household income per capita

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					Comments on the OECD Jobs Study
  Reassessed: its relevance to
     developing countries
          Duncan Campbell
   Director, Policy Integration Dept
                  ILO
             A few numbers
•   1.4 billion or 50%
•   550 million or about 20%
•   220 million
•   12.3 million
                        youth unemployment rates




              Northern Africa
               Western Asia
         Sub-Saharan Africa
                         CIS
          South-eastern Asia
Latin America & the Caribbean                                         2005
       Developed Economies                                            1995
                       World
                  South Asia
                Eastern Asia
                     Oceania

                            0.0   5.0 10.0 15.0 20.0 25.0 30.0 35.0
   Income inequality (household income per capita) is
                         increasing in a number of countries                                               …
                    70


                    60
                                                                                                  CHL
                                                                                         ECU
                                                                      PER                   MEX
                    50                                                        MDG(con)
                                                                              URY UGA(exp)
      2000 - 2003




                                                                               RUS
                                                                 USA                   MRT(con)
                    40                                       BGRNOR      TUN(con)
                                                     EGY(con)
                                           ROM                      ISR       JAM(con)                  TZA(con)
                                                       POL      DNK                        KGZ
                                   CHN-U        UKR        CHN-RGBR
                                                          ITA TWN
                                                               NLD
                                                         BGD(con)
                                                            ESP(exp)
                    30               DEE    HUN    BEL LUX
                                                         CAN
                                                       DEW        LKA(con)
                                     SVK            SWE
                                             FIN
                                       CZE            SVN
                    20


                    10


                     0
                         0    10          20             30            40           50              60             70
                                                          1990 - 1993

Source: WIDER Income Inequality database, 2005
                           The labor share in GDP is declining
              .7
              .6




                                                                                                                          ISL                                         ANT
                                                                                                                                              SWE          USA
                                                                                                                                ABW
   Labor share 2002-2004




                                                                                                                                             DNK
                                                                                                             HKG                         NLD    JPN DEU
                                                                                                                                          FRA LUX
                                                                                                                                               AUT
                  .5




                                                                                                                                      FIN
                                                                                                 MLT         CRI                    ESP
                                                                                                                       NOR
                                                                                                                      AUS        BHS                      EST
                                                                                                         LKA                      ZAF
                                                                                                                CZE
                                                                                                               KOR
                                                                                                 NZL
                                                                                                       ITA
                                                                                     ARM         POL          LVA
         .4




                                                                        CHL                                         IRL
                                                                               NAM         SVK
                                                                JOR           KAZ                                   MDA
                                                                       TUN
                                                                     IND              BRA
                                                                     COL   BHR                               BGR

                                                                                                                      PAN
                                                                     MEX                                 TTO
                                                         VEN
.3




                                          MAC THA
                                                               OMN
                                                               KGZ

                                        PHL
                                        PER    AZE
                                  IRN                    DZA
              .2




                           .2                       .3                     .4               .5                                                                   .6         .7
                                                                      Labor share 1992-1994

                           Source: UN national accounts
          Growth becomes less labor
              intensive in Asia
               Percent Increase in Employment associated with
                      a 1 percent point increase in GDP

         0.8
                                                Singapore              Philippines
         0.7
         0.6
                                                     Pakistan
         0.5                                                            Bangladesh
 1990s




         0.4                                                                         Malaysia
                                                           Indonesia
         0.3                                       India
                                  Korea
         0.2                              Thailand
                         Taiwan
         0.1                               China

          0
               0           0.2                 0.4                        0.6                   0.8
                                             1980s


Source: Felipe and Hasan 2006, “The Challenge of Job Creation in Asia”, ADB
      Macroeconomic Policy

• Greater volatility
• Smaller revenue base and less fiscal
  space
       0
           1
               2
                   3
                       4
                           5
                                    6
                                                                                            7
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
                               Mean per decade (arithmetic)
                                                              World GDP growth (annual %)




2002
                                                                                                World GDP growth, 1961-2004 (annual change in per cent)




2003
2004
Reserve Holdings by Developing countries,
         1970-2004 (in % of GNI)
35
                                                             All developing countries
                                                             East Asia & Pacific
30
                                                             Europe & Central Asia
                                                             Latin America & Caribbean
25                                                           Middle East & North Africa
                                                             South Asia
20                                                           Sub-Saharan Africa

15

10

 5

 0
     1970
            1972
                   1974
                          1976
                                 1978
                                        1980
                                               1982
                                                      1984
                                                              1986
                                                                     1988
                                                                            1990
                                                                                   1992
                                                                                          1994
                                                                                                 1996
                                                                                                        1998
                                                                                                               2000
                                                                                                                      2002
                                                                                                                             2004
  Coordination of Macroeconomic
      with Structural Policies

• Departures from the Lewisian
  development trajectory
• Continued high share of informality and
  concentration in services
      an inverted U development curve: change
            in industry employment '90-'03

                   14
                   12 pakistan
                            india
                   10
                  china
                     8
                                         indonesia
                    6
                            malaysia
        korea       4                      thailand
singapore
                    2
          japan     0
-40        -20          0           20        40      60
   Unemployment insurance and
        social protection

• « unemployment » as luxury good in most
  developing countries
• Unemployment insurance as largely
  lacking
• 80 % of world’s people not covered by
  social protection
                                         Public social security expenditure, 1990
Percentage of GDP




                    30
                    25
                    20                                                             Total social security expenditure
                    15                                                             Pensions
                    10                                                             Health care
                     5
                     0
                         Africa   Asia    Europe     Latin      North    Oceania
                                                    America    America
                                                    and the
                                                   Caribbean

                                              Region
  Active labour market policies

• A whole different meaning to « making work pay
  »
• Agencies of labour market intermediation often
  lacking (10 labour inspectors in Nepal)
• Principal ALMP in developing countries is public
  works
• Labour shortages arising in labour surplus
  countries
   Wage setting mechanisms

• Collective bargaining usually quite
  underdeveloped in developing countries.
  (effective coverage of trade unions is
  about 1 to 2 percent in Thailand)
• Declining labour share most evident in
  developing countries
• Low wages a key constraint on potential
  growth (Asian Development Bank)
Employment Protection Legislation


• Negative correlation between stringency of
  EPL and level of economic development
• Micro level used as a substitute for macro
  policies on security
• But is EPL / other measures of « rigidity »
  a binding constraint?
         difficulty of firing index v. avg annual growth 2000-04

50
                                SSA
45                                       south asia
                                   CEE
40
                           MENA
35
                LA/C
30
                                                      east asia
25             oecd

20
     0            2           4            6             8         10
                            avg annual growth %
      "rigidity of employment" v. change in real mftg wage,
                           1990-2003

     india         70
                   60
    pakistan       50 sri lanka                      korea
                   40
         philippines
                   30         japan
                   20                       malaysia
                   10                                    singapore
                     0
-40       -20          0       20      40       60           80      100
                          change in real wage
    Some concluding remarks
• A higher share of labour market
  challenges lie outside the labour market in
  developing countries.
• The consequent « weight » to be assigned
  different elements of OECD jobs strategy
  is different in developing countries
• Entrepreneurship, skills, productivity
  growth (and external factors affecting it)
  most relevant

				
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