Joint EU-ILO project seizes the benefits of sectoral and trade policies for more and better employment and growth

Trade and Employment Specialists David Cheong and Maikel Lieuw-Kie-Song, provide background information about the “Strengthening the Impact on Employment of Sector and Trade Policies (STRENGTHEN) Project”, a joint EU-ILO initiative. The project has two components: to support and build capacity among partner countries and development practitioners in formulating policies and programmes to enhance the positive impact of sector policies and programmes on employment; and to assist developing countries in harnessing international trade and trade-related foreign investment to provide more opportunities for decent work and increasing the number of productively employed workers.

What particular challenges does the project aim to address?

First, it is important to understand the context in which the project was formulated in 2013. After the 2008 global economic crisis, several countries had observed a recovery but one with little net employment creation. This job-poor growth was further aggravated by a growing labour force, especially in emerging and developing countries. Many countries saw unemployment increasing, work conditions deteriorating, and inequality rising. Global and national policy frameworks were adopted to tackle these employment challenges, but many countries were still at a loss as to how to implement their pro-employment strategies. This project was designed to support countries with the implementation of trade and sectoral policies for more and better jobs.

As a result of this context, job creation is a clear political and economic priority in all the countries where the project is active, and in all these countries the governments and social partners are working on developing policies that would in effect enhance job creation. One of the starting points of the project is that all jobs are created in sectors, and that each sector has its own potential for job creation, as well as its own characteristics of what types of jobs it generally creates. Given this, some sectors may create many relatively low-paying jobs, other fewer highly-skilled jobs, and some tend to create more formal jobs, while growth in other sectors may actually result in increases in informal jobs. Furthermore, some sectors create more indirect and induced jobs because of their supply links to the rest of the economy. The project aims to make these differences more visible by delving into some specific sectors and coming up with ways to both quantify and describe these effects for different sectors.

How exactly does the project help to strengthen the impact of trade and sectoral policies on employment?

The project supports countries with the implementation of trade and sectoral policies to modify their productive structure, boost their economic dynamism, and ultimately generate better jobs. Meeting this objective requires obtaining a better understanding of how different sectoral policies affect employment so that policies can be improved to enhance the employment outcomes. For example, one sub-sector the project is looking at in several countries is agro-processing, as many countries have policies and targets to increase processing (and value addition) of agricultural exports. However, processing among crops differs and so do the labour inputs required. The project aims to quantify this so that the employment impacts of promoting different crops are clear and understood and it becomes feasible to factor the employment-creation potential into the decision of which crops should be promoted.

Yet, in general, the implementation of pro-employment strategies has been problematic, especially in developing countries in which we work, because of inadequate labour market information, a lack of diagnostic and monitoring tools, and insufficient implementation capacity. The project helps to fill these gaps. For example, in Benin, Ghana, Guatemala, Morocco, Myanmar, and the Philippines, the project focuses on strategies to take advantage of international trade opportunities towards achieving national employment objectives.

Who are the project’s main partners on the ground?

The project’s main partners are the ILO social partners, as well as different sectoral ministries and relevant agencies. Typically, we try to partner with all the stakeholders involved in the sectors we focus on.

How do you measure and assess the potential effects of sectoral and trade policies on job creation and employment?

The development of tools and methods to measure and assess the effects on job creation is a key area of focus of the project. There is no standard approach for doing this, and each sector has its own peculiarities that require a specific approach. The project employs a variety of commonly used tools such as Input-Output tables, and has also been developing new tools, in particular taking advantage of how existing data sets in these countries can be combined to produce new insights. Particularly interesting areas in this regard are using Geographic Information System (or GIS) data to better understand the spatial dimensions of job creation and how access to infrastructure in different regions impacts on employment and the labour market, or how the job-creation effects of certain sectors differ across regions.

The project is also piloting two new approaches to assessing the effects of trade on employment. The first is called “Spotting Export Potential for Employment”. This approach builds on an export potential assessment methodology developed by the International Trade Centre (ITC). The approach measures the direct and indirect employment effects that a country could expect if it realized its untapped export potential in a particular sector. This lens provides valuable information for the identification of sectors with both export and employment potential and for policy discussions and policy design to make export development drive the creation of more and better jobs.

The second approach is part of a project activity called “Trade and Value-Chains in Employment-Rich Activities (TRAVERA)”. In each partner country, a TRAVERA survey is being conducted of around 200 actors within a chosen export value chain. The choice of the focus value chain has been closely aligned with the partner country’s priorities. The main purpose of the TRAVERA survey is to identify opportunities and threats within the export value chain in relation to creating more and better jobs.

How does the project strengthen knowledge sharing and build capacity among partners to assess employment opportunities resulting from trade and sectoral policies?

The project has a strong research component given that effective interventions need to be evidence-based. Several papers have been produced at the global and national levels to study the impact of trade on employment in developing countries. The project has also produced a study on qualitative methods to assess the impact of trade on employment. The project’s studies have been disseminated among government officials, social partners, and representatives of other relevant national organizations and institutions in the partner countries.

Capacity building is an equally important objective of the project and a combination of approaches is used. The approach is also influenced by the country context and the technical expertise of the project partners, which tends to vary from country to country. The project has organized tripartite knowledge-sharing workshops, conceptual training, and technical training on the effects of trade on employment in each of the partner countries. These workshops have provided a conceptual framework for understanding the effects of trade on employment and initiating policy discussions on the effectiveness and coherence of existing trade and sectoral policies for employment. Another important element is partnering with local institutions and hiring local consultants when conducting country-level assessments.

What is the intended long-term impact of applying the principles / or guidance recommended by the project?

The intended long-term impact is to create awareness of the importance of trade and sectoral policies on job creation, and that how countries shape their policies can have different and important employment effects. Historically, trade and sectoral policies have been an important means for countries towards developing and diversifying their economies. As a result of these policies, labour has typically shifted away from natural resource-intensive and agricultural activities (where labour productivity is low) towards more complex, technology- and knowledge-intensive activities (where labour productivity is high), often in manufacturing and services. This structural transformation has required an appropriate investment in infrastructure, relevant training and skills development of a country’s workforce, and effective social protection to help people cope with disruptions.

Because the domestic markets of most developing countries are too small, export markets are important for their economic growth, structural transformation, and employment creation and upgrading. Trade and sectoral policies are powerful tools because they can be targeted at economic activities that are prioritized by a government within its National Development Plan or National Employment Policy. By using these tools to promote employment, a government can more finely manage a country’s economic upgrading while keeping it aligned with social goals to ensure inclusive and sustainable economic growth.

Can you provide some country examples of how trade and sectoral policies adopted have resulted in more and better quality employment?

The project is still ongoing in many countries, so it is not easy to assess to what degree it has managed to actually shift policies. What has become clear however is that there is an increased awareness of the links between sectoral policies and employment and that it is important that these links are understood and quantified. This was well articulated by the Minister of Finance in Ghana who, for example, stated in his budget speech in 2017 that “In the push towards job creation and skills development, the government will introduce a mandatory job impact assessment for all public-sector projects or initiatives. Job impact assessments will also be required of private-sector entities that access government projects or contracts. In other words, all public-sector projects, whether executed by the public sector or private-sector contractors must undergo a job impact assessment to evaluate the potential job creation impact. This will enable the government to analyze how various jobs are being created so as to better structure incentives and stimuli for higher skill jobs and opportunities for Ghanaians.”

Demand for our services is also increasingly growing. For instance, in the Philippines, the project has been invited to support the formulation and implementation of the Philippines Export Development Plan. This support is in the form of strengthening the knowledge and technical capacity of government staff, mapping employment potential in key and emerging export sectors, establishing sectoral employment targets, and developing a monitoring tool to assess whether export growth has contributed to more employment and higher wages.

In Morocco, policymakers expressed an interest in creating jobs that favoured skilled workers or presented opportunities for furthering technological advancement. Using the “Spotting Export Potential for Employment” approach, the project estimated that expanding exports in transport and vehicles and electronics such as radios and televisions, could create more than 11,000 high-skilled jobs in these sectors. These estimates have been useful in assessing and introducing modifications to adjusting government supported programmes in these sectors.