Private Sector Contributio ns to Job Creation and Poverty Reduction Roland Michelitsch Chief Evaluation Officer Develo

1. Private Sector Contributions to Job Creation and Poverty Reduction Roland Michelitsch Chief Evaluation Officer Development Impact Department rmichelitsch@ifc.org October 28, 2011

2. Two Key Questions • How can we help to create jobs? • Can we set ourselves a corporate goal for job creation?

3. IFC needs to continue to think strategically about job creation in today’s global context • Economic and political events have put jobs at the centre in the developed and developing world • Globally, there were 27.6 million more people without jobs in 2010 than 2007 (ILO) • Simulations suggest that between 2005 and 2020, reducing unemployment by half -considering rapid growth of new entrants into the labor market - would require for example: creation of more than 400 million new jobs in Asia and the Pacific, and an increase in of jobs by nearly 70 percent in Sub Saharan Africa

4. IFC has to tackle these employments related challenges in two ways • Think strategically about how to create new and sustainable jobs • Ensure high work standards

5. IFC is already committed to promoting better work standards for people (IFC Performance Standard 2 Key Objectives of IFC’s work include: • To promote the fair treatment, non-discrimination and equal opportunity of workers • To establish, maintain and improve the worker-management relationship • To promote compliance with national employment and labor laws • To protect workers, including vulnerable categories of workers such as children, migrant workers, workers engaged by third parties, and workers in the client’s supply chain • To promote safe and healthy working conditions and the health of workers • To avoid the use of forced labor

6. IFC’s investments require adherence to high work standards PS2 Requirements Human Resources Policy Document and Communicate Working Conditions and Terms of Employment Respect Collective Agreements Workers’ Right to Organize and Bargain Collectively Non-discrimination and Equal Opportunity Retrenchment Plan Grievance Mechanism No use of Child Labor No use of Forced Labor Safe and healthy work environment Outcomes

7. Better Work Standards are very important but….in addition The urgent focus that needs clearer answers around the world is: HOW CAN THE PRIVATE SECTOR AND IFC DO BETTER IN CREATING SUSTAINABLE JOBS

8. The Private Sector is critical for job creation • We know that: • Private sector catalyzes job creation, fosters growth and contributes to poverty reduction • The private sector provides 90 percent of all jobs in developing countries • The IFC plays an integral role in fostering private sector development

9. IFC contributes to job creation… • Direct Effects • In 2010, IFC’s investments provided 2.4 million direct jobs, 10 percent more than 2009 (Change through (1) portfolio growth, (2) better tracking, (3) job creation • ~30% of jobs provided were for women • Female to male wage ratio was more in line with Scandinavia than with developing countries! (But still a significant gap …) • For 380 companies for which we had data from 2008-2010, job growth was 11 percent (but only <100,000). • Direct jobs provided per million $ of project costs was the highest in retail, agribusiness and health and lowest in infrastructure, heavy industries

10. IFC’s job creation extends well beyond direct jobs • Direct jobs are a small are asmall proportion of the jobs created - indirect and induced jobs effects can be tremendous • Examples: • In an agribusiness company in Egypt, for each direct job created, there were 5indirect jobs created • In a gold mining company in Ghana, for each direct job created, there were 28indirect jobs in the economy • In 2010, out investment clients provided 10 million loans to MSMEs; These in turn could have provided (NOT created) as many as 50 million jobs in the economy • One-stop shops in Mexico for business entry increased employment by 2.8% BUT: Not all multipliers and estimates are “credible” or reliable

11. Greater understanding is needed on some aspects of job creation • What are the direct employment effects of IFC’s activities? (we have reasonable understanding of this) • What are the indirect employment effects (mainly upstream & downstream linkages) of IFC’s activities? • What are the induced employment effects of IFC’s activities? • Effects from increased income and expenditures • Much more difficult: Demonstration, catalytic, cluster effects, etc.

12. Greater understanding is needed on some aspects of job creation (continued) • How does improving access to finance translate to job creation? • How does enhancing access to infrastructure impact job creation? • What is the impact of reducing investment climate constraints on employment? • What can we say about IFC’s efforts to develop skills via training or contributions to education?

13. Key questions explored in the study • The study will attempt to address the 7-key questions listed earlier • It will also delve into small detail about: • Which activities in what country conditions affect job creation? • How do various activities affect different segments of society (women, youth and poor)? • What can we say about the extent to which IFC activities influence job creation? • How do various activities supported by IFC support sustainable job creation?

14. What is the proposed approach? • Literature review around key questions identified • Case studies: • Macro studies using input-Output and SAM, piloted in Ghana and Jordan • Micro studies of specific investments across industries and countries assessing job creation along the supply chain • Empirical analysis using enterprise surveys • Review of existing evaluations (starting with IFC’s) • Open source process

15. Outcome of the study and open source process • Clearer understanding of job creation effects of typical IFC interventions in varying country and sector conditions that can feed into IFC strategy • Some ex-ante estimates of job creation that we can expect from IFC’s investments • Possible addition of an IFC development goal (IDG) on jobs

16. IDGs and Jobs • IDGs are a new set of reach or access targets, designed to measure IFC clients increased outreach in key areas • IFC has committed to six development goals in the area of: agriculture, health and education, financial services, infrastructure, MSMEs and climate change • Strong interest by IFC Board and Management to add an IDG on jobs • Study will explore the feasibility of adding IDG on jobs

17. Other relevant details you might want to know • The study will feed directly into the 2013 WDR on jobs • Team is coordinating very closely with the WDR team and exploring areas for work • Preliminary findings will be available in September 2012 and the findings will be broadly disseminated at a public event in December 2012

18. How can you contribute to our learning • Provide us with insights and comments on our findings that will be periodically made available on our website www.ifc.org/jobcreation • Direct us to relevant examples and literature that will boost our understanding of job creation, better work quality and sustainable job creation • Read and contribute to our blog that will be available shortly on the website