Jobs Diagnostics Why, what, and how Download our publication bit.ly/PathsToJobs Merotto, D., Weber, M., and Aterido, R. (2018) ‘Pathways to Better Jobs in IDA Countries: Findings from Jobs Diagnostics’ World Bank Group, Washington, DC.

1/ Jobs Diagnostics: a data-driven approach

shape the guided enquiry in Jobs Diagnostics Jobs and Economic Transformation Framework More people join the labor force & find work Self-employment, start-ups, firm entry and growth Transitions: into employment, school to work, from care-giving to labor force People get better at doing their existing job: Labor productivity rises within occupations, locations, employment types; Learning on-the-job (Paul Roemer) Returns to labor assets improve (incl. thru’ farming, self-employment) Workers move from less to more productive jobs: Structural change: sector / occupational shift (can require skills, doesn’t always) Migration / Urbanization: location shift (earnings gaps & prob., moving costs, amenities) Agglomeration externalities Formalization: jobs move from capital-thin self-employment, to capital deep waged employment in firms Division of labor, Economies of scale Selection between businesses (requires factor market flexibility, entry and exit, competition) Economic Transformation Results in: Higher labor productivity: raises earnings and creates demand for more goods and services. Externalities from good jobs which support development – and so are worth pursuing in policy These pathways to better jobs shape the guided enquiry in Jobs Diagnostics

The Building blocs for Jobs Diagnostics and Strategies 1: Identify the right question: e.g why is private sector off-farm waged employment stagnating? Guided enquiry identifies `symptoms’ Identify comparators in country type; by demographics, region, income group, employment structure Benchmark against comparators identifies `anomalies’ wrt symptoms 2: Group the symptoms, look for supporting evidence, and consider the likely causes: Is there a demand or a supply side problem? Are real wages rising? Are employment probabilities rising for people with the right skills? If the cause is X or Y, what else would we expect to see? 3. Pick the right Labor Market Model Integrated labor market? Dualistic labor market? 4. Develop a Jobs Strategy Identify the target groups – Youth? Women? The poor? Rural workers? The underemployed skilled? What market or policy failures determine the outcome?

“How?”: A guided enquiry for the jobs diagnostic – Macro Analysis Uses data on population, labor force, real GDP and employment by sector Analyzes trends in economic growth, structural change, urbanization, waged employment Points to anomalies through cross-country comparisons Projects future demographics and labor force growth and identifies macro challenges assuming past growth rates repeat themselves

A guided enquiry for the jobs diagnostic Supply side analysis Uses labor force and other household surveys Maps the profile of the workforce Observes trends over time and points to anomalies through cross-country comparisons Examines anomalies specifically looking into labor market rigidities and structural constraints

Step-wise guided enquiry – Supply side Profile of Jobs Trends in labor supply Trends in employment and education Workers‘ earnings and household consumption What determines labor market outcomes? Wrap up 5. step 4. step 3. step 2. step 1. step Interpretation To Identify Challenges

A guided enquiry for the jobs diagnostic Business dynamics uses economic censuses, national accounts surveys, business establishment surveys Maps the profile of firms and jobs in the formal private sector observes trends over time in aggregate and @ firm-level and points to anomalies using cross-country comparisons and economic deduction examines anomalies specifically looking into investment climate and doing business indicators

Step-wise guided enquiry – Demand side Profile formal firms and jobs over time: - Age - Size - Ownership - Sector - Location Trends in: - Output - Employment - Unit labor costs - Capital/Labor - Productivity - Labor share Trends at firm level in entry, exit, growth, shrinkage - Survival rate - Who grows? - Who hires? Spatial patterns What factors determine Firm level: employment productivity, labor costs, growth Wrap up 5. step 4. step 3. step 2. step 1. step Interpretation To Identify Challenges

2/ Jobs Diagnostics Standardized Tools and Techniques Macro tools – Excel Based demography, structural change Supply side tool – Stata-based runs off I2D2 mapping Business Dynamics `Demand side’ tool – Stata-based runs off Govt. data

Macro Excel-Based Tools – Asses the trends in demography

Macro Excel Based Tools – Assess Drivers of Structural Change

Macro Excel Based Tools – Decompositions of Structural Change

Macro Excel Based Tools – Sectoral Decompositions Structural Change

Macro-Excel-based Global Comparisons: Structural transformation patterns across countries and growth episodes

Standard Supply-side Outputs using LFS/LSMS

Labor Supply: Understand the profile of jobs and work in the economy Provides the structure of the workforce and jobs held in the country Uses past trends helps to infer how economic transformation should be affecting job transitions Example for Low and Middle Income Countries: Question to Step 1: What share of the working age population is employed, unemployed, or inactive? What share of those employed is in agriculture and non-agricultural employment? What is the share of those employed in agriculture and non-agricultural employment is self-employed, waged employees, unpaid family workers or employers? What share of wage employment outside of agriculture is formal or informal? What share of formal wage employment outside of agriculture is in the public or in the private sector?

Assess Trends in Labor Supply

Assess Trends in Employment Waged employment rising (Left), Youth more likely in agriculture for first informal job (Right)

Assess Workers’ earnings and hours worked

Assess what determines labor market outcomes?

Business Dynamics: Understanding the Profile of the Formal Private Sector and how it changes when possible

Business Dynamics: Assessing firms’ Labor Productivity, Employment and Real wages in aggregate and changes overtime when possible.

Business Dynamics: Decomposing firms’ Labor Productivity Growth between sectors and within sectors

Business Dynamics: Assessing changes in firms’ labor productivity over time by firm characteristics

Business dynamics: (a) benchmarking firms’ size by age to infer growth of a typical firm overtime; (b) using the share of young and old micro firms to infer whether micro firms grow on average (and relative to other countries).

Business Dynamics: If panel data is available, assess firms’ transitions overtime to show which firms grow in employment.

3/ Benchmarks derived from global research bit.ly/PathsToJobs

About the `Pathways’ study Explores employment & productivity in global growth episodes Looks for patterns in labor markets by per capita income Looks for patterns and changes in firms Helps us to benchmark “normality” in jobs and growth Decompositions from 16,000 growth episodes in 125 countries (WDI) Labor market structure in the most recent household or labor force survey for over 150 countries (I2D2) Representative firm-level data from 16 countries (economic census data, national accounts surveys, tax returns)

Economic growth doesn’t always bring enough good jobs Labor productivity drives economic growth But economic growth doesn’t always bring enough good jobs http://www.worldbank.org/en/data/interactive/2017/02/02/jobs-macro-data-dashboard

Underemployment is a challenge in LICs In many LICs and MICs, employment rates are quite high. But people work short hours and in low-quality, low-productivity jobs.

Transformation seems to start at low income levels and it involves waged work The share of Ag workers is lower in UMICs and LMICs than in LICs. The share of waged work is higher.

The transformation in waged work is within and esp. outside agriculture The increase in waged employment arises out of three processes: People move out of agriculture Of those remaining in agriculture, unpaid falls by 40% of farmers are self-employed) Those outside agriculture stop working for themselves and work for someone else (in towns). Source: I2D2

Female labor force participation is highest in LICs, lowest in MICs and higher again in UMICs Source: I2D2

These channels: Agricultural Productivity, Urbanization, Waged Work seem to also be correlated with higher GDP growth in LICs (Global Comparison Tool) Agricultural Productivity Urbanization Waged Share

Indicators Data Catalogue 4/ The Global Jobs Indicators Data Catalogue Draws from the WBG Micro Data Library 61 variables (and rising) derived from I2D2 mapping of labor variables (Jobs WDR 2013) 150 countries 2,000+ surveys (and rising)

Pathways to better Jobs seem to show over time within countries (Global jobs indicators data catalogue)