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INER NAIONAL LA BOUR ORGANIZ AIONRESE ARCH DEPARMEN

World of Work Report 2014Developing with jobs


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Copyright International Labour Organization 2014

First published 2014

Publications o the International Labour Office enjoy copyright under Protocol 2 o the Universal CopyrightConvention. Nevertheless, short excerpts rom them may be reproduced without authorization, on conditionthat the source is indicated. For rights o reproduction or translation, application should be made to ILOPublications (Rights and Permissions), International Labour Office, CH-1211 Geneva 22, Switzerland, orby email:[email protected]. Te International Labour Office welcomes such applications.

Libraries, institutions and other users registered with reproduction rights organizations may make copies inaccordance with the licences issued to them or this purpose. Visit www.irro.orgto find the reproductionrights organization in your country.

World o Work Report 2014: Developing with jobs / International Labour Office. Geneva: ILO, 2014

ISBN 978-92-2-128720-9 (print)ISBN 978-92-2-128721-6 (web pd)

ISSN 2049-9280 (print)ISSN 2049-9272 (web pd)

International Labour Office

employment / unemployment / income distribution / minimum wage / employment policy / economicdevelopment / social implication / international migration / trend / projection / developed countries /developing countries

13.01.3

Te designations employed in ILO publications, which are in conormity with United Nations practice, andthe presentation o material therein do not imply the expression o any opinion whatsoever on the part o theInternational Labour Office concerning the legal status o any country, area or territory or o its authorities,or concerning the delimitation o its rontiers.

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Since the eruption o the financial crisis in 2008 much o the global policy debatehas ocused on advanced economies and their ability to cope with the impacts

o the crisis. During this period, a major policy shif has taken place in developingcountries that has ofen gone unnoticed. Notably, in the ace o the slowdown otheir exports to advanced economies, developing countries have been conronted

with the need to rebalance their economies and find new sources o economicgrowth and job creation.

Tis report draws out the many lessons that can be learned rom this policyshif. First and oremost, it shows the considerable policy innovation among theover 140 emerging economies and low-income countries which are examined. Temeasures range rom employment guarantee schemes to cash benefits or vulner-able groups and policies to promote ormal enterprises. Some o these are beingreplicated throughout the developing world and have even had some attraction ora number o the advanced economies most affected by the financial crisis.

Second, a key inding emerging rom the report is that good quality jobs

matter or development. While it has long been argued that developing coun-tries should concentrate efforts on trade and investment liberalisation and inra-structure spending, supported by external aid i needed, evidence presented in thereport shows that such policies will not yield development unless accompanied bydedicated efforts to boost employment and decent work opportunities and tackleworking poverty. In countries where it was implemented, such a policy shif notonly helped development but also played a counter-cyclical role that helped atten-uate the impacts o the financial crisis.

Tird, governments in developing countries have gained confidence and there-ore policy space. Tey have realised that there is no one size fits all solution to theirproblems and that remedies that used to be advocated (though not always applied)

in industrialised countries are not necessarily what is required in a developingcountry context. Renewed interest among developing countries in well-designedemployment regulation, minimum wages and social protection illustrate the point.

At the same time, huge challenges persist. Rising youth unemployment,including among new graduates, stubbornly high employment inormality andsignificant income inequalities require urgent policy attention. In too many devel-oping countries, including some emerging economies that have significant insti-tutional capacity, core labour standards are not properly enorced. Tere are noindependent trade unions in some countries, and employer organisations cannotoperate effectively in other parts o the world.

In sum, Developing with Jobs highlights the relevance o the ILOs man-date, values and policy tools. It also demonstrates clearly why decent work andsocial protection should be central goals in the post-2015 development agenda.

Preface

Guy RyderILO Director-General


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Acknowledgements

Who are the authors of World of Work Report 2014? Raymond orres (Executive Summary)

Steven Kapsos (Chapter 1)

Moazam Mahmood, Woori Lee, Mariano Mamertino, Catherine Saget,Clment Malgouyres and Marina Giovanzana (Chapter 2)

Moazam Mahmood, Woori Lee, Mariano Mamertino, Ekkehard Ernst,Christian Viegelahn, Evangelia Bourmpoula and Marina Giovanzana(Chapter 3)

Moazam Mahmood, Woori Lee, Mariano Mamertino, CatherineSaget, Clment Malgouyres, Christian Viegelahn, Shailaja Fennelland Marina Giovanzana (Chapter 4)

Raymond orres, Ha-Joon Chang, Antonio Andreoni, Steven Kapsos,Eddy Lee, Irmgard Nbler, Marialaura Fino, Ming Leong Kuan,Sophia Latsos and Daniel Sexton (Chapter 5).

Sangheon Lee, Mariya Aleksynska, Uma Amara Rani, Florence Bonnet,Colin Fenwick, Mark Lansky, Mario Macis and Paola Monti (Chapter 6)

Florence Bonnet and Christian Viegelahn (Chapter 7)

Matthieu Charpe, Sangheon Lee, Daniela Arias and Slim Bridji (Chapter 8)

Sameer Khatiwada and Brenda Samaniego (Chapter 9)

Te report was coordinated by the Director o the ILO Research Department,Raymond orres, and Deputy Director Moazam Mahmood. Steven obinsupplied cross-cutting inputs and Judy Rafferty was production coordinator orthe project.

We are grateul to the ILO Deputy Director-General or Policy, Sandra Polaski,or her guidance and stimulating comments. Excellent eedback on first drafs othe report was provided by Khalid Malik, Director o the Human DevelopmentReport Office o UNDP, and Pierella Paci, Lead Economist Poverty Reductionand Economic Management Network, World Bank. Proessors Ha-Joon Chang,Antonio Andreoni, Jayati Ghosh, Nadeem ul Haq, James Howard, Dic Lo, erry

McKinley, Carlos Oya, Saumya Premchander and Stephanie rinci preparedbackground material or some o the chapters.

ILO Regional Offices or Arica, Arab States, Asia, Europe and Central Asia, andLatin America and the Caribbean gave comments and inputs, notably on theirrespective regions. Helpul eedback and numerous drafing suggestions were alsoreceived rom other ILO colleagues, including Patrick Belser, Janine Berg, EvangeliaBourmpoula, Duncan Campbell, Annette-Marie Ching, Ekkehard Ernst, VeronicaEscudero, Colin Fenwick, Marialaura Fino, Chang-Hee Lee, Michelle Leighton,Susan Hayter, Iyanatul Islam, Stean Khn, Christiane Kuptsch, Elva MoureloLopez, John Myers, Irmgard Nbler, Aurelio Parisotto, Anne Posthuma, Raphal

Peels, Catherine Saget, Helmut Schwarzer, Steven obin, Manuela omei, Alettevan Leur and Christian Viegelahn. Finally, Peter Poschen provided a timelycontribution to Chapter 5.


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Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v

Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vii

Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xvii

1. Introduction and structure of the report: Global contextand employment and social trends in the developing world . . . . . . 1

Structure o the report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Appendix A. Country classification used in the report . . . . . . . . . . . . . . . . . . . . . . 15

PART I. Jobs as drivers of development

2. Growth patternsin developingcountries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

A. Economic growth perormance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

B. Te composition and nature o economic growth . . . . . . . . . . . . . . . . . . . . . . . . . 23Appendix A. Econometric evidence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Reerences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

3. Employment patterns and their linkwith economic development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

A. Employment patterns in developing countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

B. Measures o job quality in developing countries . . . . . . . . . . . . . . . . . . . . . . . . . . 37

C. Quality jobs are drivers o development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

Reerences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

Table of contents


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4. Decomposing growth patterns: The roles of investment,consumption, government expenditure, exports and education 51

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

A. rends in growth composition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

B. Different patterns o growth: Te examples o Brazil and China . . . . . . . . 54

C. Te role o human capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

Reerences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

PART II. Policies for developing with jobs

5. Productive transformation, decent work and development . . . . . . 65

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

A. Productive transormation through economic and social upgrading . . . . 66

B. In pursuit o competitiveness: High road or race to the bottom? . . . . . . . . 75

C. Concluding remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81Reerences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82

6. Labour and social protection institutions:Recent trends and impact on development . . . . . . . . . . . . . . . . . . . . . . . . . . 85

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

A. Institutions and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

B. Labour institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88

C. Labour and social institutions and inormality . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

D. Concluding remarks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

104Reerences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105

7. Social protection, living standards and economic development:Overview of trends and assessment of policies . . . . . . . . . . . . . . . . . . . . . . 109

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109

A. Social protection in developing countries:Emerging trends in spending and coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110

B. Social protection policies in action:Innovations and gaps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114

C. Social protection and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127D. Concluding remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139

Appendix A. A typology o countries social protection strategies . . . . . . . . . . 140

Reerences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143


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8. Does income distribution matter for development?Trends in labour share of income and their economicimpacts in developing countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149

A. Why is it important to look at trendsin the share o labour in total income? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151

B. rends in the labour share o incomein developing countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153

C. Adjusting the labour share or sel-employment income . . . . . . . . . . . . . . . . . . 159

D. Economic impacts o changesin the labour share o income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163

E. Summary and policy implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167

Appendix A. rends in the labour share o income (additional analysis) . . . 169

Appendix B. Methodologies to adjust the labour shareo income or sel-employment income . . . . . . . . . . . . . . . . . . . . . . . . 173

Appendix C. Te Global Policy Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174

Appendix D. Economic impact analysis or five Latin American countries 175

Reerences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178

9. International migration and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181

A. rends in international migration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182

B. Economic consequences o international migration . . . . . . . . . . . . . . . . . . . . . . 187

C. Policy considerations: Leveraging labour migrationor growth and international development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194

Appendix A. Decomposing per capita GDP growthin a model with migration and human capital . . . . . . . . . . . . . . . 196

Appendix B. Macroeconomic impact o remittances . . . . . . . . . . . . . . . . . . . . . . . 199

Reerences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201

Recent publications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203


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List o figures, tables and boxes by chapter

FIGURES

Chapter 1

Figure 1.1 Global and regional GDP growth estimates and projections,200007, 201214 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Figure 1.2 Unemployment trends and projections, developedand developing economies, 200319 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Figure 1.3 Scenarios or uture employment growth . . . . . . . . . . . . . . . . . . . . . . . 5

Figure 1.4 Labour productivity (output per worker as % o levelin developed economies and EU), 1994, 2004 and 2014 . . . . . . 6

Figure 1.5 Employment by economic classin the developing world, 19942019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Figure 1.6 Employment growth by economic class, 200913 and 201418 8

Figure 1.7 Vulnerable employment by gender, world and regions, 2014 . . 9

Figure 1.8 Employment by economic class and statusin employment category . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Figure 1.9 Employment by economic class and economic sector . . . . . . . . . . 10

Figure 1.10 Unemployment by age and gender, world and regions,2007 and 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Figure 1.11 Labour orce participation by gender, world and regions,2004, 2014 and 2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Chapter 2

Figure 2.1 GDP per capita average annual growth rates, 19802011 . . . . . 20

Figure 2.2 GDP per capita, average annual growth rate, 19802011 . . . . . 21

Figure 2.3 Change in the share o manuacturing contributionto GDP, 19802011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Figure 2.4 Income per capita, poverty and inequality in Azerbaijan . . . . . . 27

Figure 2.5 Income per capita, manuacturing and natural resourcesin Indonesia (19702010) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Chapter 3

Figure 3.1 Employment and working age population growth rates . . . . . . . 34

Figure 3.2 Employment and labour orce growth rates . . . . . . . . . . . . . . . . . . . . . 35Figure 3.3 Change in the share o working poor (


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Chapter 4

Figure 4.1 Decomposition o economic growth: Contribution to saverageannual GDP growth during the period 19802010 . . . . . . . . . . . . 52

Figure 4.2 Composition o economic growth in Brazil, 19802012 . . . . . . 54

Figure 4.3 Composition o economic growth in China, 19802012 . . . . . 55

Figure 4.4 Decomposition o output growth into physical capital, human

capital, employment and total actor productivity, 19912011 57Figure 4.5 Human capital and GDP per capita growth in India . . . . . . . . . . 58

Figure 4.6 Human capital and GDP per capita growth in Samoa . . . . . . . . . 58

Figure 4.7 Average years o schooling or adults over age 25,1980 and 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

Figure 4.8 GDP growth and sectoral composition, Cabo Verde . . . . . . . . . . . 61

Figure 4.9 Investment in Cabo Verde, 19802011 (per cent o GDP) . . . . 61

Chapter 5

Figure 5.1 Number o bilateral and regional trade agreementsthat include labour provisions, 19902013 . . . . . . . . . . . . . . . . . . . . . 80

Figure 5.2 Number o SouthSouth trade agreementsthat include labour provisions, 19902013 . . . . . . . . . . . . . . . . . . . . . 80

Chapter 6

Figure 6.1 Labour and social protection institutions:An illustrative typology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86

Figure 6.2 Monthly minimum wages, 2012(% distribution within each region, US$) . . . . . . . . . . . . . . . . . . . . . . . 88

Figure 6.3 Minimum wages, 2011 or latest year (as % o average wages) . . 89

Figure 6.4 Statutory limits to weekly working hours (normal hours) . . . . . 90

Figure 6.5 Economic development and the incidenceo excessive working time o more than 48 hoursper week, 2012 or latest year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

Figure 6.6 rade union density in selected countries, 2010 or latest years 92

Figure 6.7 Components o employment in the inormal economyas percentage o non-agricultural emplyoment . . . . . . . . . . . . . . . . . 104

Chapter 7

Figure 7.1 Te emergence o social protection systemsover the past 100 years in developing countries . . . . . . . . . . . . . . . . 111

Figure 7.2 rends in government spending on social protection,1990 to 201112 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111

Figure 7.3 Per capita general government expenditureand per capita public social protection expenditure,at constant prices 2005 US$ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113

Figure 7.4 Number o households and jobs receiving supportrom MGNREGA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113

Figure 7.5 Percentage o countries with cash benefit programmesor children in 201213 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115

Figure 7.6 Public social protection expenditure per child(excluding health and education) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115


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Figure 7.7 Cost and coverage o the main conditional cash transerprogrammes in Latin America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117

Figure 7.8 Percentage o countries providing unemployment benefit,by type o programme . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118

Figure 7.9 Maternity protection: Percentage o womenin employment eligible or maternity cash benefits . . . . . . . . . . . . . 119

Figure 7.10 Correlation between percentage o women in employmentcovered by maternity protection and maternal mortality rate . 120

Figure 7.11 Expenditure on old-age benefits in developing countries,latest available year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121

Figure 7.12 Correlation between the proportion o older personsreceiving a pension and the labour orce participation rateamong persons aged 65 and above . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122

Figure 7.13 Social health protection coverage and poverty . . . . . . . . . . . . . . . . . . 123

Figure 7.14 A typolog y o countries social protection strategies:Variation by income groups . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125

Figure 7.15 Correlation between per capita expenditureon social protection and poverty rates . . . . . . . . . . . . . . . . . . . . . . . . . . . 128

Figure 7.16 Poverty and inequality indicators among the five groupso countries (typology) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128

Figure 7.17 Estimated impact o Bolsa Famlia programmeon extreme poverty (20012012) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129

Figure 7.18 Real wages or rural casual work (19992012) . . . . . . . . . . . . . . . . . 129

Figure 7.19 Recent changes, resources and coverage o social protectionby employment indicators, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132

Figure 7.20 Correlation between changes in spending on social protectionand productivity growth, 19912011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134

Figure 7.21 Correlation between changes in spending on social protectionand per capita economic growth, 19912011 . . . . . . . . . . . . . . . . . . . 135

Figure 7.A1 Level o statutory commitment according to the levelo income groups, latest available year . . . . . . . . . . . . . . . . . . . . . . . . . . . 141

Figure 7.A2 Resources invested to give effect to countries commitmentby level o income groups, latest available year . . . . . . . . . . . . . . . . . . 141

Figure 7.A3 Results (effective implementation): Criteria met by levelo income groups . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141

Chapter 8

Figure 8.1 Changes in labour share o incomes and in personalincome distribution (Gini index) in selected countriesover recent periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152

Figure 8.2 Te unadjusted labour share o income and GDPper capita in 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153

Figure 8.3 Changes in the unadjusted labour share o incomeby income group, 200008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157

Figure 8.4 Te unadjusted labour share o income, by region(weighted average; share in 2000 equals 100) . . . . . . . . . . . . . . . . . . . 156

Figure 8.5 Growth in sel-employment and real wages: 200008 . . . . . . . . . 158


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Figure 8.6 Adjusting the labour share o income:Different methods and results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159

Figure 8.7 Changes in the income share o the sel-employedand its components (2000s) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160

Figure 8.8 rends in the adjusted labour share o income(19972009, base year = 2000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162

Figure 8.9 Impacts o a declining labour share o income on output . . . . . 164Figure 8.10 Simulated impact o higher labour share o incomes in 2015 . . 165

Figure 8.A1 GDP per capita per income group(at constant US$, 2000 = 100) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169

Figure 8.A2 Annualized growth rate o the labour share o income ando GDP per capita (20002008: annualized growth rates) . . . . 169

Figure 8.A3 Te labour share o income across income categories(index 2000 = 100) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171

Figure 8.A4 Te labour share o income in North America and Europe,19702000 (simple average, index 2000 = 100) . . . . . . . . . . . . . . . . 172

Figure 8.A5 Sel-employment ratio by income level (2008) . . . . . . . . . . . . . . . . . . 172

Chapter 9

Figure 9.1 A snapshot o global emigration rates, 200510 . . . . . . . . . . . . . . . 182

Figure 9.2 Age distribution o migrant inflows by developmentat destination (19902000 and 200013) . . . . . . . . . . . . . . . . . . . . . . 185

Figure 9.3 Cost o migration in selected sending countries, 2013(as a share o GDP per capita) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188

Figure 9.4 Global overview o remittances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191

Figure 9.5 Remittance outflows by region (2013) . . . . . . . . . . . . . . . . . . . . . . . . . . . 192

Figure 9.6 Impact o remittances on savings and investment:A global overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193

TABLES

Chapter 2

able 2.1 GDP per capita annual growth rates, period average(per cent per annum) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

able 2.2 GDP per capita annual growth rates, beore and aferthe economic crisis (per cent per annum) . . . . . . . . . . . . . . . . . . . . . . . 22

able 2.3 Growth rates by sector, period annual averages(per cent per annum) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

able 2.4 Growth rates by sector, period annual averages(per cent per annum) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

able 2.5 Value added by sector as percentage o GDP . . . . . . . . . . . . . . . . . . . 25

able 2A.1 Fixed effect (within) estimator, GDPand manuacturing growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

able 2A.2 Fixed effect (within) estimator, GDP per capitaand manuacturing share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

able 2A.3 Fixed effect (within) estimator, GDD and manuacturinggrowth by income group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30


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Chapter 3

able 3.1 Employment growth rate by gender and age group. . . . . . . . . . . . . 34

able 3.2 Unemployment rate by gender and age group . . . . . . . . . . . . . . . . . . 35

able 3.3 Labour orce participation rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

able 3.4 Determinants o job quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

able 3.5 Share o employment by status. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

40able 3.6 Working poverty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

able 3.7 Labour productivity growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

able 3.8 Share o employment by sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

Chapter 4

able 4.1 Domestic demand, exports and imports as percentage o GDP 52

able 4.2 Domestic and oreign sources o investment unding(percentage o GDP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53

Chapter 5able 5.1 Estimation o the links between wage and salaried employment

and productive transormation patterns . . . . . . . . . . . . . . . . . . . . . . . . . 74

able 5.2 Levels o FDI per worker and share o working poorand vulnerable employment, by Global Competitiveness Indexquintile, latest year or which data are available . . . . . . . . . . . . . . . . 78

Chapter 6

able 6.1 Regulations on fixed-term contracts: A global overview . . . . . . . 95

able 6.2 Correlation coefficients among dimensions

o regulations on FCs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96able 6.3 Changes in regulations on fixed-term contracts, 20092012 . . . 96

able 6.4 Employment in the inormal sector by status in employment 98

Chapter 7

able 7.1 Correlations between social protection expenditureand economic growth, 19902012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137

able 7.2 Estimates o the impact o social protectionon economic growth, 19952012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138

able 7.3 Estimates o the impact o social protection expenditureon economic growth in countries with high-qualityinstitutions, 19952012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138

Chapter 8

able 8.1 Demand regime estimation: Single country estimation . . . . . . . . 166

able 8D.1 Data source . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176

able 8D.2 ADF tests or unit roots (variables are in level) . . . . . . . . . . . . . . . . . 177


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Chapter 9

able 9.1 Benefits and costs o international migration . . . . . . . . . . . . . . . . . . . 187

able 9A.1 Data used to estimate the impact o internationalmigration on growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198

able 9A.2 Results: Impact o migration on growth . . . . . . . . . . . . . . . . . . . . . . . 198

able 9B.1 Data source: Impact o remittances on savings and investment 199

able 9B.2 Impact o remittances on savings and investment . . . . . . . . . . . . . . 200

BOXES

Chapter 1

Box 1.1 Scenarios or uture employment growthin advanced and developing G20 economies . . . . . . . . . . . . . . . . . . . . . . . 4

Box 1.2 Te relationship between type o employmentand amily income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Chapter 2

Box 2.1 Teories to explain cross-country development patterns . . . . . . . . . . 22

Chapter 3

Box 3.1 Inormality, working poverty and vulnerable employment . . . . . . . . 38

Box 3.2 Job quality and structural transormation . . . . . . . . . . . . . . . . . . . . . . . . . 48

Chapter 4

Box 4.1 Human capital, productive employment and development . . . . . . . . 58

Box 4.2 Te role o investment and employment in developmentin Cabo Verde . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60

Chapter 5

Box 5.1 Developmental management o natural resources:Te case o Malaysia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

Box 5.2 Agricultural transormation: Te case o Brazil . . . . . . . . . . . . . . . . . . . 70

Box 5.3 Manuacturing with quality jobs in South Arica . . . . . . . . . . . . . . . . . 71

Box 5.4 raining services in Ethiopia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

Box 5.5 Te role o a skilled workorce in the take-off processin Singapore . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

Box 5.6 Better Factories Cambodia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

Chapter 6

Box 6.1 Developing with democracy:Te case o oreign direct investment (FDI) . . . . . . . . . . . . . . . . . . . . . . . . 87

Box 6.2 ILO EPLex database . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94

Box 6.3 On the interactions between different elementso regulations on fixed-term contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96


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Chapter 7

Box 7.1 Te rise o cash transer programmes in developing countries . . . . 116

Box 7.2 Coping with unemployment and underemploymentin developing countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118

Box 7.3 Te role o non-contributory pensions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122

Box 7.4 Examples o social protection and poverty reduction in action . . 129

Box 7.5 Examples o social protection programmes that integrateskills development activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133

Chapter 8

Box 8.1 Labour share o income in Europe and North America . . . . . . . . . . 157

Box 8.2 Underlying these trends is the decline in the income shareo the sel-employed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160

Box 8.3 Aggregate demand and output effects o changes in the unctionaldistribution o income in high-income countries . . . . . . . . . . . . . . . . . . 164

Chapter 9

Box 9.1 Defining North and South . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185

Box 9.2 Abuse o migrant workers at home and abroad . . . . . . . . . . . . . . . . . . . . 188

Box 9.3 Link between remittances and development:A review o empirical evidence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193


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Developing countries are catching up with advanced economies

Te process o economic convergence between developing countries and advancedeconomies has gathered momentum. Between 1980 and 2011, per capita incomein developing countries grew, on average, by 3.3 per cent per year much asterthan the 1.8 per cent per capita income growth recorded in advanced economies.

Tis process o convergence has accelerated since the early 2000s, especially sincethe start o the global crisis in 200708 (Chapter 1).Tere are, however, significant cross-country differences. Te report identifies

a group o emerging economies which have grown particularly ast (Chapter 2). Inrecent years, most low- and medium-income countries and least developed coun-tries have also made significant progress in terms o economic growth.

with those countries that are investing

in quality jobs making most progress

Te extent to which countries have made efforts to improve job quality plays a

part in explaining the observed growth patterns (Chapter 3). Tis is particularlythe case over the past decade. In countries that have made the greatest invest-ment in quality jobs rom the early 2000s, living standards (as measured by thegrowth in average annual per capita income) improved more than in developingand emerging economies that paid less attention to quality jobs.

Among those countries where working poverty including workers earningless than US$2 a day declined most steeply rom the early 2000s, overall percapita income grew by 3.5 per cent, on average, over the 200712 period. For thosecountries that made least progress in cutting working poverty since the early 2000sthe figure is only 2.4 per cent.

Likewise, countries that were particularly successul in reducing the incidenceo vulnerable employment during the early 2000s enjoyed significant economicgrowth afer 2007. In these countries, per capita growth was almost 3 per cent per

Executive Summary


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year between 2007 and 2012, practically 1 percentage point higher than in countriesmaking least progress in reducing the incidence o vulnerable employment whichincludes own-account employment as well as unpaid amily work.

However, the disparity in quality jobs remains signicant

Despite these positive trends, employment and social challenges remain acute inmost emerging and developing countries. More than hal o the developing worldsworkers (i.e., nearly 1.5 billion people) are in vulnerable employment. Tese workersare less likely than wage earners to have ormal working arrangements, be coveredby social protection such as pensions and health care or have regular earnings.Tey tend to be trapped in a vicious circle o low-productivity occupations, poorremuneration and limited ability to invest in their amilies health and education,which in turn dampens overall development and growth prospects not only orthemselves but or generations to ollow. In South Asia and sub-Saharan Arica,more than three out o our workers are in vulnerable orms o employment, withwomen disproportionately affected compared to men.

levels of working poverty remain elevated despite

the considerable progress already made

Te reduction in the incidence o working poverty in many countries o the devel-oping world has been impressive. Still, 839 million workers in developing countriesare unable to earn enough to lif themselves and their amilies above the US$2a day poverty threshold. Tis represents around one-third o total employment,compared with over hal in the early 2000s.

and around 200 million new jobs are needed over the next ve years

to keep pace with the growing working-age population in emerging

and developing countries

Over the next five years there will be an estimated 213 million new labour marketentrants 200 million in developing countries alone. Tis raises the issue o youthunemployment. Already, the youth unemployment rate exceeds 12 per cent indeveloping countries more than three times the unemployment rate or adults.Regionally, the highest youth unemployment rates are ound in the Middle Eastand North Arica regions, where nearly one in three young people in the labourorce are unable to find work. Young women, in particular, are struggling to find

work in these regions, with unemployment rates approaching 45 per cent.he job challenge is also qualitative. Indeed, educational attainment is

improving ast in most developing countries (Chapter 4). Tere is thereore a growinggap between the skills acquired in education and the nature o jobs available.

pushing many educated youth to emigrate

Te lack o quality jobs is a central determinant o emigration, especially amongeducated youth in developing countries (Chapter 9). Te gap in wages betweenreceiving and sending countries tends to be as high as 10 to 1. In 2013, over 230

million people were living in a country other than the one in which they wereborn a rise o some 57 million since 2000 with South Asia accounting orroughly hal o this increase.


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To meet these challenges, it is essential, rst and foremost, to boost

a diversied productive capacity rather than just liberalizing trade

Te evidence presented in Chapter 5, including the case studies o countries thathave successully upgraded their productive capacity, shows that developmentrequires a strategy to diversiy the economic base and enhance the ability o sus-

tainable enterprises to create quality jobs.While manuacturing tends to be associated with aster economic growthand quality job creation, the report highlights successul experiences based on agri-cultural and rural development, efficient and equitable use o natural resources andservices that connect with the rest o the economy. Tere is no single developmentpath and the report documents success stories or countries at a ll levels o devel-opment. Te natural resource constraints and environmental limits aced by allcountries can be turned into an advantage by developing and emerging economieswhich seize the opportunity or technological leaprogging. In this respect, thegreen economy offers new prospects or developing countries, which ace eweradjustment challenges than advanced economies with mature, carbon-intensive

production structures.In all cases, however, it is crucial to avoid a concentration o economic growth

in a ew export-oriented sectors with limited links to the rest o the economy.Economic diversification policies, measures to acilitate ormalization and expan-sion o enterprises, and the enorcement o labour standards can all contribute tobroad-based development and promotion o decent work.

Productive transormation needs to be underpinned by an enabling envir-onment or enterprises, including supportive macroeconomic policies. Te experi-ences o several Asian and Latin American countries underline the potential odevelopment strategies to oster production diversification in collaboration with

the private sector and strengthen the environment or enterprises, while at thesame time ensuring that there is sufficient aggregate demand, notably throughcountercyclical macroeconomic policies. Tey have also demonstrated success withwell-calibrated capital controls to manage volatile capital flows and keep exchangerates both predictable and competitive.

Tese findings shed new light on the role o government in developing coun-tries. According to conventional wisdom, selective interventions and targeted sup-port would be a source o distortions and economic inefficiency. In reality, successdepends on careul diversification strategies in the context o gradual trade liber-alization consistent with multilateral commitments.

second, strengthen labour market institutionsrather than neglecting labour standards

Labour and social protection institutions are important ingredients o economicgrowth, quality jobs and human development (Chapter 6). It is not possible toachieve economic diversification without active measures to tackle low product-ivity in agriculture and small and medium-sized enterprise, poor working condi-tion traps and high rates o inormality. Sustained, strong growth is at risk i socialinequality grows, or rent-seeking behaviour by owners o natural resources or landis allowed to continue unchecked.

Making such institutions more effective remains a serious challenge or manydeveloping countries. Wage-setting mechanisms and labour regulations need to beproperly designed and attention must be given to implementation capacity.


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Despite these difficulties, there are many interesting recent innovations in thisarea. Tere is growing awareness o the role o minimum wages in fighting workingpoverty and inequalities, while promoting labour market participation. Te reportgives examples o how some developing countries have ound innovative ways osetting and implementing minimum wages, including through social dialogue.Likewise, well-designed collective bargaining can have positive impacts on income

distribution while also tackling inormality and low-productivity traps. One majorchallenge is the decline in the coverage o collective bargaining a trend also evi-dent in advanced economies.

he issue o employment protection, which has been the subject o livelydebate but ofen without a systematic review o current practices, is careully exam-ined in the report. Contrary to predictions, weaker regulations on employmenthave not acilitated transitions to ormal employment. Instead, the report providesexamples o countries, such as Argentina, that have tackled inormality throughpragmatic approaches, combining tax reorm, social protection, aster registrationprocesses or enterprises and better enorcement.

third, extend well-designed social protection oorsas drivers of inclusive development, not just as a narrowly

targeted safety net for the poor

Tere is evidence that social protection helps to reduce the incidence o poverty,inequalities and vulnerable employment (Chapter 7). Well-designed social pro-tection enhances individual capabilities to access better jobs. For instance, BolsaFamlia in Brazil, the Mahatma Gandhi National Rural Employment GuaranteeAct in India and similar programmes in Cabo Verde have been successul in pro-viding supplementary incomes to households, al lowing amilies to invest in pro-

ductive activities as well as to improve their health and educational outcomes.In addition, social protection can boost economic growth and quality job cre-ation. Much depends on the responsiveness o social protection to changing eco-nomic conditions. Countercyclical programmes in China and South Arica areinteresting cases in point in this respect. In some countries, such as Ethiopia andNamibia, employment is an explicit target o social protection schemes.

Establishing an efficient unding base or social protection is crucial. Te cre-ation o a tax on oil and gas exports in Bolivia was instrumental in ensuring sus-tainable financing o the non-contributory old-age pension.

Finally, it is important to combine social protection with a set o policies thatpromote a supportive environment or enterprises and job creation. Tis includes

simpliying administrative procedures or the sel-employed in order to acilitateormal entrepreneurship. Another successul measure has been the provision oadditional incentives or benefits recipients, including jobseekers, to receive trainingand take on work, as illustrated by Brazil s vocational training programmes offeredto beneficiaries o income transer programmes.


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and, nally, ensure balanced income developments

to avoid harmful inequalities

Te widening o income inequalities within countries is now a well-establishedact. Analysis suggests that this trend is associated with a change in the distribu-tion o income, to the detriment o labour.

Developing countries have not been immune to these patterns (Chapter 8).Evidence suggests widening inequalities can be detrimental to economic growth,to the extent that the negative consumption effect associated with growing in-equalities outweighs any positive impacts in terms o higher returns rom invest-ment and improved cost-competitiveness. Such a negative outcome is all the morelikely because the competitiveness effects are dampened by the act that the shareo labour incomes alls in many countries leading to a deficit o global aggre-gate demand and a race to the bottom in wages and standards. In addition toimpacts on the economy, widening income inequalities may erode social cohesionand intensiy social unrest, as has happened in some Arab and Asian countries.

he ability o developing countries to oset alling labour income shares

through progressive taxation is more limited than in the case o advanced econ-omies. It is thereore essential to reinorce labour market institutions, which canimprove the market distribution o incomes between labour and capital. hiscan be done by acilitating dialogue between employers and workers, enorcinglabour laws and standards as well as implementing well-designed social protec-tion in order to ensure more balanced income distribution in developing coun-tries. Tere are important experiences in this area, such as in Argentina, Braziland recently unisia.

Finally, decent work should be a central goal

in the post-2015 development agenda

he indings o the Report suggest that sustained development is not possiblewithout making progress on the employment and decent work agenda. By put-ting in place policies and institutions that help create more and better jobs, theprocess o development will be acilitated. Conversely, economic growth is notsustainable when it is based on poor and unsae working conditions, suppressedwages and rising working poverty and inequalities. In addition to their impact oneconomic growth, jobs, rights, social protection and dialogue are integral compo-nents o development.

Employment and decent work should thereore be a central goal in the post-

2015 development agenda. Te ILO has adopted a range o important initiativeswhich, as part o a new development agenda carried out under the aegis o the UN,could provide a significant contribution to improving the living standards o allwomen and men around the world.


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11

A global economic slowdown in 2013, but expectations

of faster growth ahead

Global economic growth decelerated in 2013 to 3 per cent, down rom 3.2 percent in 2012 and well below the average annual growth o 4.2 per cent achievedduring the period between 2000 and 2007, prior to the onset o the global eco-

nomic crisis (figure 1.1). A driving actor behind this sluggish perormance was thecontinued weakness in the developed economies (in particular in Europe), wheregrowth slowed to just 1.2 per cent, compared with 1.4 per cent in the previousyear, although the economic slowdown was widespread, also affecting much othe developing world. Te regions o Central and South-Eastern Europe, South-East Asia and the Pacific, South Asia, Latin America and the Caribbean, NorthArica and sub-Saharan Arica all registered slower growth rates in 2013 than inthe previous year.

he main causes o the economic slowdown in emerging and developingcountries include ongoing macroeconomic adjustments in certain large countries,such as China, as they move to more domestic-led growth; some periods o finan -

cial instability, which saw capital outflows rom emerging markets in expectationo a less accommodative monetary policy stance in the United States; and dimin-ished demand or exports rom the advanced economies. Many developing coun-tries are also struggling with the consequences o inadequate inrastructure andlimited human capital actors which are likely to have a negative impact ongrowth in the coming years. Furthermore, while many developing countries aregradually shifing towards greater reliance on domestic sources o growth, thisrebalancing process has been insufficient to offset the weak demand or exportsin the advanced economies.

According to the latest IMF projections, global economic growth is expected

to accelerate in 2014, reaching 3.6 per cent, and to accelerate urther in 2015.

1. ILO, Global employment trends 2014: Risk o a jobless recovery?(Geneva).

Introduction and structure of the report

Global context

and employmentand social trends inthe developing world


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Central and South-Eastern Europe, South-East Asia and the Pacific and LatinAmerica and the Caribbean are expected to see a modest slowdown in 2014.Growth in East Asia is projected to remain unchanged at 6.8 per cent. All otherregions are expected to register aster growth in 2014 than in 2013. Much o theanticipated improvement in global growth in 2014 is due to better prospects inadvanced economies, with the Developed Economies and European Union pro-jected to grow by 2.1 per cent in 2014 and by 2.2 per cent in 2015 the astestgrowth since 2010.

At the same time, downside risks to growth continue to predominate at theglobal level. Concerns regarding a hard landing in some emerging economies

have grown and uncertainty surrounding potential adverse effects o unwindingextraordinary measures put in place by central banks is weighing on the outlook.

Unemployment remains elevated globally, though with notable differences

between advanced and developing regions

Global unemployment rose by nearly 4 million in 2013, reaching 199.8 million,with the global unemployment rate remaining broadly unchanged at 6 per cent(figure 1.2). Unemployment rose as employment growth ailed to keep pace withgrowth in the labour orce, which includes both the employed and those seekingwork. Te number o unemployed worldwide is now 30.6 mil lion higher than

beore the onset o the global crisis a reflection o the persistent weakness inlabour markets during the global economys ragile and uneven recovery overrecent years.

Notable dierences between advanced and developing economies haveemerged with respect to unemployment trends (figure 1.2). Te developed econ-omies saw a large spike in the number o unemployed and the corresponding un-employment rate beginning in 2009, and the groups unemployment rate remainsstuck at 8.5 per cent, substantially higher than the pre-crisis rate o 5.8 per centregistered in 2007. In contrast, in the developing world, there was only a modestincrease in the unemployment rate at the height o the global crisis, rising rom

2. o provide the most recent ILO estimates o key labour market indicators, unless otherwise noted,labour market data in Chapter 1 are based on ILO, rends Econometric Models, April 2014.

2

4

6

8

Figure 1.1 Global and regional GDP growth estimates and projections, 200007, 201214 (%)

Source: IMF, World Economic Outlook, April 2014.

WORLD Developed

Economies

and European

Union

Central and

South-Eastern

Europe (non-EU)

and CIS

East Asia South-East

Asia and

the Pacific

South Asia Latin America

and the Caribbean

Middle East Nor th Af rica Sub-Saharan

Africa

2000-07

2012

2013

2014

GDPgrowthrate(%)

0

10


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3

1. Global context and employment and social trends in the developing world

5.4 per cent in 2007 to 5.8 per cent in 2009. It has since allen back and is roughlyin line with pre-crisis levels.

Tese trends reflect an important dichotomy between advanced and devel-oping countries in terms o the ways in which economic distress affects labour mar-kets. In developed economies, which tend to have relatively robust social insurancesystems or jobseekers, unemployment typically increases as economic undamen-tals deteriorate. On the other hand, in many developing economies, in particularin those with only limited social protection systems, there tends to be a ar weakerrelationship between economic growth and unemployment (see Chapter 3 in thisvolume). Tis, in turn, implies that, while unemployment rates are an importantindicator in gauging the overall health o labour markets, additional indicators arenecessary, particularly in developing economies, to orm a comprehensive picture

o ongoing labour market dynamics.Global employment prospects are unlikely to be significantly improved eveni economic growth is slightly aster than projected (box 1.1). Tis suggests thatundamental changes in the growthemployment relationship are needed in orderto improve the labour market situation.

Key labour market challenges in emerging and developing countries

include, rst, boosting productivity levels, which are still far below

those in the advanced economies

With ew exceptions, labour productivity growth rates in developing regions have

been considerably higher than those in the advanced economies since the turno the century, and this trend is projected to persist over the medium term. Asproductivity growth is an essential ingredient or sustainable improvements inliving standards and poverty reduction in the long term, aster growth that couldresult in a catch up in productivity levels is a welcome development.

But how quickly are developing regions converging with the industrializedworld with respect to this important indicator? Unortunately, the answer isairly slowly. In East Asia, the region that has seen the most dramatic improve-ments in productivity levels over the past 20 years, output per worker in 2014 isstill less than one-quarter o the corresponding level in the developed economies

and European Union (figure 1.4). Substantial progress has been made, as the cor-responding figure in 1994 was only 7.6 per cent; however, even assuming that theEast Asia region managed to continue to grow labour productivity at the very

50

100

150

200

Figure 1.2 Unemployment trends and projections, developed and developing economies, 200319

Source: ILO, Trends Econometric Models, April 2014.

Unemploy

ment(millions) U

nemploymentrate(%)

0

250

5

6

7

8

4

9Total unemployment:

2 00 3 2 00 4 2 00 5 20 06 2 007 20 08 2 00 9 2 010 2011 2012 2 013 2 014p 2015p 2016p 2017p 2018p 2019p

Developed

Developing

Unemployment rate:

Developing

World

Developed


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4


Box 1.1 Scenarios for future employment growthin advanced and developing G20 economies

This box provides the results of ILO scenarios for employment in advanced and devel-oping G20 economies to the year 2018, which were produced on the basis of observedcountry-level trends and patterns in employment elasticities. The scenarios are intendedto show potential paths for future employment growth and to illustrate the scale of thechallenge involved in closing the global jobs gap, as well as the relatively wide range ofpotential outcomes in pursuing this goal.

Data used and construction of the scenarios

G20 aggregate employment projections for the period 201418 are based on pro-jections of employment at the country level. Speci fically, nominal employment forG20 countries (including European Union members) is extrapolated using projectedcountry-level elasticities of employment to GDP growth together with IMF GDP growthprojections. These are then aggregated to produce employment projections between2014 and 2018 for the G20 economies as a whole.

The baseline scenario (blue line) uses the projected employment elasticities for theperiod 201418 together with the baseline IMF GDP growth projections. The resultingemployment projections are consistent with the central projections from the ILOs

Trends Econometric Models, April 2014 database.The augmented growth scenario(grey large-dotted line) uses the projected employmentelasticities together with augmented GDP growth projections. For each G20 country, thebaseline average IMF growth projection for the period 201418 is increased by 0.5 per-centage points per year (as targeted by the G20 Finance Ministers). For countries withnegative employment elasticities, it is assumed that the growth boost has neither apositive nor a negative impact on employment growth.

The augmented growth and employment-intensity boost scenario(grey small-dottedline) uses the augmented GDP growth projections together with augmented projectedemployment elasticities. The employment elasticities are increased by 50 per cent fordeveloped G20 countries (for example, increasing Canadas projected employmentelasticity from 0.28 to 0.41) and by 25 per cent for emerging and developing G20countries (for example, increasing Indonesias projected employment elasticity from

0.38 to 0.47). This scenario therefore assumes that GDP growth over the projectionperiod will be more employment-intensive (and less driven by productivity growth). Forcountries with negative employment elasticities, the elasticity is increased by half (thatis, a country with a 0.2 elasticity would have a 0.1 elasticity in the employment-intensive scenario).

Results in advanced and in emerging and developing G20 economies

In the baseline scenario, which is equivalent to the current ILO baseline employmentprojection based on current trends and growth prospects, the total jobs gap in theG20 economies (equal to the difference between actual G20 employment and thelevel of employment that would have resulted had pre-crisis trends continued) stood at54 million in 2013 and is projected to reach 64 million by 2018. In the advanced G20economies, the jobs gap equalled 26 million in 2013, or slightly less than half of the

total G20 jobs gap. As the current jobs gap in the advanced G20 economies is equalto 5.8 per cent of their total employment, closing the gap presents a formidable chal -lenge. In the baseline scenario, the gap is projected to widen further in the advancedG20 economies, to 31 million in 2018, equal to 6.6 per cent of total employment. Inthe emerging and developing G20 economies, the jobs gap is larger in nominal terms,at 28 million in 2013; however, this represents less than 2 per cent of total employmentin these economies and thus narrowing the nominal employment gap in emerging anddeveloping economies poses a significantly smaller challenge. In the baseline scenario,the gap is projected to grow to 33 million by 2018, or to 1.9 per cent of employment.

A scenario based on an additional increase in G20 countries average GDP growth ratesof 0.5 per cent per year makes only a modest impact on the jobs gap in the advancedG20 economies, resulting in 3 million additional jobs in 2018 in comparison to the base -line scenario. In this scenario, the jobs gap would still widen, from 26 million in 2013

to 28 million in 2018. In the emerging and developing G20 economies, a growth boostalone is projected to result in an additional 8 million jobs by 2018, which would narrow


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5


the gap to 25 million. Thus, according to ILO simulations, a total of 11 million additionaljobs would be created through a growth boost alone. Related analysis conducted bythe IMF, OECD and World Bank* projected a more optimistic jobs outcome, with a GDPboost of the same magnitude increasing G20 employment by 18 million by 2018. Yet,even with this more optimistic scenario, it is clear that faster growth alone is unlikely tomake a significant contribution to closing the jobs gap that has opened up, particularlyin advanced economies.

On the other hand, a scenario of increased growth along with a more employment-intensive growth pattern could have a major, positive impact in terms of reducing the

gap. In the advanced economies, this is projected to result in the creation of 11 millionadditional jobs by 2018, reducing the overall jobs gap to 19 million, or to 4.2 per cent oftotal employment. In the emerging and developing G20 economies, this scenario wouldclose much of the gap by 2018. These findings indicate that faster growth togetherwith a more employment-intensive growth pattern could indeed make a significantdent in the jobs gap that has emerged as a result of the global economic crisis. How-ever, increasing the employment intensity of growth would require an appropriate set oflabour market policies, tailored to national circumstances.

It should be noted, however, that for a given rate of economic growth, shifting towardsmore employment-intensive growth implies a shift to lower-productivity growth. Par-ticularly in developing economies, given the benefits of productivity growth to broadereconomic development objectives, such as poverty reduction, the focus should be onachieving growth that is balanced between creating more jobs and more productive jobs.

* Remarks by Angel Gurra, OECD Secretary-General, delivered at the G20 Finance Ministers and CentralBank Governors Meeting; Washington, DC, 10 April 2014.

435

455

475

415

495

Figure 1.3 Scenarios for future employment growth

Sources: Calculations based on ILO, Trends Econometric Models, April 2014

and IMF, World Economic Outlook projections.

1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

Panel A. Advanced G20 economies

Employment(millions)

1485

1545

1605

1665

1725

1425

1785

1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

Panel B. Emerging and developing G20 economies

Employment(millions)

Estimated/forecasted

Pre-crisis trend

0.5% growth boost

0.5% growth boost

0.5% growthand employment

intensity boost

0.5% growthand employment

intensity boost

Pre-crisis trend

Estimated/forecasted


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6


rapid 8 per cent average annual rate achieved over the past decade (an optimisticprojection given the regions current productivity growth rate o around 6 percent), East Asia would not reach the present level o productivity in the developedeconomies until the year 2033.

It would take South Asia until the year 2055 and South-East Asia until 2071to achieve the current level o productivity in the developed economies. Lookingahead as ar as the year 2100, without a substantial acceleration in productivitygrowth rates, average productivity levels in sub-Saharan Arica and North Aricawould remain well below current levels in the developed economies. Tus, acceler-

ating productivity growth poses a crucial challenge or many developing countriesin the years ahead while they simultaneously ace the challenge o creating su-ficient numbers o jobs.

second, ghting working poverty and improving income distribution

Rapid economic growth, together with improvements in labour productivity overthe past two decades in much o the developing world, has resulted in markedreductions in the incidence o working poverty. In 1994, 39 per cent o the devel-oping worlds workers were living with their amilies in extreme poverty (on lessthan US$1.25 in consumption per household member per day). By 2004, this

figure had allen to around 25 per cent and, by 2014, it is estimated to have allento 13 per cent. As a result, there are 417 million ewer workers living in extremepoverty now than there were two decades ago (figure 1.5).

Te number o workers living in moderate poverty in the developing world(on between US$1.25 and US$2), which stands at 457 million in 2014, is littlechanged since 1994. However, the share o these workers in total employment hasdeclined rom 23.6 per cent down to 16.9 per cent a ar more modest reductionthan the corresponding reduction in extreme working poverty. aking these twogroups together, 30 per cent o the developing worlds workers remain poor today,down rom nearly 63 per cent in 1994. While this clearly represents a tremendous

achievement in the broader development agenda, more work needs to be done interms o boosting the employability and productivity o the poor, as three in tenworkers in the developing world are still trapped in poverty.

10

20

30

40

50

60

Figure 1.4 Labour productivity (output per worker as % of level

in developed economies and EU), 1994, 2004 and 2014

Source: ILO, Trends Econometric Models, April 2014; World Bank, World Development Indicators.

Central and

South-Eastern

Europe (non-EU)

and CIS

Eas t Asia South-East

Asia and

the Pacific

South Asia Latin America

and the Caribbean

Middle East Nor th Afr ica Sub-Saharan

Africa

1994

2004

2014p

Outputperworker(%o

faveragelevel

inDevelopedEconomiesandEuropeanUnion)

0

70


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7


A avourable trend that has coincided with the sharp reduction in poverty inthe developing world has been the emergence o a developing middle class work-orce (those workers living with their amilies on between US$4 and US$13 perhousehold member per day), and a developed middle class workorce (those livingon more than US$13 per day). In 2014, the ILO estimates that nearly 34 per cento workers in the developing world are in the developing middle class, with a ur-ther 11.5 per cent in the developed middle class. Tus, more than our out o tenworkers in developing regions are either in the developing middle class or above,whereas ewer than two out o ten workers were considered to be in the middle

class two decades ago.Te remaining economic class category encompasses workers who are classi-fied as near poor (between US$2 and US$4 per day) those workers who aremanaging to eke out a living that enables them to escape poverty, but with insu-ficient income to be considered as alling within the middle class. Around one-quarter o all workers in developing regions are in this category, up rom around19 per cent in 1994 and roughly unchanged compared with 2004.

Looking ahead to 2018, the ILO projects a urther reduction in working pov-erty in the developing world as a whole. As shown in figure 1.5, which indicatesthe historical growth in employment by economic class between 2009 and 2013and projected growth between 2014 and 2018, the number o workers in extreme

poverty is expected to all by 68 million and the number o workers in moderatepoverty is expected to decline by 13 million. Te number o near-poor workers isunlikely to change significantly, although the share o near-poor workers in totalemployment will all as the overall number o employed grows.

Te number o workers in the developing and developed middle classes andabove is projected to increase by nearly 235 million between 2014 and 2018, com-pared with growth in these two groups o 262 million over the period rom 2009to 2013. Most notably, growth in the number o workers in the developed middleclass and above (living on more than US$13 per amily member per day) is pro-jected to accelerate substantially, with this segment set to grow by 120 million

3. Tese definitions are set orth in Kapsos and Bourmpoula (2013). Te US$13 poverty lineexpressed in 2005 international dollars is equivalent to the 2005 poverty line in the United States.

Figure 1.5 Employment by economic class in the developing world, 19942019

Note: PPP = purchasing power parity.

Source: S. Kapsos and E. Bourmpoula: Employment and economic class in the developing world,

ILO Research Paper No. 6 (Geneva, 2013); ILO, Trends Econometric Models, April 2014.

Employ

ed(billions)

0

3.0

Extremely poor(less than US$1.25, PPP)

Moderately poor(between US$1.25 and US$2, PPP)

Near poor(between US$2 and US$4, PPP)

Developing middle class(between US$4 and US$13, PPP)

Developed middle class and above(above US$13, PPP)

0.5

1.0

1.5

2.0

2.5

1994 1999 2004 2009 2014p 2019p


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between 2014 and 2018 compared with an increase o 92 million between 2009and 2013. Te implications o this shif in employment quality are stark: or thefirst time in history, over the next several years, most new jobs in the developingworld are likely to be o sufficient quality to allow workers and their amilies to liveabove the equivalent o the poverty line in the United States. Yet, even given thisoptimistic outlook, it is likely that around 85 per cent o the developing worldsworkorce will be living below the US-equivalent poverty line in 2018 (down rommore than 88 per cent in 2014).

However, a closer examination o regional trends within the developing worldreveals substantial differences across the developing regions (figure 1.6). In threeregions, Central and South-Eastern Europe, East Asia, and Latin America and

the Caribbean, growth in middle class employment is expected to account or allo the employment growth between 2014 and 2018, while the number o workersliving with their amilies in poverty or near poverty is projected to decline. In eacho these regions, the developed middle class group is expected to see the greatestemployment growth. Indeed, these three regions, which are home to 47 per cento the developing worlds workorce, are projected to account or 82 per cent othe total growth in employment in the developed middle class throughout thedeveloping world. Tis is suggestive o continued robust improvements in averageliving standards and avourable prospects or increased consumption and higherdomestic demand. However, it also indicates a mixed employment picture in the

remaining developing regions.Indeed, in South Asia and sub-Saharan Arica, while extreme poverty is pro-jected to continue to decline, many o the new jobs created over the next several years

Figure 1.6 Employment growth by economic class, 200913 and 201418

Note: PPP = purchasing power parity. The length of the columns sums to 100 per cent.

Numbers in brackets indicate changes in employment by class in millions

Source: S. Kapsos and E. Bourmpoula: Employment and economic class in the developing world,

ILO Research Paper No. 6 (Geneva, 2013); ILO, Trends Econometric Models, April 2014.

Share in absolute employment changes (%)

Developing world

Central and South-Eastern

Europe (non-EU) and CIS

East Asia

South-East Asia

and the Pacific

South Asia

Latin America

and the Caribbean

Middle East

North Africa

Sub-Saharan Africa

201418

200913

201418

200913

201418

200913

201418

200913

201418

200913

201418

200913

201418

200913

201418

200913

201418

200913

50 25 0 25 50 75 100

Extremely poor(


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are unlikely to be sufficiently productive to allow workers to escape poverty or nearpoverty. In both regions, the near poor segment o the workorce is projected to seethe most growth between 2014 and 2018 and both regions are also expected to seea continued increase in the number o workers in moderate poverty. In both cases,the two middle class segments are projected to see substantial gains, indicating thatnew, productive employment opportunities are being created. However, the chal-

lenge o generating broad-based productivity growth that can accelerate the reduc-tion in poverty and growth in the middle classes in these regions remains ormidable.

third, improving the quality of jobs and working conditions

More than hal o the developing worlds workers, a total o 1.45 billion, workeither on their own account or as contributing (unpaid) amily workers in a amilyenterprise. ogether, these two employment statuses comprise so-called vulnerableemployment, an acknowledgement that these two groups are less likely than wageworkers (employees) to have ormal working arrangements, be covered by socialprotection systems or to have regular earnings. Workers in vulnerable employment

are more likely than workers in ormal wage employment to be trapped in a viciouscircle o low-productivity employment, poor remuneration and limited ability toinvest in their amilies health and education, which, in turn, reduces the likeli-hood that current and subsequent generations will be able to move up the product-ivity and income ladders. Accordingly, the vulnerable employment indicator is oneo the key labour market indicators used to measure progress towards the achieve-ment o the Millennium Development Goals (MDGs).

What is the extent o vulnerable employment across the different regions o theworld? Among the developing regions, as figure 1.7 shows, vulnerable employmentrates are highest in South Asia and sub-Saharan Arica (where more than three out

o our workers are in vulnerable orms o employment) and considerably lower inCentral and South-Eastern Europe and CIS, Latin America and the Caribbean,and the Middle East (where between two and three out o ten workers are in vul-nerable employment statuses).

4. See: ILO: Guide to the Millennium Development Goals employment indicators, second edition(Geneva, 2013). Available at http://www.ilo.org/wcmsp5/groups/public/---ed_emp/---emp_elm/documents/publication/wcms_208796.pd.

Figure 1.7 Vulnerable employment by gender, world and regions, 2014


Females(%)

Males (%)

0

100

20

40

60

80

0 20 40 60 80 100

WORLD

Developed Economiesand European Union

CEE & CIS

East Asia

South-East Asiaand the Pacific

South Asia

Latin Americaand Caribbean

Middle East

North Africa

Sub-Saharan Africa

J

J

J

J

J

J

JJ

J

J


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Box 1.2 The relationship between type of employment and family income

Based on a sample of household surveys from 39 developing countries, Kapsos and Bourmpoula(2013) find that 83.7 per cent of the extreme working poor (employed population living with theirfamilies on less than US$1.25 per person per day at PPP) in these countries are either engaged inown-account work or unpaid family work (the two categories that comprise vulnerable employment),while only 12.7 per cent of the extreme working poor are in wage employment (figure 1.8). Among themoderate working poor, 77 per cent are found in the vulnerable employment statuses, with a some -

what higher share (19 per cent) in wage employment. A higher share of the near poor class of workersis in wage employment (35.3 per cent), indicating that wage employment is not a guaranteed route outof poverty. However, wage employment is far more likely than vulnerable employment to lead to higherearnings that can result in improved living standards for workers and their families: more than six outof ten workers in the developing middle class and above in these countries are in wage employment.

A similar pattern is found in the sectoral employment distribution (figure 1.9), with a declining shareof workers in agricultural employment observed as households move up the economic ladder. Threeout of four workers in the developing middle class in these countries are employed in the servicessector. There is only a slight difference in the share of workers in the industrial sector across theeconomic classes, which reflects the heterogeneity of industrial jobs, with low-productivity activitiestypically available to poorer workers and higher value added industrial employment among middleclass workers.

Taken together, these findings imply that efforts to expand formal wage employment opportunities andto promote structural transformation, out of lower productivity, subsistence agricultural activities intohigher value added employment in the services and industrial sectors is a potentially powerful mech-anism for raising living standards and growing the middle class.

Source: S. Kapsos and E . Bourmpoula: Employment and economic class in the developing world, ILO Research Paper No. 6(Geneva, 2013).

20

40

60

80

0

100

Figure 1.8 Employment by economic class and status in employment category

Note: The aggregate refers

to 39 developing countries.

Sharesofstatusintotalemployment

byclass(%)

Extremely poor(


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11


In some regions, there is a notable gender difference with respect to the likeli-hood o being in vulnerable employment. In the world as a whole, women are onlyslightly more likely than men to be in vulnerable employment (48.7 per cent oemale workers globally versus 46.9 per cent o male workers). However, in NorthArica, the gap between women and men is nearly 25 percentage points, withwomen much more likely than men to be in vulnerable orms o employment. In

sub-Saharan Arica, this gender gap is 14.8 percentage points and in the MiddleEast it is 5.9 percentage points. In contrast, in Central and South-Eastern Europeand CIS and in Latin America and the Caribbean, there is no difference betweenwomen and men in terms o the likelihood o being in vulnerable employment.

As workers in vulnerable employment are less likely than ormal wageemployees to have access to social protection coverage and more likely to livein poverty, expanding wage employment and reducing the incidence o vulner-able employment is a desirable goal rom a social equity perspective. At the sametime, given the strong, positive relationship between wage employment and higherlevels o household consumption (and thereore higher levels o labour product-ivity), reducing vulnerable employment should also be viewed as a key objective in

achieving the broader goals o increasing productivity, raising economic growthand promoting sustainable improvements in living standards (see box 1.2). Policiesthat take into account the particular constraints acing women in securing wageemployment could also help to address gender imbalances.

6

12

18

Figure 1.10 Unemployment by age and gender, world and regions, 2007 and 2014

Panel A. Males and females


WORLD Developed

Economies

and European

Union

Central and

South-Eastern

Europe

(non-EU) and CIS

East

Asia

South-East

Asia and

the Pacific

South

Asia

Latin America

and

the Caribbean

Middle

East

North

Africa

Sub-Saharan

Africa

U

cost of cash transfer programs in latam 2014

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