The city was developed in early 20th century by Jamshedji Nusserwanji Tata to set up a steel plant in India. It is one of the most well planned cities in India and the 7th richest city in India that too in one of the poorest states of India. Jamshedpur is the only million plus city in India without a municipal corporation. The largest steel company, Tata Steel employs the best of talent here. The key takeaway from this case study is that private sector has a large potential to create jobs and reduce poverty when they include the people in its vision and provide a conducive environment to grow both for the company and the society in which it exists; by ensuring livelihood and all the comforts and conveniences of a city, it was not difficult to set up a steel plant in a densely forested area.

In sharp contrast we see today a large steel project by POSCO facing huge resistance in India. The point of contention here is that the people are not convinced that they will get enough jobs and livelihood by giving up their current source of income - their land. Thus, job creation is only possible when the displacement management is done well.

Another point to be studied is how well the govt policies and private initiatives work in tandem. Quoting another example from India, the MGNREGA programme of the government to provide a minimum of 100 days of work to rural people led to a shortage of labor for many private projects. This programme has a good intent; however, it did not go a long way in creating new jobs; all it did was shift jobs from one segment to another. Thus, any project, of either government or private sector, should aim to overall increase the number of jobs and not shift jobs from one segment to another. The creation of jobs should also be even over various regions to prevent migration of people leading to development of few regions only (as seen in coastal China).

Another point to consider is the mismatch between demand and supply of jobs. For example, the power sector in India faces shortage of skill at the middle level; there are lot of senior people to guide the projects and entry level people and unskilled labor to execute the projects; however lack of skilled project managers at middle level puts pressure on the available resources.

Finance and infrastructure are critical for this. Either infrastructure should be available or policies should be in place to facilitate the building of infrastructure. With the increasing participation of private sector in building the infrastructure and availability of finance from institutions like IFC, private sector is now reaching the most underdeveloped regions.


Patrick Smith - 2/23/2012 7:57:04 PM
Jobs drive needs rethink on finance and resources
Unquestionably, the IFC is right to target unemployment, especially youth unemployment. This is a time when slow-growing industrialised countries in Europe are talking of a ÔÇ£lost generationÔÇØ with youth unemployment hitting 40%. On paper, job opportunities should abound in developing economies ÔÇô given roads, schools, hospitals and power stations that need to be built. But state budgets are being cut back as revenues fall. Equity investment from the IFC and other multilateral institutions could help plug these financing gaps and kick start job-creating public works programmes. Partnerships between the IFC and the still-expanding China Development Bank might also help.

Your excellent blog argues that limited access to finance contributes to job scarcity. Entrepreneurs struggle to raise money for small and medium scale enterprises ÔÇô although these are far more effective at creating sustainable jobs than the big state or multi-national companies that get the lion's share of credit. Could the IFC research focus on this shortcoming and could it do more to tilt its own portfolio towards small and medium size companies?

Your example of a gold mining company in Ghana as a job creating enterprise raises more questions. World Bank research suggests that mining companies in Ghana, and other developing countries, contribute relatively little to state revenues; local civic groups argue that some mine projects result in a net loss of job opportunities because of the farmers (and the ÔÇ£galamseyÔÇØ or informal miners) that they displace. Why not test mining and other natural resource projects for their effects on job creation as well as environmental conditions?

One last question, linked to natural resource projects in Africa, is about the lack of investment in refining and processing facilities to add value (and create sustainable jobs) in mining and oil economies? Again, can pressure be brought to bear on international resource companies financed by the IFC to do more on local content, and therefore jobs?

Nancy Chimhandamba - 2/23/2012 4:20:19 AM
And what kind of jobs are we creating
An interesting discussion. It is no surprise that three quarters of the world's unemployed are in the developing world. Being an MBA graduate operating my own business for the last two years, the challenges facing entrepreneurs and small to medium enterprises in developing countries contribute to the high unemployment in the developing world. Top on the list is access to finance and programmes that support start-ups. While financing may be available the criteria to access it is discouraging. The result is high unemployment and the growth of the informal sector, where finding sound working conditions and benefits and opportunities for advancement is not necessarily a priority as it is all about survival. Providing better access to finance and infrastructure will continue to be a very important topic for discussion.

Roland Michelitsch - 2/22/2012 8:38:57 PM
... and what kind of jobs are we creating
Thanks for the encouraging comment. You raise many questions. The study will try to answer them, and here are some initial reactions:
Clearly we care about the quality of jobs, not just the number of jobs.
Here are some things you may find interesting (with website links):
- Through an ILO/IFC partnership called "Better work" we are trying to improve working conditions:
See www.betterwork.org
- Data from our Development Outcome Tracking System DOTS shows that while there is a wage gap between women and men among our client companies - at 75 cents to the $ - this gap is much smaller than typical in developing countries, and initial data seems to be indicating it is narrowing. See www.ifc.org/results - investments - development results - Key findings: Two years of measuring development impact by gender
- IFC's Performance Standard on Labor and Working Conditions help to ensure good working conditions, and - by becoming a de-facto global standard by being applied as "Equator Principles" by other institutions, these standards have an influence well beyond IFC. See www.ifc.org/sustainability, and the 2012 edition of the Sustainability Framework, Performance Standard 2.

Casper N. Edmonds - 2/22/2012 11:02:00 AM
And what kind of jobs are we creating
A great and very welcome initiative.

Indeed, many women and men across the world are making up their minds about globalization, free trade, growth and development on the basis of whether it has resulted in a job for them - or not. For many poor women and men, a job is a source of personal dignity, identity, a sense of contribution to society, and perhaps most importantly a way to sustain themselves and their families.

But not just any job. Too many hazardous jobs result in injuries and sometimes death. Too many women and men end up working poor - in low-skilled, precarious jobs in the informal sector with no safety net or access to social protection.

So, an important follow-up question to the new study on the number of jobs created by the IFC, is what kinds of jobs is it that we and our clients have helped generate. Are they more green or brown? Are they lasting or temporary? Are they low-skill manual jobs, or are we and our clients investing in the skills and human resources that firms across the world so despearately require?