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

The Effectiveness of Public Works in Creating Sustainable Employment in Developing Countries 24 th 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 14 th 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 of 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 objective (consumption smoothing) • Programmes offering repeated or ongoing employment opportunities 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)