WB urges shift in focus to improving job quality

By Erika Mae P. Sinaking, Reporter

THE World Bank (WB) called on governments to focus on improving job quality as the global economy prepares for a record influx of new job seekers over the next decade, warning that many countries facing the biggest employment pressures are the least prepared to generate sufficient work.

Speaking at a seminar livestreamed on July 8 from the International Labour Organization (ILO) headquarters in Geneva, World Bank Group Chief Economist and Senior Vice-President for Development Economics Indermit S. Gill said policymakers should prioritize “better jobs” that offer higher wages and opportunities for career progression, arguing that employment alone is insufficient to reduce poverty.

“The world has to deal with the record number of job seekers during the next decade,” Mr. Gill said, citing the World Bank’s latest global assessment of employment trends.

He noted that estimates for new labor market entrants range from 250 million to 1.2 billion people depending on the metrics used, with the challenges concentrated in Sub-Saharan Africa, South Asia, and the Middle East and North Africa. 

In Southeast Asia, the demographic surge in new workers is nearing its end as fertility rates have fallen, he said.

“The countries with the youngest workforces are the least business ready,” he said, referring to findings from the World Bank’s new Business Ready report, which evaluates countries’ regulatory and institutional environments for businesses.

He said economies with younger populations generally perform poorly on indicators measuring business readiness, making it harder for firms to expand and absorb growing numbers of workers.

Mr. Gill also cited findings from the World Bank’s Women, Business and the Law report, saying countries that need to create the most jobs are often those where women continue to face the largest legal and institutional barriers to entering the workforce or starting businesses.

“The world underutilizes the talent,” he said, adding that removing barriers facing women workers and entrepreneurs would help raise productivity and expand employment opportunities.

The World Bank is also changing how it evaluates labor markets in its next flagship World Development Report, provisionally titled Jobs for the Next Generation, Mr. Gill said.

He argued that traditional labor market indicators place too much emphasis on whether an individual has a job rather than whether employment enables workers to escape poverty and move into better-paying occupations.

“Getting a job is usually the first step towards getting many jobs down the line,” Mr. Gill said. “Getting a job is just the first step to prosperity.”

He questioned the usefulness of defining employment based on whether a person worked only a minimal number of hours during a reference period, saying policymakers should instead pay closer attention to job quality, earnings and career progression.

Mr. Gill noted that the ILO estimates around 200 million people worldwide are unemployed, but roughly 900 million people remain classified as working poor despite having jobs.

“There has to be… something else rather than what we have right now” he said, referring to existing labor market measures.

The ILO said international statistical standards are regularly updated and that work is continuing to develop better measures covering job quality, informality, underemployment and other aspects of labor markets.

Mr. Gill said another World Bank report found that extreme poverty has largely plateaued since the coronavirus pandemic, with many poor workers remaining concentrated in agriculture, self-employment and household enterprises rather than in higher-productivity sectors.

He said the World Bank is encouraging countries to generate employment in five sectors that offer greater opportunities for productive wage employment: agribusiness, manufacturing, infrastructure, healthcare and tourism.

Asked about artificial intelligence (AI), Mr. Gill said fears that AI will eliminate jobs are more applicable to advanced economies than developing countries, where a large share of workers remain employed in small businesses and informal sectors.

Instead of attempting to lead frontier AI development, developing economies should prioritize adapting AI technologies to improve healthcare, education, agriculture and public services, he said.

Mr. Gill also urged governments to review tax policies that he said place a heavier burden on labor than on capital or technology.

“If you think that not enough people are getting employed, then why the hell are you still taxing labor?” he said, arguing that reducing distortions in labor taxation could be a more efficient way to encourage employment than relying primarily on redistributive policies after taxes have already been collected.

The discussion forms part of the ILO’s ongoing dialogue with international organizations on employment and labor market policies.