By Yaroslav Lissovolik

Concerns about inflation and lack of growth are the dominant themes across the world economy these days, though one of the macro indicators that appears to be at times no less important is job creation. Indeed, the theme of jobs was one of the key issues in the US presidential race and Trump’s electoral program. In the largest emerging markets, such as China and India, unemployment among the younger generation of university graduates is leading these economies to explore the pathways to growth that are conducive to higher job-creation. The challenges faced by developing economies in the labour market have to do with multiple factors, including rising protectionism, mounting digitalization, AI transformation and increasing incidence of hybrid work. What is lacking in terms of the response to these challenges is a coordinated and collaborative cross-border agenda for developing economies that transcends the limitations of dealing with job creation solely at the national level.

One of the areas for such cooperation across the Global South may be the development of start-ups that are supported by platforms of development institutions of developing economies. India has actively promoted the theme of start-up development at the global level during its chairmanship in the G20 and these initiatives may be further pursued in the BRICS context with the support from the regional and national development institutions in which BRICS+ economies are members. Apart from creating favorable conditions for start-ups, there is also a need to support small and medium-sized businesses as well as the various modalities of self-employment given their large share in total employment in the developing world.

In fact, ILO estimates suggest that “self-employment, micro and small enterprises play a far more important role in providing jobs than previously believed” – the analysis of data from 99 countries revealed that these ‘small economic units’ account for 70 per cent of total employment, making them by far the most important drivers of employment in the global economy. The normative implications of these ILO findings point to the need for prioritizing support for small economic units as a key pillar of developing countries’ socio-economic strategies.

Pursuing South-South cooperation in the sphere of environmental policy, including in such areas as countering land degradation and desertification, can be an important source of additional jobs in developing economies. The International Labor Organization (ILO) estimates that “100 million jobs can be created by 2030 by ensuring a green transition that fully takes into account its social dimensions”. To better gauge the economic impact of environmental policies the ILO is working with IUCN on a restoration barometer that assesses the impact of land restoration on employment.

An important factor in increasing job creation in the developing world is regional integration. It can be conducive to the emergence of regional labour markets that allow for greater labour mobility and the harmonization of labour standards across countries. It may also be a source of new jobs through boosting economic growth via trade creation and dynamic effects. In the investment sphere, integration projects that connect members of regional integration blocs and that are financed with the support of the regional development institutions may be a source of higher economic growth and job creation. Estimates of job creation effects for Mediterranean countries using a Computable General Equilibrium model from Ayadi et al (2017) put the impact of deeper regional integration on youth employment creation at no less than 4.4 million jobs, with the youth unemployment rate projected to fall from 25.7% in 2015 to 17.6% by 2040. Of all of the regions of the Global South job creation is particularly critical in sub-

Saharan Africa, where high population growth is making the region one of the key suppliers of labour in the world economy. According to the IMF, “by 2030, half of all new entrants into the global labor force will come from sub-Saharan Africa, requiring the creation of up to 15 million new jobs annually”. In other words, addressing labour supply imbalances in the world economy will depend to a major degree on the progress in raising labor employment in Africa. The policy prescription from the IMF for boosting job creation in sub-Saharan Africa includes three key priorities:

- Shifting informal jobs from a trap to a stepping-stone

- Creating conditions that are conducive to jobs growth in high-productivity sectors like modern services and manufacturing

- Breaking down barriers to private business growth

Another key area for job growth in the Global South is financial services with the view to boosting financial inclusion – existing empirical estimates suggest that digital financial inclusion has a significant effect in driving sustainable employment in upper-middle and high-income economies. In competing for global talent developing economies may consider the creation of platforms among the leading regions/municipalities of the Global South in the sphere of digital economy development.

Developing AI capabilities through common South-South cooperative platforms will be critical in boosting competitiveness in a sector that is not only exhibiting sizeable job growth, but that is also disrupting employment patterns across the world economy. Elsewhere in services, the sphere that may be particularly important in increasing employment for large developing economies such as India and China is health care. The development of the healthcare sector together with education will be crucial in rendering GDP and employment growth more socially oriented and conducive to enhancing the conditions for “human capital” across the Global South.

Overall, across sectors the key focus areas for developing economies in job creation are services, in particular those pertaining to IT, financial sector/financial inclusion and social welfare. At the micro-level of companies, greater priority needs to be accorded to providing support for SMEs, self-employment and micro-enterprises. Across regions there is the growing importance of sub-Saharan Africa as a key contributor to the global labour force. The key pathway to greater employment growth in the developing world that needs more focus and exploration is greater South-South economic cooperation, including through regional integration as well as common cross-country platforms targeting joint projects in the environmental and the digital economy spheres.

Yaroslav Lissovolik – Founder of BRICS+ Analytics

BRICS+ Analytics