GENERATING DEMAND FOR LABOR: ADDRESSING CENTRAL ASIA’S DEMOGRAPHIC AND POLICY CHALLENGES ROBERT S. CHASE, PH.D. LEAD ECONOMIST, WORLD BANK GROUP ASTANA ECONOMIC FORUM MAY 21, 2015 Astana Economic Forum May 21, 2015

Foundations: World Development Report (2013) & “Back to Work: Growing with Jobs in Europe and Central Asia” (2014)

More and better jobs central to reducing poverty…

… and promoting shared prosperity

Appropriate Role of Government in Mediating Jobs Supply and Demand?

Labor Market Institutions “Plateau”: At median levels, impacts are small Source: Betcherman (2013)

Europe & Central Asia Employment Context: Reform Agenda Strongest reform record among middle income regions… … with significant variation in implementation speed of reforms Doing Business Indicator (Gap to Frontier)Transition Index (EBRD 2012) Notes: ECA = Europe and Central Asia; LAC = Latin America and the Caribbean; EAP = East Asia and Pacific.

Europe & Central Asia Employment Context: Demographics Source: Back To Work: Growing with Jobs in Europe and Central Asia (2013). ECA Countries: Change in 15+ Population (%) Younger countries also face demographic pressures: Out-Migration, youth bulge, and long-run aging

Preparing Workers for New Jobs – Incentives and barriers Rebalancing social protection, work incentives and barriers to labor force participation and formal employment Source: Back To Work: Growing with Jobs in Europe and Central Asia (2013).

Preparing Workers for New Jobs – Labor Mobility Many workers fail to move to areas with higher job creation potential Percentage of adult (18+) population who moved to a different city in the last 20 years Source: Back To Work: Growing with Jobs in Europe and Central Asia (2013).

Diverse Jobs-centered policy agenda: Overall Objectives Rebalancing the work-social protection pillars of the growth and social model Transition (modernization) legacy – Advancing reforms, economic integration and diversification Facilitate firm entry/exit Create enabling environment for businesses for high potential to thrive and create jobs and for others to “fail fast, fail cheap” Aging and demographic imperatives – Create incentives and enable longer and more productive working lives Promote labor market inclusion, particularly of new entrants 11

Diverse Jobs-centered policy agenda Short term: Macro/fiscal policy to ensure fundamentals for economic recovery Longer term: Promote superstar firms – Eliminate barriers to business expansion and entrepreneurship More adaptable workers - Generic skills and market-driven, life- long learning Make (formal) work pay – Remove disincentives and barriers to work More mobile workers – Remove impediments to labor mobility 12

Diverse Jobs-centered policy agenda: Priorities Business climate, labor market and public sector reform Late modernizers: public sector restructuring; first generation business climate reforms for productive diversification Skills All countries: strong generic skills foundations among youth Incentives and barriers Young countries: reforming tax and social benefit systems so as to make formal work pay and smart activation policies Internal mobility All countries: removing barriers associated with administrative requirements and underdeveloped housing markets; 13