1. A FRAMEWORK FOR OPERATIONALIZING JOBS POLICIES Omar Arias World Bank Arias, Omar S., Carolina Sanchez-Paramo, Maria E. Davalos, Indhira Santos, Erwin R. Tiongson, Carola Gruen, Natasha de Andrade Falcao, Gady Saiovici, and Cesar A. Cancho. 2014. Back to Work: Growing with Jobs in Europe and Central Asia. Washington, DC: World Bank.

4. D. Purves

6. Labor supply constraints? Step 1a: Is growth sufficient to create Jobs? (real GDP growth >= LF growth) Sector composition of growth is too capital intensive? Labor demand constraints? Labor market matching constraints? What are the constraints? (Examples) No Step 1b: Consider Growth Diagnostic Why Not? Yes Commodity boom (natural path) Misaligned exchange rate (Dutch disease) Tax policies favoring capital Low skills base High labor (hiring/firing) restrictions Skills Low participation, High reservation wage Constraints to women’s participation Low worker incentives from labor taxes and poor design of social benefits Limited mobility High public sector wage Step 2a: Is growth creating enough jobs? No Step 2b: Are better Jobs being Created? (formal/ informal) Yes Limited domestic/external markets Poor investment climate Limited access to finance, FDI Low innovation, limited external trade Low churning; limited firm entry Technology favors capital over labor Tax/regulations favor K over L Negative short-term impact of policy reform– including where trade and FDI are disruptive in short-term Limited information on vacancies/skills Discrimination, labor segmentation Limited internal labor mobility Yes, Nirvana! Source: Jobs Group, World Bank. A Jobs Diagnostic Framework: From Symptoms to Constraints

7. (1) Transition legacy and speed of reforms Strongest reform record among middle income regions… … with significant variation in the implementation speed of reforms Doing Business Indicator (Gap to Frontier)Transition Index (EBRD 2012) Source: Data from EBRD, WB DB. Notes: ECA = Europe and Central Asia; LAC = Latin America and the Caribbean; EAP = East Asia and Pacific. The Jobs Challenge in ECA: Two contextual factors

8. (2) Impact of demographics on the labor force Source: Back To Work: Growing with Jobs in Europe and Central Asia (2014). ECA Countries: Change in 15+ Population 2010 - 2030 (%) Younger countries also face demographic pressures: Out-Migration, youth bulge, and long-run aging The Jobs Challenge in ECA: Two contextual factors

9. Resuming Sustained Growth: Ensure macro fundamentals for economic recovery and regain the pre-crisis reform momentum Enabling Private Sector-led Job Creation: Enable business creation and expansion, tap on entrepreneurship Preparing Workers for Jobs: Helping workers acquire skills for the modern workplace Making (formal) work pay by removing disincentives and eliminating barriers to the labor market Removing obstacles to internal labor mobility Meeting the Jobs Challenge in ECA: Three policy goals

10. 1.Reforms take time to payoff  Employment and Productivity Virtuous Circles Operationalizing Jobs Policies: 5 Evidence-based Principles

11. % of years in each decade when both labor productivity and employment increased Reforms and modernization generate a virtuous circle between productivity and employment growth over the long-haul Reformers did better in 1990s and reforms paid off… with a lag Source: Back To Work: Growing with Jobs in Europe and Central Asia (2014). Enabling Private Sector-led Job Creation – Reforms can payoff but take time

12. Job creation in the private sector outpaced job destruction among advanced reformers Poland (advanced reformer) achieved net employment creation in mid-2000s… … while job destruction was still outpacing job creation in Ukraine (late reformer) Source: Back To Work: Growing with Jobs in Europe and Central Asia (2014). Enabling Private Sector-led Job Creation – Reforms can payoff but take time

13. 1.Reforms take time to payoff  Employment and Productivity Virtuous Circles 2.Most new jobs are created by a small set of firms (typically young) ENTREPRENEURSHIP Operationalizing Jobs Policies: 5 Evidence-based Principles

14. A small segment of “super star” firms (Gazelles) accounts for most job creation almost everywhere As % of all firms and all jobs created during 2004-08 Notes: The number above each country represents the average growth rate of employment per year Source: Back To Work: Growing with Jobs in Europe and Central Asia (2014). Enabling Private Sector-led Job Creation – Nurturing the Gazelle Firms

15. Advanced reformers translate entrepreneurship potential into higher creation of new businesses % workers who prefer to become self-employed, took steps, and actually started a business, 2010 15 Source: Back To Work: Growing with Jobs in Europe and Central Asia (2014). Enabling Private Sector-led Job Creation – Tapping on Entrepreneurship Potential

16. 1.Reforms take time to payoff  Employment and Productivity Virtuous Circles 2.Most new jobs are created by a small set of firms (typically young) ENTREPRENEURSHIP 3.New jobs increasingly require foundational (cognitive & socio-emotional) and technical skills tied to employers’ needs MODERN SKILLS Operationalizing Jobs Policies: 5 Evidence-based Principles

17. 17 Source: World Bank WDR 2016 (forthcoming), based on ILO KILM data. For China, data comes from the Population Census for 2000 vs 2010. Work is becoming more intensive in non- routine skills and less so in routine skills Change in Employment Composition by type of occupation (2000-2012) Preparing Workers for New Jobs – Growing demand for “new economy” skills

18. Growing demand for “new economy” skills among youth; concern for obsolescense among older workers Source: Back To Work: Growing with Jobs in Europe and Central Asia (2014). Preparing Workers for New Jobs – Developing Strong Foundational Skills

19. 1.Reforms take time to payoff  Employment and Productivity Virtuous Circles 2.Most new jobs are created by a small set of firms (typically young) ENTREPRENEURSHIP 3.New jobs increasingly require foundational and technical skills tied to employers’ needs MODERN SKILLS 4.Inclusive access to jobs require adequate work incentives and tailored & integrated employment services CONNECTING TO JOBS Operationalizing Jobs Policies: 5 Evidence-based Principles

20. Access to services: childcare Work arrangements and working conditions Access to productive inputs, information and networks Attitudes and social norms Geographic mobility Work incentives Some groups face disincentives and other barriers to work Some women, youth, older workers, and ethnic minorities often face work disincentives or multiple disadvantages Preparing Workers for New Jobs – Adequate Incentives and removing barriers

21. 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 (2014). Preparing Workers for New Jobs – Adequate Incentives and removing barriers

22. 1.Reforms take time to payoff  Employment and Productivity Virtuous Circles 2.Most new jobs are created by a small set of firms (typically young) ENTREPRENEURSHIP 3.New jobs increasingly require foundational and technical skills tied to employers’ needs MODERN SKILLS 4.Inclusive access to jobs require adequate work incentives and tailored & integrated employment services CONNECTING TO JOBS 5.Indirect local job creation accounts for the bulk of new jobs SPATIAL CONNECTIVITY AND LABOR MOBILITY Operationalizing Jobs Policies: 5 Evidence-based Principles

23. Evidence from USA, Sweden and Turkey shows that one new job in tradable sectors (e.g, manufacturing) can lead to two to four new jobs in the non- tradable sectors of the economy (Aldan, Maloney, Posadas, Talkin 2015; Moretti 2012; Moretti & Thulin 2013) Fostering job spillovers – Jobs Ecosystems Focus on enabling agglomeration economies (3D / 3I, WDR 2009) Integration through spatially blind institutions, spatially connective infrastructure, and spatially targeted interventions. Enabling the emergence of jobs ecosystems through support to Entrepreneurship, Modern skills and Connecting people to jobs Addressing market failures, multiple constraints Exploiting synergies Enabling Labor Mobility and Spatial Connectivity EMC 2 Spatially-integrated jobs policies

24. 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). Preparing Workers for New Jobs – Enabling Labor Mobility

25. SOME ISSUES FOR THE DESIGN AND IMPLEMENTATION OF MULTI-SECTORAL JOBS POLICIES Country-specific tailoring – Country context, phase of reform process – Synergies across ongoing or planned reforms, policies and targeted interventions Policy and inter-agency coordination – Challenge of multi-sectoral implementation Across the National Government Across levels of Government – Using Results-based budgeting and unified systems (e.g, registries) Leveraging financing – Public, FDI, international partners Concluding Observations

26. THANK YOU http://documents.worldbank.org/curated/en/2014/01/18831 523/back-work-growing-jobs-europe-central-asia