Shared-Growth and Job Creation: Exploring Employment and Shared Growth Linkages in Madagascar Margo Hoftijzer

Structure of presentation Set-up of study Main findings Assessment of pilot World Bank & CSAE - Shared Growth and Job Creation in Africa - March 2008

Set-up of Study Exploring the role of labor as linkage between growth and poverty reduction 1. From growth to employment: Linking changes in output p.c. to changes in labor productivity and employment (Shapley). 2. From labor productivity to earnings: Linking changes in labor productivity to changes in earnings (macro-micro comparison). 3. From employment and earnings to poverty: Linking changes in sectoral employment and earnings with those in poverty (Ravallion, Huppi). Linking changes in labor income components to changes in poverty (Kakwani, Neri, Son) World Bank & CSAE - Shared Growth and Job Creation in Africa - March 2008

A crisis-affected period (overall and sectoral annual output growth, %) World Bank & CSAE - Shared Growth and Job Creation in Africa - March 2008

Basic indicators Population, employment and poverty (2001, 2005) Population (mln) 15.9 17.9 Dependency rate (%) 0.91 0.89 Employment rate (%) 82.5 85.8 Unemployment rate (%) 1.2 2.6 GDP per capita ($) 247 233 Poverty rate (%) rural urban 69.7 77.3 44.2 68.7 73.5 52.0 Low earners (%) 44.1 33.8 Working poor (%) 69.2 65.4 World Bank & CSAE - Shared Growth and Job Creation in Africa - March 2008

Output per worker linked to GDP p.c. Shapley decomposition (2001-2005) World Bank & CSAE - Shared Growth and Job Creation in Africa - March 2008

Inequality reduces Distribution of monthly earnings (2001,2005) World Bank & CSAE - Shared Growth and Job Creation in Africa - March 2008

Median earnings (MGA): Revealing sectoral developments Employment and earnings by sector (2001, 2005) 2001 2005 Employment share (%): Δ %(#): Primary sector 73.5 80.1 28.2 Secondary sector 6.8 2.5 -56.6 Tertiary sector 19.2 17.4 6.6 Median earnings (MGA): Δ%: 24.2 31.6 30.6 83.6 80.0 -4.4 92.6 72.3 -22 Total median (mean) 35.3 (69.4) 30.8 (55.5) 14.6 (-20.0) World Bank & CSAE - Shared Growth and Job Creation in Africa - March 2008

Employment and poverty Changes in employment differ by poverty level (%) Employment rate Wage workers Self-employed Family laborers Poor - 2001 88.4 8.7 5.7 85.6 - 2005 88.7 10.8 4.1 85.2 Non-poor 71.7 39.8 13.7 46.5 80.8 22.7 9.2 68.2 Total 82.5 18.3 8.2 73.6 85.8 14.9 5.9 79.2 World Bank & CSAE - Shared Growth and Job Creation in Africa - March 2008

Household labor income by sector: Income sources and consumption Changes in HH income sources differ by consumption level Household labor income by sector: Other Total (%) Primary Secondary Tertiary 2001 64.8 7.9 21.9 5.4 100 Poorest 87.2 3.0 4.4 Q2 82.4 4.3 8.4 4.9 Q3 73.3 5.0 16.0 5.7 Q4 56.7 10.7 27.0 5.6 Richest 23.7 16.5 52.9 6.9 2005 70.7 3.5 21.4 81.0 1.9 12.6 4.5 77.1 2.1 17.8 76.2 16.9 3.9 68.8 3.6 23.0 4.6 50.6 6.8 36.6 6.0 World Bank & CSAE - Shared Growth and Job Creation in Africa - March 2008

Decomposing poverty reduction Inter and intra sectoral contributions Inter-sectoral contributions Residu Change in Poverty Primary Second. Tertiary (P0) -1.0 -6.8 -0.4 3.1 7.0 -1.5 -0.5 -1.8 (P1) -8.7 -10.5 -0.3 1.2 3.7 -0.6 -0.2 -1.4 World Bank & CSAE - Shared Growth and Job Creation in Africa - March 2008

Sources of changes in labor income (average, per household, 2001-2005) Poor Non-Poor Total Household per capita labor income (% change) 29 -15 15 Contribution of changes in: Average earnings per hour 143 141 138 Average hours worked -27 24 -43 Household unemployment -4 12 -9 Household participation -13 -77 14 (% change, geometric means across household) World Bank & CSAE - Shared Growth and Job Creation in Africa - March 2008

Main findings Fall in GDP per capita: associated with fall in labor productivity due to substantial labor influx into agriculture. Fall in poverty incidence: due to higher employment in households just below the poverty line. Fall in poverty depth: due to higher hourly earnings of the poor (higher primary, larger share of secondary and tertiary). Fall in inequality: higher earnings of the poor, lower earnings of the non-poor. World Bank & CSAE - Shared Growth and Job Creation in Africa - March 2008

Assessment and next steps Exploration of growth – labor – poverty linkages Useful information for Madagascar Illustrative for other countries Link between labor productivity and labor income Role of agricultural prices and products More specific policy guidance for poverty reduction through labor World Bank & CSAE - Shared Growth and Job Creation in Africa - March 2008