The Effectiveness of Public Works in Creating Sustainable - - PowerPoint PPT Presentation

The Effectiveness of Public Works in Creating Sustainable Employment in Developing Countries

24th June 2011 EXPERT GROUP MEETING ON THE CHALLENGE OF BUILDING EMPLOYMENT FOR A SUSTAINABLE RECOVERY Dr Anna McCord

Structure of Presentation

• Overview of PWP in the current policy and

development context

• PWP description
• Overview of current PWP implementation in

developing countries

• How might PWPs contribute to sustainable

employment

• Review of the evidence
• Conclusions and challenges

Context

• PWPs have long history in OECD and LICs & MICs

(>1000 years)

• Preference for supporting the working age poor

through PWP in place of cash transfers (CT) dates back to 14th century in Britain

• Growing popularity in recent years, eg

– Social Floor Initiative (UN, 2009) – UN Policy on Post-Conflict Employment Creation, Income Generation and Reintegration (PCEIR) (UN, 2009) – WDR (2011)

Reasons for Popularity

• Considered policy substitute for Cash

Transfers within social protection discourse, avoiding dependency

• Increasingly linked in rhetoric to productivity

enhancement

• Adopted as instrument to address rising levels
• f unemployment resulting from structural

labour market changes ...in absence of alternative effective ALMP

PWP Objectives

• Often have dual objective – provision of social

protection for poor households with labour and also productive function - economic stimulus (at household, local and national level)

• Multiple vectors of impact;

– Direct benefit to individual (wage) – Indirect benefit to individual (skills transfer) – Indirect benefit to individual/economy (asset creation)

• In crisis it is hoped PWP will also provide macro

economic stimulus by promoting/ protecting demand and thereby also ‘creating’ employment

What are Public Works Programmes?

• ‘Public Works’ & ‘Workfare’ terms in general use
• Widely differing programmes share this term
• Terms used without adequate clarification of programme

characteristics

• Common terminology without a shared understanding of the

meaning – exacerbates the challenge of appropriate policy – result is conceptual confusion and programme design incongruities

General Definition

• ‘... programmes in which participants must work to obtain
• benefits. These programmes offer temporary employment

at a low wage rate, and have been widely used for fighting poverty.’ Subbarao (2001:2),

• “Workfare programs. Public work programs are a useful

countercyclical instrument for reaching poor unemployed workers” (World Bank, 2001, p.155)

• Also adopted as a response to chronic poverty
• Some provide ongoing, not temporary employment
• Since Triple F crisis PWP are associated with wider set of

policy objectives relating to sustainable employment creation and macroeconomic stimulus

Different Forms of PWP

• PWPs offering a single short-term episode of employment

with a safety net, humanitarian, or social protection

• bjective (consumption smoothing)
• Programmes offering repeated or ongoing employment
• pportunities as a form of income insurance, in some

cases guaranteeing employment for all who seek it

• Programmes promoting the labour intensification of

infrastructure creation to promote aggregate employment

• Programmes enhancing employability by improving

quality of labour supply thereby reducing frictional unemployment

Type A

• Short one-off episode of temporary employment
• Appropriate as a safety net response to temporary labour

market disruptions (natural disaster or short term economic crisis)

• Permits consumption smoothing for a temporary period until

labour market returns to normal

• Provision of employment dominates over quality of output
• Implemented widely in southern Asia, in response to natural

disasters

• Typical many PWPs implemented in SSA (eg Malawi and

Tanzania Social Action Funds, Expanded Public Works Programme South Africa)

Type B

• Provide ongoing or cyclically repeated employment
• State guarantees employment, quasi non-contributory income

insurance - Employment Guarantee Schemes (EGSs)

• Recognition of structural nature of crisis - ongoing market

failure and cyclical seasonal vulnerability

• Underlying concept is state responsibility to provide large

scale employment to populations in need on ongoing basis

• State directly creating demand for labour as employer of last

resort

• EGS need to be large scale if they are to guarantee income and

have stimulus role and so create significant demand for labour

• USA Work Programmes, NREGA, PSNP

Type C

• Promote the use of labour-based techniques in the

infrastructure sector

• Increase aggregate labour demand
• Primarily objective is infrastructure provision, also

short term ‘risk coping’ benefits

• Short term employment (mean duration 4 months
• Ethiopian Rural Roads Authority (ERRA), the

AGETIP in Senegal, AFRICATIP in Western Africa, and the ILO’s Employment-Intensive Investment Programmes (EIIPs)

Type D

• Address supply-side constraints to employment,
• Promoting ‘employability’ through experience and skills
• Based on assumption that unemployment is frictional and

existence of unmet labour demand

• Appropriate if key constraint to employment is lack of skills
• Not appropriate if constraint is lack of effective demand
• Mostly implemented in OECD countries (contested efficacy)
• Rare in sub-Saharan Africa
• Risk of substitution rather than increases in aggregate

employment

• Viability questionable in context of structural unemployment

Overview of Current PWP Activity in LICs and MICs

• 200 (-+) PWPs currently operational in SSA
• 50 (+) in southern Asia
• 90% type A and C (one-off short term employment)

irrespective of labour market context

• Only handful of type B (EGSs)
• PWP aspiration is typically social protection plus

productivity stimulus and ‘graduation’

Major PWP Funding in SSA

International Experience

• South Asian experience similar in terms of

dominance of short term PWPs

• Not so prevalent in LAC or Middle East North Africa
• World Bank funded temporary employment

programmes for those affected by temporary crisis or structural or political reform eg Yemen, Mexico and Argentina

International Summary

• Most type A and C
• Short term one off in contexts of chronic / structural

unemployment

• Extremely low coverage as % labour force
• Notable type B exceptions;

– Productive Safety Nets Programme – Ethiopia 2005 (1.5 million jobs per annum) – Mahatma Gandhi National Rural Employment Guarantee Programme (NREGA) - India 2005 (50 million jobs per annum) – Jefes y Jefas de Hogar Desocupado– Argentina – 2001

Renaissance of PWP - Growing Popularity

• Now greater exploration of PWP as tool for

– employment creation post 3F crisis – economic stimulus – tool to promote stability

• Growing popularity with donors (eg World Bank, DFID)

and governments

– Search for productive ways to support the poor and address chronic/structural labour market failure – Promoted as response to needs of working age poor (UN Social Floor)

• PWP rebranded as ‘Productive Safety Nets Programmes’
• Aspiration of contribution to growth and sustainable

employment

PWP & Sustainable Employment Creation – working hypothesis

• A PWP can create employment in two ways

– Directly through the PWP ‘job’ – Indirectly through the effects of the PWP job on the wider economy

Direct PWP Employment Creation

• Can be significant in scale and duration (New Deal, PSNP,

MGNREGA, Jefes y Jefas)

• Rhetoric tends to outstrip reality in terms of scale
• Financial and/or administrative constraints limit scale of

implementation (EPWP)

• Usually low coverage and short duration
• Ideological inconsistency in increasing direct state

employment

• Risk of substitution effect rather than net increase
• Replicate worst elements of segmented labour market
• Tension with ‘decent work’ (min. wage waiver, poor

conditions)

• Create a sub-group of workers for whom minimum labour

standards do not apply, potential adverse incorporation

Indirect Employment Creation Consequences of PWP

• Wage increases demand for goods and services and hence

employment (potential Keynesian stimulus)

• Wage and accumulation stimulates self employment -

‘graduation’/survivalist micro-enterprise

• Supply side improvements result in reduction in frictional

employment

• Assets enhance productivity & employment opportunities
• PWP employment/reintegration increases stability (eg in

context of DDR) which leads to increased economic activity and employment (Liberia)

• Employment reinforces state credibility and hence stability

which results in jobs (PCEIR)

• Symbolic policy may be enough to promote confidence

(AGETIP, EPWP)

Evidence

• Various theories of change presented in relation to

indirect impacts

• Intuitive (eg UN 2009)
• Limited empirical/quantitative evidence of significant

secondary impacts of PWP implementation on sustainable employment creation

• Limited evidence on direct impacts

– Difficulty of empirical analysis (fragile/conflict) – Donor focus on process vs outcomes (IEG, 2011)

Conditions for Indirect Employment Creation through PWP

• Necessary but not sufficient;

– Sufficient scale of stimulus relative to size of economy

• wage level
• duration of employment
• coverage (dilution if scale & concentration limited)
• quality and economic relevance of assets created

– Supportive national policy context

• complementary interventions (micro-finance, IGA etc)

for local level employment multipliers

Unresolved Questions: Employment Distribution & Quality

1 Creating employment for whom?

– newly laid off workers (preserve demand) – politically important groups (promote stability) – those chronically excluded/adversely incorporated into labour market (social justice)

2 Is creating ‘employment’de facto meaningful?

– what is the quality of employment (wage rate, terms of inclusion, duration) – is the response proportionate/significant given nature of labour market failure?

Unresolved Questions: Labour Markets and Feasibility

3 Is there sufficient understanding of the labour markets in LICs in the aftermath of the structural reforms of 80s and subsequent process of globalisation? 4 Are large scale PWP interventions feasible in many developing countries?

• Only successful examples of ‘significant’ and sustained

response through PWP have been mass ongoing direct state employment schemes (India, Ethiopia) Not experience of autonomously sustainable employment creation occurring as a consequence

Conclusion

• Typically PWP provide temporary employment and

are supply driven, constrained by government/donor budgets and administrative and technical capacity

• PWP meet only a fraction of needs
• PWP can create ‘employment’ of various sorts, but

do not in themselves engender employment sustainability independently of on ongoing government/donor support

• PWPs are often framed by inappropriate and

excessive expectations by policy makers and donors

Thank you

• Questions…

Selected Bibliography

• Betcherman, Olivas, & Dar. Impacts of Active Labor Market Programs: New

Evidence from Evaluations with Particular Attention to Developing and Transition Countries, World Bank, Social Protection Discussion Paper Series, Paper No. 402, January 2004.

• Harvey, 2011. A Job-Led Recovery Strategy Achieving Economic Recovery

through Direct Public Job Creation, Demos.

• McCord and Slater, 2011. Overview of Public Works in Sub-Saharan Africa. ODI,

London.

• Martin & Grubb, 2001. What works and for whom: A review of OECD’s countries’

experience with active labour market policies. Swedish Economic Policy Review, 8(2): 9-–56.

• Meth, 2011. Employer of Last Resort? South Africa’s Expanded Public Works

Programme (EPWP). A SALDRU Working Paper Number 58. Cape Town, University of Cape Town

• UN, 2009. Policy for Post-conflict Employment Creation and Income Generation,

and Reintegration. ILO, Geneva.

• UN, 2009. Social Protection Floor: A Joint Crisis Initiative of the UN Chief

Executives, Geneva.