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In developing countries, jobs are a cornerstone of development, with a pay off far beyond income alone. They are critical for reducing poverty, making cities work, and providing youth with alternatives to violence, says a new World Bank report.

The World Development Report 2013: Jobs stresses the role of strong private sector led growth in creating jobs and outlines how jobs that do the most for development can spur a virtuous cycle. The report finds that poverty falls as people work their way out of hardship and as jobs empower women to invest more in their children. Efficiency increases as workers get better at what they do, as more productive jobs appear, and as less productive ones disappear. Societies flourish as jobs foster diversity and provide alternatives to conflict.

“A good job can change a person’s life, and the right jobs can transform entire societies. Governments need to move jobs to center stage to promote prosperity and fight poverty,” says World Bank Group President Jim Yong Kim, "It's critical that governments work well with the private sector, which accounts for 90 percent of all jobs. Therefore, we need to find the best ways to help small firms and farms grow. Jobs equal hope. Jobs equal peace. Jobs can make fragile countries become stable."

The report’s authors highlight how jobs with the greatest development payoffs are those that raise incomes, make cities function better, connect the economy to global markets, protect the environment, and give people a stake in their societies.

“Jobs are the best insurance against poverty and vulnerability,” says Kaushik Basu, World Bank Chief Economist and Sr. Vice President, “Governments play a vital enabling role by creating a business environment that enhances the demand for labor.”

The global economic crisis and other recent events have raised employment issues to the center of the development dialogue. The WDR authors, who processed over 800 surveys and censuses to arrive at their findings, estimate that worldwide, more than 3 billion people are working, but nearly half work in farming, small household enterprises, or in casual or seasonal day labor, where safety nets are modest or sometimes non-existent and earnings are often meager.

“The youth challenge alone is staggering. More than 620 million young people are neither working nor studying. Just to keep employment rates constant, the worldwide number of jobs will have to increase by around 600 million over a 15-year period”, says Martin Rama, WDR Director.

But in many developing countries, where farming and self-employment are prevalent and safety nets are modest at best, unemployment rates can be low. In those places, most poor people work long hours but cannot make ends meet. And the violation of basic rights is not uncommon. Therefore, the quality and not just the number of jobs is vitally important.

The Report advances a three-stage approach to help governments meet these objectives:

• First, solid fundamentals – including macroeconomic stability, an enabling business environment, human capital, and the rule of law- have to be in place.
• Second, labor policies should not become an obstacle to job creation, they should also provide access to voice and social protection to the most vulnerable.
• Third, governments should identify which jobs would do the most for development given their specific country context, and remove or offset obstacles to private sector creation of such jobs.

Understanding the particular jobs challenge for a given region or country is essential. Differences in the structure of employment across regions, across genders, and across age groups are striking. For example, 6 out of 7 workers in Eastern Europe and Central Asia are wage earners, but 4 out of 5 workers in Sub-Saharan African are farmers or self-employed. Many more women than men are in non-wage work in low- and lower-middle income countries. Meanwhile, in middle-income countries women are more likely to be wage workers, though too often they earn less than men.

Policy priorities are different in agrarian societies and in urbanizing countries. Making smallholder farming more productive is key in the first case, while better infrastructure, connectivity, housing, and city planning are vital in the second. Demography matters too. In Sub-Saharan Africa, 10 million youth enter the labor force every year, but in many middle-income countries the population is aging and in some the labor force is shrinking. Skills and the removal of privilege in access to markets and jobs are needed to tackle youth unemployment. But longer working lives and affordable social protection are needed in aging societies.

Focusing on the key features of different country types can help identify more clearly the kinds of jobs that would make the greatest contribution to development in each case. This focus allows for an analysis of the potential tradeoffs between living standards, productivity, and social cohesion in a specific context. It provides clues about the obstacles to job creation and, ultimately, the priorities for policy makers as they identify the most important constraints to job creation and how to overcome them.

In Emerging Europe and Central Asia the period 2000-2007 was one of rapid income growth, increased productivity, and reduced poverty. Countries successfully integrated into the global economy, restructured enterprises, improved conditions for doing business, and modernized labor markets and social benefits systems. But this did not always translate into higher aggregate employment, as economic restructuring meant that jobs were both created and destroyed. Following the 2008 financial crisis, job destruction accelerated in many countries and the unemployment situation has worsened sharply, particularly among the youth and older workers. As a result, jobs have become a critical focus of most countries' policy agenda.

To redress high and persistent unemployment, the region needs to ignite a virtuous circle between productivity growth and job creation, building on its transformed, more competitive private sector. For this, jobs policies need to adjust to a shrinking and aging work force, ensure that regulations do not stifle labor market flexibility, and adapt social protection systems to encourage participation in the labor market.

"Reducing joblessness will require changes in the social contract between workers, enterprises and governments. The policy agenda must focus on removing obstacles to entrepreneurship, helping education and training systems adapt better to fast-changing labor markets, facilitating labor mobility, and making pensions, social benefits, and labor regulations compatible with longer and more productive working lives," says Philippe Le Houérou, Vice President, Europe and Central Asia. "The right combination of policies will vary across countries, but the desired result is the same: rapid creation of productive jobs."

The World Bank Group fosters job growth through its two main channels of support to the developing world -- the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA) -- as well as through the IFC and the Multilateral Investment Guarantee Agency. Assistance comes in the form of policy advice, support for private sector development plus loans and programs to advance urbanization, infrastructure and human development (including social protection).