Transitioning from post-conflict to resilience, and the search for active labour market policies and equitable growth in Timor-Leste

colegio_soibada Timor leste
The demographic dividend

Emmanuel Asomba is a development policy researcher working within the nexus of poverty reduction strategies, human development and systematic reviews of public policies and programs.

Connectivity, complexity, and changing relations of power have transformed the way that Timor-Leste is drafting its post-conflict recovery agenda. Against this backdrop, there is an increasing claim by a diverse constituency in the nation regarding the notion of shared responsibility as the central mainstay of its societal format and development structures.

Timor-Leste therefore embarked on a voluntary journey to bring together a coalition of public, business, and civil constituencies, pooling resources to address common societal aims and buttress its country-led planning mechanisms by joining the G7+ platform in 2010. As a country transitioning from conflict, the idea is to shape inclusiveness by tapping into peer-to-peer partnerships (“fragile-to-fragile” support), to institutionalise a framework of cooperation to prime the formation of decent work programmes. This process constitutes a crossover whereby national and regional NGOs, networks of individual employers, and other commercial actors can explore social partnerships, contextualising how public agencies can devise a set of targeted measures to increase sectoral and inter-sectoral cooperation to enhance labour market inclusion.

For the UNDP, this background is relevant in many ways, for example, the role of employers and trade unions to sustain peace across the different stages of the country’s development. In such a case, the role of the economic agent is to have responsibility for anyone, thereby strengthening social ties across the country. This prompts a logical call to enrich empirical analysis looking into how the activities of public and private organisations and firms can harmonise efficiency and equity, to combine development objectives with social justice to attain sustainable growth.

This line of thinking could help broaden the notion of “economic agent”, considering the social structure of work to fully understand the consequences of wage differentials across jobs. This means the implications for well-being in terms of work-choice outcomes and the need for marginalised groups, especially women and youth to have access to decent living standards.

In terms of programmatic interventions and donor coordination, the integration of the New Deal method steered by UNDP offers a very interesting blend, with much attention to mutual interrelations to appreciate the socio-economic context in fragile situations. With a focus on governance and state building, this framework can help scrutinize the impacts of the internal dynamics of cooperation to balance short-term versus long-term objectives in donor programming.

The purpose is to promote the incorporation of adaptive principles for capacity development to take root. As technical assistance is fundamental to peacebuilding and state building, development interventions have to take into account the nature of the local context in Timor-Leste. At this juncture, it means that accountability occurs as a complex chain of relationships where support from UNDP can assist the government gauge policy experiences to strengthen governance and lessen fragility. In other words, tailoring interventions to context can bring more thorough risks-analysis, allowing donors to contribute to long-term sustainability, especially crucial for the government to tap into policy coordination to improve efforts in local-level programming.

As the transition moves forward, the state seeks to handle wider welfare issues to uphold and promote peace and security, particularly considering how to harmonise social spending to align the capabilities of its citizens around the notion of inclusive growth. Linked to this developmental goal is the awareness that development planning has to match the evolving realities of the country, thus suggesting the adoption of more complex patterns of cooperation to enrich stability, accountability, and human development.

Simultaneously, over the years we have witnessed in the country a mounting discussion about the place of youth in the transformation from post-conflict recovery to long-term development. With half (46%) of the population aged under 18, the prevailing concern for policy-makers has been to find a way to galvanize young people as agents of change to improve good governance, and tackle policy-formulation that can engage them in productive and decent employment.

What matters for long-term growth are smart investments to steer a progressive future. For instance, these inputs can be decisive public investments in infrastructure, health, education, and diffusion of a value chain in vocational training as well as technology enabling young people to act on their potential, especially if the state also endeavors to consolidate female labour-force participation.

Consequently, new thinking about these issues comes naturally from the link between population growth, the quality of life, and the organisation of the employment regime for young people. Around 30% of Timorese citizens are between 15-29 years old, offering policy-makers and development partners a transformational lever to target high growth, and ultimately poverty reduction, to make sure the demographic dividend can be used to balance a population bubble, ensuring that most citizens have access to productive work.

For that reason, a substantial strategy is to improve the standards of development of enterprise-based schemes creating a more reliable relationship between education and employment to promote inclusive growth in the country, on the basis that access to employment and education opportunities can help reduce household poverty, enlarge young people’s human capital base, and at the same time link local-level initiatives with local-level actors to enhance the extension of multiparty social partnerships. This is a fundamental departure from traditional welfare-state solutions to harness public negotiations on the concept of employment and equal opportunities, thus allowing freedom of choice to be explicitly exercised.

This model combats disadvantage by increasing investments in human capital and productive systems, and fights discrimination based on people’s earnings and gender. The state should provide guarantees to marginalised groups, women and youth to inspire them to contribute in the labour market, in order to overcome the polarisation, fragmentation, and atomisation of Timorese society. To make it work across all segments of the population, the government has to assimilate sustainable policies involving all the actors in networks exchanging best practices through strategic donor coordination and dialogue.

The logic of the argument is to ensure a smooth transition to results-based monitoring to enhance development effectiveness making sure, for example, that the health system can overcome disparities in services, and deliver basic health packages including family planning; or that national education centres can support the provision of quality education. Over the long-term, these efforts can lead to better wages, and the integration of a responsive labour market whereby optimised employment and self-employment programmes can scale-up access to non-formal training services to stimulate equitable growth.

Useful links

This analysis is the abridged version of a concept note for the United Nations Development Programme (UNDP) Bangkok Regional Hub addressing youth employment, livelihoods, and the demographic dividend in Timor-Leste.

OECD and Timor-Leste

International Support to Post-conflict Transition

The long downturn has hit labour markets hard — but it has also reshaped them

Today’s post is from James Plunkett, Director of Policy at the Resolution Foundation

First there was the crisis, then the long downturn, and now—let us hope—a labour market recovery. And as Britain and America enter the third phase of a painful economic story, a new question is coming to define political debate: how will the proceeds of the recovery be shared? The answer to this question will depend partly on the policy choices that are made in coming years. But it will also depend on underlying labour market dynamics. What kinds of jobs are mature economies creating in the early 21st century? And how have jobs markets changed since 2008? Last week a new report from the Resolution Foundation threw new light on these questions, suggesting that the downturn may have intensified an erosion of middle-skilled jobs that was already apparent before the crisis struck.

The new analysis looks at how the UK and US jobs markets were reshaped from 2008 to 2012 in a number of ways. First, it looks at how the employment shares of different occupations rose and fell in these years. From 2008 to 2012 the crisis appears to have hit middle-skilled occupations harder than others, accelerating a trend of occupational polarisation already established in academic literature. Figure 1 shows how occupations, ranked from low-skilled to high-skilled, saw their share of UK employment change over the four years. The pattern is clear: a relative decline of middle-skilled jobs while low- and high-skilled jobs expanded. Similar results are seen in the US.

Figure 1: The changing shape of the UK jobs market after the crisis

Change in Log (Employment) across the skill-distribution of UK occupations, 2008-2012

Figure 1

Notes: Skill percentiles are defined on the basis of mean wage in 2002. See Box 1 and Annex A in the full report for full methodology.

Source: Resolution Foundation and Centre for Economic Performance analysis, Labour Force Survey

Second, for the UK, the analysis reveals how the crisis has affected jobs differently depending on the types of tasks they involve. It finds that, in the UK at least, the downturn continued an erosion of routine occupations that was apparent before the crisis struck. Figure 2 shows levels of employment in routine and non-routine occupations in the UK from 2007 to 2012. While employment fell in routine occupations throughout the period, employment in non-routine roles actually rose throughout the downturn. Interestingly, real wages show the opposite pattern; they fell faster in non-routine jobs than in routine jobs. While the reasons for this are not entirely clear, it may be that employers sought to hold on to non-routine workers, doing so partly by squeezing their pay.

Figure 2: Impact of the crisis on routine and non-routine jobs

Employment, millions, 2007-2012

Figure 2

Notes: ‘Routine’ occupations are those in the top third of routine-intensity, ‘middle routine intensity’ relates to occupations in the middle third of routine-intensity, and ‘non-routine’ relates to occupations in the bottom third of routine-intensity. See Annex B of the report for full methodology for defining routine-intensity.

Source: Resolution Foundation and Centre for Economic Performance analysis, Labour Force Survey and O*Net dictionary of occupational information

Third, in both the US and UK, the downturn has played out very differently in different industrial sectors. In both economies, the middle-paying third of sectors appear to have seen employment fall from 2008 to 2012 while low- and high-paying sectors saw employment rise. In both cases, these broad patterns mask significant variation in the performance of specific sectors. In the UK in particular, there have been standout successes at the top and bottom of the labour market. At the top, Business Activities grew 15.5 per cent from 2008 to 2012 as net employment rose by 460,000. Meanwhile at the bottom, Hotels and Restaurants, the UK’s lowest paying sector, grew faster than any other sector from 2008 to 2012, seeing employment rise by 17.1 per cent.

Figure 3 shows equivalent analysis of patterns in employment by industry for the US, where similar patterns to the UK can be seen. Employment fell in all six of the middle-paying sectors of the US economy from 2008 to 2012, while it rose in all but one of the six lowest paying sectors. Meanwhile, in both the US and UK, there were also clear impacts from the collapse in demand between in 2008 and 2012, most notably sizeable falls in employment in Construction and Manufacturing.

Figure 3: The shifting industrial make-up of US employment after the crisis

Figure 3

Source: Resolution Foundation and Centre for Economic Performance analysis, Current Population Survey, National Bureau of Economic Research

How should we interpret these findings? Certainly it is easy to overstate what is happening. Middle-skilled jobs are not ‘disappearing’ from the UK and US labour markets, either before or after the crisis—they are simply declining as a share of employment. Moreover, even as middle-skilled occupations see a relative decline, demand for middle-skilled workers will remain high as new cohorts are required to replace those retiring each year. And it is also important not to assume that a polarising labour market necessarily means rising wage inequality. This link is far from straightforward. A polarising labour market could mean rising wage inequality, as more workers are pushed into the two ends of the labour market. But it could also mean falling inequality if, for example, rising demand for low-skilled workers pushed up their pay, and the supply of high-skilled workers rises fast enough to meet growing demand.

But the bigger debate initiated by these results is over their causes. On the one hand, there will be those who argue that these findings simply reflect where we are in the economic cycle. We might expect top jobs to have been protected more than others from the downturn, while low-skilled jobs may be the first to have gained from a gradual return to growth. Middle-skilled jobs may yet bounce back. And of course, big falls in industries like construction are likely to reflect a temporary collapse in demand. On the other hand, there is also a deeper, more structural explanation for some of these trends. The sectors of health and social care are growing, and the collapse of routine jobs in the UK is hard to explain without some reference to the impact of technology. There may yet be deeper trends at work here, even if they are dominated by demand in the short-term. As the UK and US economies enter a third, recovery phase, these questions will become key to understanding how the proceeds of that recovery will play out.

Useful links

Click to read the OECD Skills Outlook 2013
OECD Skills Outlook 2013

Does education still pay?

Click to download the report

Today’s post is from Dr Neil Lee, senior economist at The Work Foundation.

Youth unemployment is reaching crisis point in many countries. The financial collapse of 2008/9 and the weakness of the subsequent recovery have made it harder for young people to make the first step into the labour market. Unemployment rates have risen across the OECD. Some in the media have claimed that there is a crisis in graduate unemployment, and that education may not be worth the cost. And a cursory glance at the statistics would seem to support this point of view: across the OECD, unemployment rates have increased for those with higher education from only 3.3% to 4.7% between 2008 and 2010.

Yet if the labour market is difficult for those with higher education, it is far worse for those without. As the OECD’s Education at a Glance report – released last week – makes clear, education is more valuable than ever. For those without an upper secondary education, unemployment across the OECD has increased from 8.8% to 12.5%. Education matters, and increasingly so.

Given that the supply of highly educated workers has increased hugely over the past 30 years, why hasn’t the demand for educated workers declined? One answer is structural change in the economy. As we move to an economy based on knowledge rather than physical production, the demand for workers who can create, use and disseminate knowledge has increased. The economic crisis accelerated structural change, with weak industries closing and marginal jobs reduced.

Alongside this is the related issue of technological change. Skilled workers who can use and – to a lesser extent – produce technology are increasingly in demand. And globalization, or the increase in trade between countries, is also a partial explanation, meaning that low-skilled workers in advanced economies have fewer job opportunities – but that workers in other parts of the world often have more.

Young people without education have been caught between these trends. And where low-skilled employment has increased, it has been in low-waged service work. While manufacturing has declined as a source of employment, services have become more important, with the result that even the skill requirements for entry level work has changed. Large plant manufacturing gave young people opportunities to ‘learn on the job’, meaning that it mattered less if young people lacked the soft skills to work – they could enter the labour market and develop them.

Yet in service based economies, young people without soft skills are caught in a “Catch 22”: it is hard to develop soft skills without experience of work, but they cannot find employment without soft skills. In many countries, including the UK, these two processes have led to long-term increases in youth unemployment, particularly for those with less education.

So what are the answers?

Firstly, the public debate needs to abandon the myth that there are too many graduates, or that education is not worth it. The facts directly contradict this and it is vital that neither policymakers nor young people themselves begin to believe it.

Secondly, it is important to provide young people with a ‘soft landing’ into the labour market – the opportunity to develop workplace skills alongside formal education. Countries with low levels of youth unemployment, such as Germany or the Netherlands, are often good at this. In the Netherlands, many young people work part-time whilst still in education. This allows them to develop workplace skills in the areas of teamwork, punctuality and customer service without getting caught in a ‘Catch-22’.

Thirdly, we need continued efforts to ensure young people from any background have the chance to gain higher education. The OECD’s Education at a Glance report contains some startling findings on differences in attainment for young people of different backgrounds. On average across the OECD, young people whose families have low levels of education are less than half as likely to be in higher education compared to the average.

However, some countries perform better on this measure than others – chances are better for a young person from Australia than the UK. And one of the key drivers of this is attainment while at school: countries that are better at educating children in school fare better when it comes to translating this into higher education.

Youth unemployment is a major challenge across the OECD, with rates especially high for those with fewer qualifications. Governments need to respond across a number of fronts, but at the heart of the problem is education. Increasing educational attainment, particularly amongst disadvantaged groups, will be the key to addressing the long-term challenge of youth unemployment.

Useful links

OECD work on employment

OECD work on education