Lousy jobs for all or Decent Work for a few Francis Teal Centre for the Study of African Economies Department of Economics University of Oxford University of Antwerp – City Campus 21 October 2014

Not a great choice is it? So let me begin with a point on which we can agree. What we both want to see is decent jobs for all. At the moment both in developed and developing countries we are failing to do this. This failure is having a particularly adverse affect on younger people. Lawrence Egulu’s presentations highlights the extent of that failure. We do not disagree that policy is failing massively. Indeed I think the figures greatly understate the true magnitude of the problem.

What do we mean by a lousy job?

What do we mean by a decent job?

More lousy jobs? Surely you will say I cannot be arguing we need more lousy jobs such as those shown on my first slide? Look at the jobs. It is true they are all “lousy” if we compare them to the second slide but – and it’s a very big but – some are much lousier than others. The only picture that came with wages and that was for the bottom right which was presented as showing sweat shop workers in Cambodia on US$60 per month. My argument is simple The workers with the lousy jobs in the two top slides would kill for the lousy jobs at the bottom.

What is the core ILO argument about decent jobs? ‘Taken together, these findings [of how jobs link to family incomes] imply that efforts to expand formal wage employment opportunities and to promote structural transformation, out of lower productivity, subsistence agricultural activities into higher value added employment in the services and industrial sectors is a potentially powerful mechanism for raising living standards and growing the middle class.’ Taken from the Box 1.2 ILO World of Work Report - Developing with Jobs 2014 What that argument appears to say is the workers have higher income because they have formal wage jobs. The Report later clearly states that creating more wage jobs will create higher incomes. ‘improved job quality (as proxied by wage employment) is not only a good indicator of labour market progress but also a determinant of higher per capita incomes.’ (page 47) These are the core arguments that Lawrence Egulu elaborates on.

ILO chart showing employment type and incomes

What is wrong with that argument? We need to focus on the key argument - workers have higher income because they have formal wage jobs - and ask ourselves: Why do some workers have so much higher incomes than others? Do incomes differ because one is a wage employee and the other is self-employed? Rather obviously not. So the argument in the ILO report is based on seeing a correlation and inputing causation. Incomes are not higher because the worker has a ‘decent’ job. Incomes are higher and it happens (often but not always) to be in the form of wages.

Why are incomes higher in the jobs in my second slide? Lots of reasons which include: They have more education and training. They have a wide range of work related skills. They work with highly sophisticated capital equipment. They work in large organisations with fellow equally highly trained professionals. They work in societies with a highly developed infrastructure, public services which (on the whole) work and are subject to the rule of law with well defined property rights.

Lousy versus decent jobs is a false dichotomy The ILO argument proceeds by contrasting lousy jobs with decent ones. In fact within all job types there is a very large range of incomes. Lets look at the range of yearly salaries for economics professors in the US. The lowest 10 percent of economics professors earned $42,820 per year on average in 2009. The highest 10 percent earned $144,750 on average, according to the Bureau of Labor Statistics. From: http://www.ehow.com/info_7756426_much-do-economics- professors-make.html Even within this very narrowly defined occupational group these is substantial variation in earnings. The same is true in poor countries.

Earnings & Earnings Growth in Self Employment, Small Firms & Large Firms Monthly Earnings in Urban Ghana Monthly Earnings in Urban Tanzania

How earnings change with firm size: workers of average age, education and tenure

Some concluding thoughts We do not disagree that we want to see many more decent jobs. We do not disagree that policy is failing to do so – massively so and in a way that is impoverishes millions the majority of them young. Where we do disagree is in thinking a policy of creating decent jobs is any kind of policy at all. I have not had time to discuss how we might create many more decent jobs but I hope I have convinced you that the simple dichotomy of lousy versus decent jobs is no way at all to understand what we do need to do.