Job creation as a path to growth: Insights from ongoing research

At a recent workshop on job creation, economic growth, and development, researchers explored how employment can drive poverty reduction.

On 29-30 October, the Jobs Network organized a workshop in Gothenburg, gathering an international team of researchers discussing issues within the fields of employment and development. Presentations ranged from gender equality to smallholder farmers and career expectations among young women in India and led to engaged discussions among the workshop participants.

Among the presentations was an introduction to the effects the emergence of industrial parks has had on women workers and their families in Ethiopia. In his presentation, Espen Villanger, director at CMI, explored two sometimes contrasting views on the long-term impacts jobs have on poverty reduction: On the one hand, formal employment in the industrial sector is perceived to be at the core of economic growth, poverty reduction, and political stability. Following this train of thought, Ethiopia has invested billions of dollars in the development of industrial parks aiming to create jobs, hoping to achieve structural change. On the other hand, recent research has raised alarming concerns about job quality, low wages, negative health impacts, and the limited long-term benefits for workers, especially in African industrial parks.

Villanger is part of an international team consisting of researchers from CMI, the Norwegian School of Economics (NHH), the Policy Studies Institute (PSI), and the University of Gothenburg, that looks into jobs as a powerful route out of poverty, including the Ethiopian industrial parks.

Using a large-scale randomized field experiment with 1464 married women, the Ethiopia study has tracked the outcome over nine years. Women were randomly assigned job offers in Ethiopian factories, allowing the researchers to measure the short-, medium-, and long-term effects on earning, household income, and poverty. Their key findings were highlighted in Villanger’s presentation at the workshop, and include:

• Women’s earnings from factory work account for a small but important fraction of total household income.
• The effect on total earnings of the women is significant up to two years after the job offers but then converge.
• In the first year, the job offers have a positive effect on household income, but the researchers have found no effects on poverty, food security, or dietary diversity.
• In areas where many women started in the jobs, and where there were few other job opportunities, the effects on poverty reduction were high. But after 9 years the effects level out.
• The job offers have no additional impacts on income, for example by allowing women to climb the job ladder or making households invest in a business.
• There are no signs of a big push. The job offers do not lead to investments in future income generation.

In conclusion, the researchers’ results indicate that industrial jobs are a complex tool for poverty reduction. While getting a job in one of Ethiopia’s industrial parks certainly can provide short-term benefits for the women in question, these benefits do not automatically translate into empowerment and long-term improvement for themselves and their families.