Development

Low-income countries differ from higher-income countries in that they have large informal sectors, greater prevalence of self-employment and subsistence agriculture, low female labor participation rates and poor labor market conditions. As labor is most often the only asset of someone in poverty, policies that are not associated with job creation may fail to reduce poverty. Contributions to this subject area deal with the potential of labor economics to address those challenges.

  • Social protection programs for women in developing countries

    How to design social protection programs that poor women can benefit from

    Lisa Cameron, May 2014
    Women are more likely than men to work in the informal sector and to drop out of the labor force for a time, such as after childbirth, and to be impeded by social norms from working in the formal sector. This work pattern undermines productivity, increases women’s vulnerability to income shocks, and impairs their ability to save for old age. Many developing countries have introduced social protection programs to protect poor people from social and economic risks, but despite women’s often greater need, the programs are generally less accessible to them than to men.
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  • Public works programs in developing countries have the potential to reduce poverty

    The success of public works programs in reducing poverty depends on their design and implementation—in practice, they do better as safety nets

    Laura Zimmermann, May 2014
    Public works programs in developing countries can reduce poverty in the long term and help low-skilled workers cope with economic shocks in the short term. But success depends on a scheme’s design and implementation. Key design factors are: properly identifying the target population; selecting the right wage; and establishing efficient implementation institutions. In practice, rationing, corruption, mismanagement, and other implementation flaws often limit the effectiveness of public works programs.
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  • Youth bulges and youth unemployment

    Youth bulges are not a major factor explaining current levels of youth unemployment

    David Lam, May 2014
    The youth population bulge is often mentioned in discussions of youth unemployment and unrest in developing countries. But the youth share of the population has fallen rapidly in recent decades in most countries, and is projected to continue to fall. Evidence on the link between youth bulges and youth unemployment is mixed. It should not be assumed that declines in the relative size of the youth population will translate into falling youth unemployment without further policy measures to improve the youth labor market.
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  • Does increasing the minimum wage reduce poverty in developing countries?

    Whether raising minimum wages reduces—or increases—poverty depends on the characteristics of the labor market

    T. H. Gindling, May 2014
    Raising the minimum wage in developing countries could increase or decrease poverty, depending on labor market characteristics. Minimum wages target formal sector workers—a minority in most developing countries—many of whom do not live in poor households. Whether raising minimum wages reduces poverty depends not only on whether formal sector workers lose jobs as a result, but also on whether low-wage workers live in poor households, how widely minimum wages are enforced, how minimum wages affect informal workers, and whether social safety nets are in place.
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  • The brain drain from developing countries

    The brain drain produces many more losers than winners in developing countries

    The proportion of foreign-born people in rich countries has tripled since 1960, and the emigration of high-skilled people from poor countries has accelerated. Many countries intensify their efforts to attract and retain foreign students, which increases the risk of brain drain in the sending countries. In poor countries, this transfer can change the skill structure of the labor force, cause labor shortages, and affect fiscal policy, but it can also generate remittances and other benefits from expatriates and returnees. Overall, it can be a boon or a curse for developing countries, depending on the country’s characteristics and policy objectives.
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  • Redesigning pension systems

    The institutional structure of pension systems should follow population developments

    Marek Góra, May 2014
    For decades, pension systems were based on the rising revenue generated by an expanding population (demographic dividend). As changes in fertility and longevity created new population structures, however, the dividend disappeared, but pension systems failed to adapt. They are kept solvent by increasing redistributions from the shrinking working-age population to retirees. A simple and transparent structure and individualization of pension system participation are the key preconditions for an intergenerationally just old-age security system.
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  • Introducing a statutory minimum wage in middle and low income countries

    Successful implementation of a statutory minimum wage depends on context, capacity, and institutional design

    David N. Margolis, May 2014
    Motivations for introducing a statutory minimum wage in developing countries include reducing poverty, advancing social justice, and accelerating growth. Attaining these goals depends on the national context and policy choices. Institutional capacity tends to be limited, so institutional arrangements must be adapted. Nevertheless, a statutory minimum wage could help developing countries advance their development objectives, even where enforcement capacity is weak and informality is pervasive.
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  • Do firms benefit from apprenticeship investments?

    Why spending on occupational skills can yield economic returns to employers

    Robert Lerman, May 2014
    Economists once believed firms do not pay to develop occupational skills that workers could use in other, often competing, firms. Researchers now recognize that most firms benefit from investing in apprenticeship training. Evidence indicates that financial returns to firms vary. Some recoup their investment within the apprenticeship period, while others see their investment pay off only after accounting for reduced turnover, recruitment, and initial training costs. Generally, the first year of apprenticeships involves significant costs, but subsequently, the apprentice’s contributions exceed his/her wages and supervisory costs. Most participating firms view apprenticeships as offering certainty that all workers have the same high level of expertise and ensuring a supply of well-trained workers during sudden increases in demand and to fill leadership positions.
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  • Designing labor market regulations in developing countries

    Labor market regulation should aim to improve the functioning of the labor market while protecting workers

    Gordon Betcherman, May 2014
    Governments regulate employment to protect workers and to improve labor market efficiency. However, employment regulations can be controversial, often complicated by opposing ideological views. Thus, it is important for policymakers in developing countries to base decisions on empirical evidence of the impacts of these regulations. The majority of the evidence suggests that most countries have set their regulations in the appropriate range. But it can be costly when countries either overregulate or underregulate their labor market.
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  • Self-employment and poverty in developing countries

    The right policies can help the self-employed to boost their earnings above the poverty level and earn more for the work they do

    Gary S. Fields, May 2014
    A key way for the world’s poor—nearly half of humanity—to escape poverty is to earn more for their labor. Most of the world’s poor people are self-employed, but because there are few opportunities in most developing countries for them to earn enough to escape poverty, they are working hard but working poor. Two key policy planks in the fight against poverty should be: raising the returns to self-employment and creating more opportunities to move from self-employment into higher paying wage employment.
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