Department of Agricultural, Food, and Resource Economics Food Security Group

IDWP 144. David Tschirley and Thomas Reardon. 2016. Impact on Employment and Migration of Structural and Rural Transformation

EXECUTIVE SUMMARY:
This paper examines how global drivers of employment change might play out in the
developing world over the next two- to three decades. It first considers exogenous trends that
have effects on employment: demographic trends, and trends in industrialization and
automation. It then examines responses that might offset the impacts of these challenging
trends. Finally, it proposes a country classification to organize discussion of policy and
programmatic responses.

The paper finds that the widely discussed youth bulge is largely confined to Sub-Saharan
Africa (SSA), and is a bulge only in comparison to other areas of the world: youth labor
market entrants are falling (albeit slowly), not rising, as a share of the existing labor force in
SSA. The paper also finds that migration in the sense of movement of people from urban to
rural areas has declined in importance and now accounts for well under half of total urban
population growth in all regions. It appears unlikely that such movement will ever play the
same role it played in the urbanization of the early western industrializers.

The main threat to inclusive employment in developing countries is the worldwide trend
towards employment deindustrialization, driven by automation and opening to global trade.
Automation is driven by the confluence of, and extremely rapid development in,
computerization, robotics, and Big Data. We conclude that the global erosion of low-skilled
jobs, driven by these processes, is likely to continue. This presents special challenges for poor
countries with abundant, and in some cases, growing labor forces with little skill.
Consequently, patterns of transformation observed in the past, whereby low-skilled labor left
agriculture to low skilled but higher paying positions in industry will be hard to replicate.

A diversified approach to assisting low skilled laborers, therefore, is needed. Labor-intensive
manufacturing will remain for some time in the portfolio of opportunities open to low-skilled
workers, though at lower levels than in the past. It should be encouraged wherever possible
through improvements in the business environment, investment in transport and
communications, and openness to trade. Open regional trade will be especially important for
many countries, especially those that have industrialized least, but exports to world markets
should also be pursued whenever possible. Jobs in the service sector will increase, and much
of this work will be informal. Informality should therefore be embraced as a reality of the
current economic landscape, common to nearly all countries. Workers in the informal sector
should have assistance to function well, through legal protections against harassment,
investment in skills, and provision of infrastructure. The gap between jobs that provide social
benefits and those that do not should be reduced through expanded public provision of a basic
package of benefits for all. While this will be expensive, it can be justified if the benefits are
genuine public goods such as health, pensions, and education. The role of the state under such
an evolution of employment becomes strengthening of the fundamental capabilities of its
populace, providing a broad cushion of benefits to address public goods, and strengthening
the business environment through conducive policy and infrastructural investment. The
policy environment should include, but not be limited to, selected elements of industrial
policy, tailored to the institutional capacities of the countries implementing them.