Introduction to Part 3
M
ost jobs are created by the private sector. While public works and targeted employment programs are justified in certain situations, the primary role of government is not to directly provide employment. It is to set the conditions for job creation by the private sector, and especially to remove the obstacles to the creation of more of the jobs with the highest development payoffs, given the circumstances of the country. When faced with jobs challenges, policy makers tend to look first at labor policies as either the solution or the problem. It is important, then, to understand the role and the impacts of policies and institutions like labor market regulation, collective bargaining, active labor market programs, and social insurance. But the main constraints to the job creation often lie outside the labor market, and a clear approach is needed to support appropriate policy responses.
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Fundamentals are necessary for growth and are a precondition for strong job creation by the private sector. Macroeconomic stability, an enabling business environment, human capital, and the rule of law, including the progressive realization of rights, are the key policy fundamentals. Labor policies need to be adequate for growth to translate into jobs. Policies should seek to avoid the distortive interventions that stifle labor reallocation and undermine the creation of jobs in functional cities and global value chains. But policies should also
PRIORITIES
LABOR POLICIES
FUNDAMENTALS
Source: World Development Report 2013 team.
ensure voice and social protection, especially for the most vulnerable.
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Policy priorities have to be established in support of good jobs for development. Ideally, policies should aim at removing the market imperfections and institutional failures preventing the private sector from creating more of those jobs. If the constraints cannot be easily singled out or are difficult to remove, offsetting policies may be considered.
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