Inter-agency Technical Meeting on “Building employment and decent work into sustainable recovery and development – The UN contribution”

(29 November – 1 December 2010, ILO Training Centre, Turin, Italy)

In the aftermath of the global financial and economic crisis, there is growing recognition of the need for policy coherence for employment and decent work

In 2004, the World Commission concluded that the multilateral system was underperforming in terms of ensuring coherence among economic, financial, trade and environmental and social policies to promote human development and progress. Today, there remain fragmentation and inconsistencies but some of the main constraints to policy coherence are weakening.

There is a new, clear political priority on job-rich growth. There have been steps towards UN system-wide operational coherence and a few solid episodes of inter-agency policy dialogue. There has been a shift away from the earlier “mainstream” narrow set of policy tools. There is also a new drive from emerging donor countries and the G20 towards a broader view of development, going beyond the narrow focus on the Bottom Billion and the MDGs to encompass a full range of coherent policies for inclusive and sustainable growth.

The challenge is to consolidate this unique moment into concrete sets of policy suggestions, crafting a stronger, employment-centred development agenda that is better shared across the multilateral system. This should have (a) a macroeconomic dimension to encourage global coordination and employment-friendly national frameworks, and (b) policy and institutional reforms to support productive investment, structural transformation, technological upgrading and a fair sharing of the dividends of growth to ensure stable and balanced development patterns.

Recovery remains uneven and fragile, low income countries need fiscal space and policy autonomy for job-rich growth

Global recovery is uneven and fragile. The ILO cautions that recovery is jobless and the quality of jobs has suffered most from the crisis. Fixed capital formation remains low in many regions and there is concern for the implications of fiscal austerity in developed economies. Ultimately, in the absence of financial reforms and fiscal support to aggregate demand, economic volatility and financial imbalances might end up being redressed mainly through painful labour market adjustments.

According to the IMF, low income countries (LICs) are regaining positive growth rates faster than in earlier recessions, driven by regional exports to emerging economies, high commodity prices and countries’ own fiscal stimuli. Yet household incomes have been hit hard, especially among the most vulnerable groups. The economic outlook for LICs remains uncertain, depending largely on the strength of the global economy and openness to trade. The Fund sees some scope for rebuilding financial buffers in LICs while expanding public expenditure in infrastructure and social safety nets.

UNICEF sees contraction in social spending in 2011 in about half of 126 developing countries surveyed, with strong social implications - cuts in food and fuel subsidies, public sector wages nearing the poverty line and narrowing of social expenditure catering to the extreme poor. UNFPA warns against high rates of demographic growth and urbanization in the poorest countries, leading to long spells of labour market distress especially for the youth.

Overall, there is consensus among agencies on the need to sustain fiscal resilience in low income countries through international support, mobilization of domestic resources and tax reforms. There is a new attention to the developmental impact of fiscal policy. The focus is no longer exclusively on the debt incurred as a result of public borrowing, but also on the growth generated by public investment. There remain differences across agencies as it concerns spending priorities as well as areas for reform (eg trade and labour markets). In-depth analysis of causal linkages and better evidence on the multiplier and employment impact of different sets of policies and reforms are needed to make the case for job-rich recovery and development, building up capacity to assist governments more effectively.

There is a new breed of initiatives on the growth-employment-poverty linkage

Work is in progress in expanding the multilateral policy toolbox for a job-rich growth. If the ILO has developed its Global Jobs Pact, most other agencies have taken steps to respond to countries’ demand for assistance in addressing labour market vulnerabilities.

UNCTAD subscribes to ILO’s view that employment is not a residual result of economic growth but requires coherent macroeconomic policies, structural industrial change and a distinctive range of labour market policies and institutions including income policies, minimum wages, public employment programmes. UNICEF is stimulating a broad debate on the macroeconomic foundations of inclusive recovery. UNDP is active in many areas including private sector development, youth employment, public employment programmes and it is looking at the employment dimension of each of the MDGs. FAO and IFAD are strongly engaging in promoting employment and decent work in rural areas. UNFPA is researching the linkages between population dynamics, employment creation, food security and poverty and it is about to launch population situation analyses at country level to feed into development strategies and UNDAF. UNWTO is measuring employment in the tourism industries. UNESCO is working on a holistic approach to education and TVET. The World Bank is carrying out analytical work on the employment impact of the crisis, monitoring labour market indicators and developing a jobs knowledge platform.

Those efforts are very encouraging. The issue is to avoid reinventing of the wheel and ensure that the state-of-the-art specialized knowledge of each agency is disseminated across the system and used to develop collective policy wisdom, comprehensive data collection and research that is practical and actionable.

Is an alternative economic policy model emerging?

There is some convergence in the way UN agencies are approaching issues of poverty, employment and growth. Some common elements are:

The advocacy for macroeconomic policies that better reconcile sustainability and growth - eg less rigid trade-offs between inflation and unemployment/ underemployment, capital account management, fiscal policy etc;

The revival of industrial policy and trade strategies geared at crowding in private sector investment, local production capacities and economic diversification;

Better attention to policies and institutions to address labour market vulnerabilities and inequalities, ensuring productivity translates into adequate remuneration and workers’ earnings.

The quest for a holistic development strategy, where synergies between economic and social initiatives work to ensure impact at the macro, institutional and micro levels.

In the emerging heterodox framework, wages are not seen as indicators of shortage/excess of labour, which should be left free to fluctuate in order to clear demand and supply. They are considered critical components of household incomes, thereby sustaining demand for consumption hence investment and growth. Labour market policies, institutions and organizations play a role in connecting productivity, earnings and consumption, fostering stable growth trajectories.

Especially in the poorest settings - where labour market institutions are weak and most people are casually employed or self-employed in the informal economy with no employment contracts, no collective bargaining and very weak enforcement of minimum wages - a range of public interventions are necessary to sustain livelihoods and promote access to remunerative work. This may take different forms: for instance public works setting the floor for earnings, microfinance, conditional and unconditional cash transfers, and public delivery of basic social services.

A full-fledged policy model alternative to the pre-crisis mainstream one is still way under construction. Though the faith in self-regulating markets is more tempered, there remains a tendency within the IFIs to prioritize prudent fiscal and monetary policies, nominal targets for credible commitment, state retreat from markets and optimism about the optimizing capacities of individual economic agents. The underlying practice, if not the conviction, remains that “sound” macroeconomic fundamentals are sufficient to generate output and employment growth. The new “multipolar” membership of the IFIs is producing lively HQ policy debates and some greater acceptance of non conventional policy approaches. But on the ground there remains a divide between the IFIs and the UN. Stronger policy dialogue, joint analysis and research might help overcome a-priori judgements that fuel the divide on both sides.

Sharpening the employment and decent work policy portfolios – emerging and re-emerging good practice

Employment targets can be an effective tool to encourage policy commitment and consistency from governments. Targets can be constructed as to provide employment equivalents of achieving the MDG goals, thereby providing useful guidance to policy-makers. Sectoral employment indicators could specially contribute to industrial and sectoral policies.

Investment in agriculture and rural development is critical to poverty reduction by means of enhancing productivity and incomes of small farmers and landless labourers. Support programmes should facilitate access to production inputs, finance, services and marketing opportunities for small producers and the strengthening of the linkages between local demand and local production and between farm and non-farm activities. Integrating the decent work dimensions – eg issues of wages, workers’ rights and social dialogue - remains a distinctive challenge given the fragmented nature of labour market and production in rural areas.

Public employment programmes (PEPs) are being more commonly used for emergency situations and as a response to economic downturn. Traditionally they comprise infrastructural development and maintenance, with the introduction of labour-intensive techniques accounting for a stronger employment impact. The scope of PEPs has broadened to cover community and social services as well as resource regeneration and the environment. Innovations in project selection, recruitment of workers and delivery of payments account for greater transparency and accountability. PEPs provide an important employment safety net while structural solutions to foster private enterprises and growth take effect.

The introduction of a legal guarantee to a minimum of work days is a main innovation. Employment Guarantee Schemes (EGSs) – of which the National Rural Employment Guarantee Act of India is the most renowned example - are self-targeting public programmes where temporary employment is offered to those who have an urgent need to earn an income, eg up to a maximum of 100 days per year per poor household at a given wage. Beneficiaries enrol when they need extraordinary income support and drop out when better opportunities come up. By this token, an EGS provides “on demand” shelter from economic risk to poor households, enhancing resilience. At the aggregate level, it acts countercyclically and it sets an income floor. Work performed under the scheme also contributes to improve local productive assets.

Youth unemployment interventions typically focus on providing training, including entrepreneurial skills and attitudes. Successful projects offer a varied package of training services, job placement and counselling or, in the case of entrepreneurship promotion, linkage with microfinance, mentoring and business services providers. This opens up opportunities for fruitful interagency cooperation (eg Serbia). This kind of projects, however, are expensive and hard to scale up in poor countries, where the overall offer of jobs is scarce and entrepreneurship only a channel to involuntary self-employment in informal activities. Efforts to address youth concerns should go beyond the supply of labour; employability initiatives should fit within national employment and investment strategies and supplemented by public employment programmes targeting the most vulnerable. Decent work, ie quality of jobs and space for voice, is a fundamental to fully address youth distress.

Demographic trends and patterns of migration have a strong influence on development and poverty reduction efforts, including employment creation and food security. For this reason they should be adequately integrated in the design of development and poverty reduction strategies. While population dynamics are often assumed to be exogenously determined, they are not. They are influenced by economic opportunities, income and wealth, and they are shaped by policy on education and health.

In addition to protecting people from debilitating poverty, comprehensive social protection systems either through large cash transfer programmes or under the Global Social Protection Floor initiative, have the potential to provide households with sufficient security to take advantage of economic opportunities, possibly leading to the diversification and strengthening of livelihoods. At the same, social protection contributes to stabilize demand during economic downturns, maintaining space for enterprises to prosper and generate jobs.

Country experience shows that a wide range of complementary policies and institutions are needed to combat poverty and inequality

Based on a review of 16 countries, a report released by UNRISD suggests that success in eradicating poverty is the result of a policy focus on long-term processes of structural transformation, not on discrete social policies targeting the poor or on economic growth per se. Successful countries, according to UNRISD, combined institutions for voice for the poor with rights-based, comprehensive social policies and with patterns of growth and structural change that could generate jobs that were adequately remunerated and accessible to all – regardless of income, gender, ethnicity or location.

This vision of development strategy cuts across the spheres of politics, the economy and society. It highlights the link between poverty and inequality, recognizing the central role of the labour market as an entry-point for redistributive and normative policies to address structural inequalities and the effect those have on social cohesion and nation building. This triad vision encompasses the full dimensions of the notion of decent work, including issues of rights and organized citizenship. It might provide a framework to organize contributions from the whole gamut of UN entities to a post-MDG poverty reduction agenda.

The challenge is to manage the tension between on the one hand, a development agenda focused on a limited number of discrete, unambiguous and measurable objectives (which might well align with donors’ idiosyncrasies and the limited capacity of recipients) and, on the other end, the need for broader strategic and transformative approaches.

The value added of interagency coherence and cooperation

Inter-agency collaboration is not a 'nice thing to do' but rather a necessary tool and process to achieve scale, improve efficiency and enhance the impact and visibility of the UN system. Coherence and cooperation are fundamental to achieve the broad based development objectives of the UN system and those set out in national development frameworks, including the goals of full employment and decent work. Effective strategies to generate decent and productive jobs should go beyond interventions in the labour market. The macroeconomic environment, governance, security, investment climate, education, training and social protection systems - all have a role. This requires different areas of expertise and consistency across different types of interventions.

The review of episodes of “voluntary” coherent UN action on employment and social protection issues (Nepal and Maldives) shows that it is possible for the UN system to prompt significant policy reforms, beyond its traditional domain of humanitarian assistance. Enabling factors include: a “policy moment” whereby there is strong consensus on the urgency of employment and social policy change; a common policy stance among agencies with different technical expertise; their capacity to collectively provide data, analysis and an evidence-based menu of policy options; and fiscal and policy autonomy and ownership of those options by the government.

Interagency collaboration and coherence are also important to each agency to achieve its own distinctive mandate and objectives. As one of the cases reviewed indicated, it may facilitate cross-negotiations and policy synergies, whereby a difficult reform of the labour market legislation was made possible by means of strengthening social protection for workers and their families. Such spillovers are increasingly recognized by policymakers.

By mandate or tradition, different agencies have distinctive links with different ministries or national development agencies. Enhanced interagency cooperation and a common policy stance can encourage whole of government approaches, hence more effective public policy as well as impact of ODA.

The challenges

Overall, the experience with cooperation and coherence is mixed. As the MDGs, UNDAF and the Delivering as One reform process advance, there emerge signs of more coherent programming of UN country-level activities. As a result, some higher priority seems to be assigned to employment and decent work issues; youth employment for instance figures prominently in many UNDAFs and it has special priority in some regions. There are examples of spontaneous cooperation in specific areas such as social protection and youth employment, associated with a shift from project-based to programme and policy-based approaches. But for the most part implementation remains fragmented.

The impediments to coherence on the ground are numerous. Agencies have specific mandates and operate within distinctive normative frameworks, differently connected to the UN overarching set of universal principles and declarations. There are analytical differences and policy rifts that make it difficult to agree on common frameworks and consistent prescriptions – for instance, areas such as minimum wage legislation and labour market flexibility remain highly contentious. Impediments also stem from organizational boundaries defined by inter-agency mistrust, competition for funding and mandate encroachment. Country operations are often driven by project based-outcomes rather than the broad policy frameworks and strategies that are needed for employment and decent work generation. Interagency cooperation and coherence could result in superior outcomes, but the performance and administrative incentives to cooperate are limited, while the transaction costs of can be very high in terms of conflicting procedures and time spent in meetings.

A stronger spur comes when cooperation is a condition for the release of technical cooperation funds, as in the case of the MDG fund sponsored by Spain. Initial experience shows some shift towards the adoption of broader policy approaches based on demonstration programmes, common programming tools and the full leveraging of the distinctive resources of each agency. Still when too many agencies are involved fragmentation remains, as each agency claims a piece of the pie, while the complexity of coordinating multiple actors may make programmes less flexible, delivery slower, and reporting more cumbersome.

At the country level, agencies have different resources, a different presence on the ground and different influence on governments, with the IFIs having an especially strong grab on “hard” economic ministries. The MDGs, UNDAF and the UN Country Teams provide a framework for convergence and collaboration, but the limited participation of the IFIs can leave a gaping hole in policy coordination. It is important to widen policy dialogue on the policies, programmes and action of each agency in order to maximize country level assistance. Where a technical agency is non-resident, there is a danger that the issues it represents - though included in the UNDAF - be left out from the implementation phase.

To conclude, some ideas to move on

Quality research on employment and decent work is needed to develop a stronger knowledge base and greater capacity to assist countries move out of poverty. Focus on coherence can lead to a more integrated policy thinking, paving the way for closer operational interagency collaboration. Topics relevant to policy design include the financing of social policy, the quality of public investment, the labour market behaviour of earners and dependents within poor households, and the availability of reliable labour market and poverty statistics and indicators. Thorough assessment of the impact of public programmes is critical. Joint research efforts among UN agencies could help gain critical mass and improve dissemination of results, breaking the monopoly by the Bretton Woods Institutions.

Knowledge sharing and capacity building – There are several knowledge tools and handbooks on decent work (ILO, UN-NGLS, UN-Habitat, FAO) that should be better disseminated possibly through the web portal developed under the CEB Toolkit for Mainstreaming Decent Work. New ones should be developed, eg guidance notes for UNCTs, policy-makers and stakeholders which include reference to good prctice. The curricula of the UN Staff College could be expanded to cover issues of policy design in employment and social policy areas. Capacity building in adopting heterodox policy approaches would be especially helpful.

Advocacy and policy dialogue – The forthcoming UN Summits and Conferences provide an opportunity to advocate for decent work and strengthen UN collaboration; eg the topics of productive capacities, rural incomes and youth employment are particularly relevant to LDC4, while decent green jobs is a key theme for Rio+20. Holding an interagency policy dialogue on rural employment and decent work would be of special interest. Policy coherence events should be held at the regional level to tap into the resources of development banks and regional organizations and support work around the regional priorities set up by UN regional teams.

Interagency collaboration - It is important to bring more on board in a more practical way the BWIs who, depending on country contexts, may not be active members within the UN team. The role of donors is critical to provide incentives to collaborate. The experience with the Spanish MDG fund should be replicated; ultimately, policy coherence is a cost-saving mechanism for donors wishing ODA to have an impact.

Distinctive suggestions to strengthen the plan of action for Full Employment and Decent Work under the 2^nd UN Decade for the Eradication of Poverty include: reaching out to regional organizations such as the European Commission, the African Union and OECD POVNET; involving more closely other agencies dealing with systemic issues - from trade and finance to human rights; developing common advocacy tools; and better monitoring of the activities carried out under the Plan.