1. Structural transformation and the evolution to higher productivity and living standards Duncan Campbell Director, Global Mega-Trends Team Research Department ILO

2. Some definitions, some received wisdom

3. A few definitions using World Bank groupings based on GNI per capita, i.e. low income, middle-low income, middle-high income, high income. a labour market discussion of each is warranted ! « emerging », as defined by Antoine van Agtmael (IFC) – Embarked on economic development and reforms – Have begun to open their markets and « emerge » – Fast-growing economies, in relative terms

4. First, the Lewisian basics Development occurs through inter-sectoral change – from agriculture to light industry, to more advanced industry, and the growth of services The inter-sectoral shift yields economies of scale unavailable in traditional agriculture This in turn results in higher incomes that inter alia fuel the growth of services

5. The decomposition of services Manufacturing had embodied services that have been been outsourced (e.g. custodial or restaurant services) Thus, in causal terms, manufacturing creates services initially … but the causality is dual Many services are local – a point to which we return And many services are tradeable, thus not unlike manufacturing

6. Where do we stand empirically?

7. Let’s take a look at what is happening empirically Yes, development theory has an empirical foundation, particularly in Asia No, it is not capturing all of inter-sectoral change dynamics

9. a first distinction between « employment-led » and « growth- led » demand for labour much economic activity in developing countries is the search for demand creation rather than demand derived from product markets

10. The “Dual Economy” is divided into a “traditional” and a “modern” economy The “traditional” EconomyThe “Modern” Economy is relatively more … informalFormal Vulnerable in employment statusLikely to have a higher share of wage-earners RuralUrban Likely to be less productiveLikely to more productive Credit-insufficientAccess to credit Likely to have a low capital-to-labour ratioLikely to have a higher capital-to-labour ratio Oriented to domestic, even local marketsOriented to domestic and international markets Sheltered from the impact of macroeconomic policies Exposed to macroeconomic policies Deficient in the quality of jobsDeficient in the quantity of jobs Likely to be less or un-protectedLikely to have at least de jure protection Prone to greater earnings instabilityStable and predictable in earnings and income

12. Regional economic and labour market prospects 12 Regional economic and labour market prospects East Asia...as the economies in the region become more mature Sharp increase in unemployment expected in the region from earlier low levels...

13. Economic Growth and the Service Sector

15. The middle class ($4-$13 ppp) per day is growing in the developing world

16. A couple of upshots Agriculture declines as share of GDP output, but much less as share of employment Industrialization stymied in many countries (e.g. Philippines) Industrialization when it occurs is capital intensive and less labor absorbing

17. Why all this matters to the status of employment

18. a typology of status in employment paid employment is a developed-country phenomenon, except at its lowest end (casual wage labour by the rural landless) self-employment, with a significant share being « survivalist » is a developing-country phenomenon various forms of unpaid work, and non-market work, are developing-country characteristics

21. Structural transformation is important because it alters status in employment

23. A few (very few) words on Viet Nam

24. Growth but not many jobs?

25. Why? The view from ILO and MOLISA in 2010 The pace of restructuring is too slow, from rural to urban, from agriculture to manufacturing, from public to private Growth has been capital accumulation with little innovation … and capital intensive Demographics: a population surge coinciding with a shortage of skilled labor Consider also exogenous constraints to productivity growth

26. But Viet Nam has not fared poorly relative to its neighbors

27. What, in conclusion, seems to matter? «no country has made the arduous journey from widespread rural poverty to post-industrial wealth without employing targeted and selective government policies to modify its economic structure and boost its economic dynamism.» In short, vertical and horizontal industrial policies

28. So, what matters is…. Investment Innovation Capabilities Productivity Protection And a pro-active state

29. Thank you! Stay connected with us at www.facebook.com/Vietnam.ILO