- Knowledge base
- Policy question
Promoting ‘inclusive development’ implies first and foremost that serious attention should be given to (a) strategies that create local employment opportunities and (b) opportunities that enable poor people to participate in the labour market. We propose 4 policy areas where Dutch aid and trade can be helpful to enhance employment at the bottom of the pyramid.
Many programs for development cooperation tend to focus attention on agricultural farm development without considering that more than 50% of household income in rural areas is derived from off-farm and non-farm employment. Similarly, most programs for enterprise development still disregard the fact that almost 80% of small-scale businesses are informal services based on self-employment. Poverty is strongly present in both categories, but market-based policies and public institutions largely bypass these people.
Inclusive development requires massive generation of employment for poor people that are fail basic education and lack resources to invest in asset creation. In the countryside, people of advanced age are still responsible for major agricultural operations. Many young people look for a better destiny in the cities (or eventually try to migrate towards Europe). Unemployment rates of up to 40% still prevail in large parts of sub-Sahara Africa, and chronic poverty is largely concentrated in this population segment. Escaping this poverty trap asks for decisive public policies and market incentives that recognize the dynamics of local labour markets.
First, attention should be given to actions for improving labour productivity of rural workers, through education and practical training for jobs outside the agricultural sector, or for better jobs in more advanced agricultural processes. Progress in rural mechanization asks for tractor drivers and technicians, rural towns offer opportunities for shopkeepers and taxi drivers. Also in urban areas, new professions are emerging in the telecom, retail and transport sector that require basic skills. Investing in secondary education and vocational training for business skills and financial literacy have a high pay-off for the people and the society.
Second, emerging micro- and family-firms need to strengthen market linkages in order reduce the currently high costs for input purchase and output marketing. This will enable them to recruit additional labour force and to offer more stable employment positions. Employment effects of most microfinance programs are still disappointing, since they focus too much on working capital and neglect fixed capital investments. Vouchers that permit microfirms access to improved inputs show more effects for stabilizing employment.
Third, informal job protection (‘better jobs’) is of critical importance to improve decent working conditions. Respecting labour hours and wage agreements are part of the business climate. Programs that provide voice to workers and that enable worker organization show to deliver also positive enterprise effects, since greater job identification pays off with higher labour productivity.
Fourth, targeting women for rural and urban employment is proven to be a highly effective strategy for guaranteeing pro-poor development. Female employment in public infrastructure rehabilitation programs as well as for the promotion social protection and environmental services yield high returns in terms of improved child care and family nutrition.
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