Comments on the OECD Jobs Study Reassessed: its relevance to developing countries Duncan Campbell Director, Policy Integration Dept ILO

A few numbers 1.4 billion or 50% 550 million or about 20% 220 million 12.3 million

Income inequality (household income per capita) is increasing in a number of countries … Source: WIDER Income Inequality database, 2005

The labor share in GDP is declining Source: UN national accounts

Growth becomes less labor intensive in Asia Source: Felipe and Hasan 2006, “The Challenge of Job Creation in Asia”, ADB

Macroeconomic Policy Greater volatility Smaller revenue base and less fiscal space

Reserve Holdings by Developing countries, (in % of GNI)

Coordination of Macroeconomic with Structural Policies Departures from the Lewisian development trajectory Continued high share of informality and concentration in services

Unemployment insurance and social protection « unemployment » as luxury good in most developing countries Unemployment insurance as largely lacking 80 % of world’s people not covered by social protection

Active labour market policies A whole different meaning to « making work pay » Agencies of labour market intermediation often lacking (10 labour inspectors in Nepal) Principal ALMP in developing countries is public works Labour shortages arising in labour surplus countries

Wage setting mechanisms Collective bargaining usually quite underdeveloped in developing countries. (effective coverage of trade unions is about 1 to 2 percent in Thailand) Declining labour share most evident in developing countries Low wages a key constraint on potential growth (Asian Development Bank)

Employment Protection Legislation Negative correlation between stringency of EPL and level of economic development Micro level used as a substitute for macro policies on security But is EPL / other measures of « rigidity » a binding constraint?

Some concluding remarks A higher share of labour market challenges lie outside the labour market in developing countries. The consequent « weight » to be assigned different elements of OECD jobs strategy is different in developing countries Entrepreneurship, skills, productivity growth (and external factors affecting it) most relevant