By: Anit Mukherjee
Anyone watching the Democratic Party convention — and the Republican convention before that — would not have failed to notice how many times one particular word was mentioned: jobs. Creating decent, remunerative, and secure jobs is a hot-button political issue not only in the United States but globally. As the recent protests in Bangladesh, Kenya, and Nigeria show, anger over unemployment can easily spill over into the streets, bringing with it both economic and political instability that governments around the world are finding hard to manage. There are three reasons for why jobs — or the lack of them — have become such a pressing issue now: demographic change, youth aspiration, and skill gap.
At the turn of the century, it was fashionable to anticipate a ‘demographic dividend’ whereby an increase in working-age population, especially in developing countries, would enable them to grow at a faster pace than the developed ones. “Given the right policies” was the caveat. But as recent events show, things have not gone exactly the way many predicted in places like Nigeria, Kenya, and Bangladesh, particularly given rising debt. In Kenya, the trigger for the recent political turmoil was when the government announced new taxes to fulfill Kenya’s external debt service obligations while two out of five Kenyan youth were unemployed in spite of the economy growing at nearly six percent annually over the last decade.
To be sure, the world has witnessed a steep reduction in poverty along with improvements in social indicators, such as school enrollment and maternal and child health along with the rapid diffusion of information and communications technologies (ICT). Putting kids in school has been one of the great successes of the last two decades. Most developing countries have attained primary school enrollment rates of over 90 percent and a higher proportion of students finish high school than in the 1990s. A child born in the year 2000 would have entered the workforce with a college degree in 2022 along with the aspiration to land a decent, well-paying, and secure job at the end of it. By some estimates, a million young people enter the workforce every month in India and will continue to do so for the next couple of decades. The problem is that countries have not been able to create jobs at a pace that is needed nor fulfill the aspirations of the youth and their families.
Finally, there’s the skill gap. This is basically the mismatch between demand for skills and their supply in the labor market. Politicians around the world promise initiatives, such as worker retraining or equipping young people with 21st century skills during elections. But the fact of the matter is that the skill gap is constantly evolving. It requires investment by both public and private sectors and adaptability on the part of the workers. Most importantly, building both a stock and flow of skilled workers cannot be divorced from a strategic, long-term vision of a country’s economic growth and the sectors that will lead it.
Take Bangladesh for example. The country has been a success story as far as its development indicators are concerned and achieved lower-middle income status in 2015. Much of this growth was driven by its ready-made garment sector employing over four million workers — a large majority of whom were women — making Bangladesh the second largest exporter globally after China. But however remarkable its achievement has been, it is not the first choice of college-educated students like the ones we saw on Dhaka’s streets protesting against the reservation of government jobs with the remuneration and social security that come with it. Evidently, the private sector has not stepped up to fill this need, as is the case in many other developing countries.
The lesson from Bangladesh is this: governments cannot depend only on a labor-intensive low-skilled sector to create jobs in an economy where the educated workforce has different skillsets and high aspirations. So what can governments do? First, invest in regular, high quality employment data. Most developing countries lack basic information on demand and supply as well as what skills are most sought after by employers. Without it, policymakers are flying blind. Second, build a pipeline of skilled workers not only for what is needed today but what the country would need in the future. This applies equally to developed countries like the United States. Coordination with the private sector is essential to guage the demand and supply in the market for skills. Finally, governments should embrace and encourage entrepreneurship. The youth of today are more aware of the opportunities a connected world provides. Governments should harness that energy, not try to stifle it.
Anit Mukherjee is a Senior Fellow for the Global Economics & Development program at ORF America.