2.8 The foundations of a decent work strategy for poverty reduction: Working Out of Poverty
2.8 The foundations of a decent work strategy for poverty reduction: Working Out of Poverty
per capita income is essential to reducing poverty and that persistent growth
failures are accompanied by a persistent failure to reduce poverty. However,
they have not found a stable relationship between the rate of average per
capita growth and the rate of poverty reduction.
Rapid economic growth is more effective than slow growth in reducing
poverty. Yet what matters most is the character of economic growth, which
is determined in part by the structure of the economy and in part by government
policy. When increases in output are concentrated in economic sectors
in which most of the poor work and this generates more income for people
living in poverty, growth is pro-poor. Put another way, pro-poor growth
leads to an improvement in the conditions of the poor proportionately
greater than that for the population as a whole. Understanding the channels
which link growth to improving the lives of people living in poverty is therefore
essential to the design of sustainable pro-poor growth strategies.
A faster pace of sustainable growth is likely to increase the demand for
labour across the economy, including that supplied by poor workers. However,
a 1 per cent rise in production does not necessarily yield a 1 per cent
increase in jobs. This relationship, termed the elasticity of employment,
varies considerably between countries and at different periods in the same
country. Although more research is needed to understand why the elasticity
of employment varies, we do know that a high ratio of job growth to output
growth produces conditions that increase the rate of poverty reduction. 34
Analysing work and life cycles of family poverty helps identify how an upward
spiral of increasing economic and social security can replace the vicious
circle of accumulated deprivations and generate pro-poor growth.
Improving the availability of opportunities to work and raising the incomes
that the poor are able to generate from the work they can find poses
three policy challenges:
● increasing the demand for labour and raising the productivity and incomes
of people living and working in poverty;
● integrating socially excluded communities into the labour market and
overcoming discrimination, particularly against women and girls;
● improving the terms on which developing countries trade with richer
countries and obtain investment finance.
One of the main problems in boosting the pace of employment growth
is that, although developing countries face a shortage of capital and an
abundance of labour, past development strategies have often favoured
capital- rather than labour-intensive investment. Investments in communications,
energy and water infrastructure often use capital-intensive techniques
even if equally effective labour-intensive methods are available. Although
micro and small entrepreneurs have the largest potential impact on job creation,
they encounter many difficulties in obtaining finance to get started
and survive.
Rural industries and services are frequently disadvantaged by comparison
to urban sectors, despite the need to expand work opportunities for
the rural poor and avoid increasing the pressure of migration to already
stressed urban environments. Agricultural policies have often favoured production
by capital- and land-intensive larger farmers and trading companies
rather than targeting the needs of small farmers and landless labourers. Redressing
these imbalances are key elements of pro-poor growth and must be
combined with an intelligent use of capital-intensive technologies specific to
the resources and needs of particular countries.
Raising educational and skill levels is vital to overcoming many of the
barriers that exclude and disadvantage poorer workers on the labour market.
This must start with a renewed drive to increase access to primary education,
but must also include a much stronger emphasis on vocational
training so that school leavers and adults are able to acquire competencies
that the market demands. Combating preventable diseases, stopping the
spread of the HIV/AIDS pandemic, and increasing the availability of primary
health care have a direct impact on the capacity of poor people to earn
a regular income. Access to credit for investment in small-scale production
and to meet occasional family needs, such as the purchase of school clothes
or funeral expenses, promotes both job creation and the ability of the poor
to overcome shocks to the family budget.
Perhaps most vital of all is the struggle against discrimination in all its
forms. Race, religion and caste barriers condemn many communities to the
margins of society and the economy. Pervasive gender discrimination makes
it even more difficult for women to escape poverty than men. 36
The relationship between poverty reduction and sustainable growth is
circular. Integrating measures to stimulate the demand for labour and improve
the responsiveness of the supply side of the jobs market, with a particular
focus on boosting the earning power of the poor, enhances the growth
potential of the economy. Increasing the productivity of the working people
living in poverty removes a restraint on the overall capacity of the economy
and stimulates demand by raising the purchasing power of a large group of
consumers.
Furthermore, the poverty-reducing quality of growth is enhanced if it is
stable. Recessions can push millions of families into a state of poverty in
which they can become trapped even in a subsequent recovery. 37 Alongside
macroeconomic policies to promote a stable pattern of growth, mitigating
the vulnerability of the poor in episodes of slow growth is an important part
of strategies for poverty reduction. However, many of the causes of instability
originate in the international economy. National policies are unlikely to succeed fully unless the architecture of global markets for trade and finance
is reformed. The international dimensions of strategies to reduce poverty
and promote employment-generating sustainable growth are discussed in
Chapter 5.
28 The foundations of a decent work strategy for poverty reduction Working Out of Poverty - To learn more about this author, visit International Labour Organization's Website.
Like this article? Share it with your friends
Most analysts of the nature and causes of poverty agree that growth in
per capita income is essential to reducing poverty and that persistent growth
failures are accompanied by a persistent failure to reduce poverty. However,
they have not found a stable relationship between the rate of average per
capita growth and the rate of poverty reduction.
Rapid economic growth is more effective than slow growth in reducing
poverty. Yet what matters most is the character of economic growth, which
is determined in part by the structure of the economy and in part by government
policy. When increases in output are concentrated in economic sectors
in which most of the poor work and this generates more income for people
living in poverty, growth is pro-poor. Put another way, pro-poor growth
leads to an improvement in the conditions of the poor proportionately
greater than that for the population as a whole. Understanding the channels
which link growth to improving the lives of people living in poverty is therefore
essential to the design of sustainable pro-poor growth strategies.
A faster pace of sustainable growth is likely to increase the demand for
labour across the economy, including that supplied by poor workers. However,
a 1 per cent rise in production does not necessarily yield a 1 per cent
increase in jobs. This relationship, termed the elasticity of employment,
varies considerably between countries and at different periods in the same
country. Although more research is needed to understand why the elasticity
of employment varies, we do know that a high ratio of job growth to output
growth produces conditions that increase the rate of poverty reduction. 34
Analysing work and life cycles of family poverty helps identify how an upward
spiral of increasing economic and social security can replace the vicious
circle of accumulated deprivations and generate pro-poor growth.
Improving the availability of opportunities to work and raising the incomes
that the poor are able to generate from the work they can find poses
three policy challenges:
● increasing the demand for labour and raising the productivity and incomes
of people living and working in poverty;
● integrating socially excluded communities into the labour market and
overcoming discrimination, particularly against women and girls;
● improving the terms on which developing countries trade with richer
countries and obtain investment finance.
One of the main problems in boosting the pace of employment growth
is that, although developing countries face a shortage of capital and an
abundance of labour, past development strategies have often favoured
capital- rather than labour-intensive investment. Investments in communications,
energy and water infrastructure often use capital-intensive techniques
even if equally effective labour-intensive methods are available. Although
micro and small entrepreneurs have the largest potential impact on job creation,
they encounter many difficulties in obtaining finance to get started
and survive.
Rural industries and services are frequently disadvantaged by comparison
to urban sectors, despite the need to expand work opportunities for
the rural poor and avoid increasing the pressure of migration to already
stressed urban environments. Agricultural policies have often favoured production
by capital- and land-intensive larger farmers and trading companies
rather than targeting the needs of small farmers and landless labourers. Redressing
these imbalances are key elements of pro-poor growth and must be
combined with an intelligent use of capital-intensive technologies specific to
the resources and needs of particular countries.
Raising educational and skill levels is vital to overcoming many of the
barriers that exclude and disadvantage poorer workers on the labour market.
This must start with a renewed drive to increase access to primary education,
but must also include a much stronger emphasis on vocational
training so that school leavers and adults are able to acquire competencies
that the market demands. Combating preventable diseases, stopping the
spread of the HIV/AIDS pandemic, and increasing the availability of primary
health care have a direct impact on the capacity of poor people to earn
a regular income. Access to credit for investment in small-scale production
and to meet occasional family needs, such as the purchase of school clothes
or funeral expenses, promotes both job creation and the ability of the poor
to overcome shocks to the family budget.
Perhaps most vital of all is the struggle against discrimination in all its
forms. Race, religion and caste barriers condemn many communities to the
margins of society and the economy. Pervasive gender discrimination makes
it even more difficult for women to escape poverty than men. 36
The relationship between poverty reduction and sustainable growth is
circular. Integrating measures to stimulate the demand for labour and improve
the responsiveness of the supply side of the jobs market, with a particular
focus on boosting the earning power of the poor, enhances the growth
potential of the economy. Increasing the productivity of the working people
living in poverty removes a restraint on the overall capacity of the economy
and stimulates demand by raising the purchasing power of a large group of
consumers.
Furthermore, the poverty-reducing quality of growth is enhanced if it is
stable. Recessions can push millions of families into a state of poverty in
which they can become trapped even in a subsequent recovery. 37 Alongside
macroeconomic policies to promote a stable pattern of growth, mitigating
the vulnerability of the poor in episodes of slow growth is an important part
of strategies for poverty reduction. However, many of the causes of instability
originate in the international economy. National policies are unlikely to succeed fully unless the architecture of global markets for trade and finance
is reformed. The international dimensions of strategies to reduce poverty
and promote employment-generating sustainable growth are discussed in
Chapter 5.
28 The foundations of a decent work strategy for poverty reduction Working Out of Poverty - To learn more about this author, visit International Labour Organization's Website.
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