Report of High Level Tripartite Meeting on Policy Coherence for strengthening the Nexus of Growth, Investment and Decent Work for South Asian Subregion

This meeting taps into the knowledge of ILO constituents, other multilateral institutions including the IFIs, the donor community and researchers on the policy linkages between growth, investment and employment to formulate a strategy for achieving employment-rich growth for the countries in the South Asian subregion

Record of proceedings | 05 September 2007

Report on

High-Level Tripartite Meeting on

The Nexus of Growth, Investment and Decent Work

For South Asian Subregion

3-4 April 2007, Hotel Taj Palace, New Delhi

Prepared By:

Dr.Mainak Sarkar

Assistant Professor

IMI, Delhi

1. In the context of globalization most countries in the region had undertaken various policies to liberalize their economies and this has resulted in impressive growth performance across South Asia in recent years, however the growth could have been more equitable. This situation urgently needs to be corrected for social and economic stability.

2. The main reason for this disconnect between growth and equity / development is the failure of the growth process to generate sufficient number of quality jobs or ‘decent work’ as defined by the ILO. Organized sector employment with high wages and some form of protection for the worker, has been stagnant whereas jobs in the informal sector have proliferated, where there is no protection for labor of any kind. Also there exist a large number of the working poor, families which live below the poverty line despite being employed.

3. Although growth should naturally lead to higher employment, this process may fail for the following reasons as noted by the experts:

a. Demographic imbalance – large growth in the labor force with many young people entering the workforce who are unskilled. Note that this is both a threat and an opportunity.

b. Agriculture – this sector has been stagnant in terms of employment generation. Also structural transformation with labor moving to industry has not happened.

c. Sectoral composition of growth – the sectors that have grown in recent years are not labor intensive.

d. Technology – industry has widely moved towards adopting capital intensive technologies that require fewer workers.

e. Productivity – the short term impact of rising productivity can also lead to a fall in employment, however in the long run this is good for enhancing the competitiveness of the economy, further growth and creation of jobs.

f. Rigidities in the labor market – this topic is controversial with experts expressing divergent opinions. Proponents feel reforms are needed for further investment, growth and employment generation particularly in the organized sector. Opponents feel that given the small size of the organized sector and poor implementation of existing laws this is not a constraint on growth currently.

4. Adequate attention to employment concerns therefore must be given by all government policies, in particular macroeconomic stabilization policies undertaken by the government.

5. In this context there is a great need for policy coherence among all stakeholders. Among multilateral agencies there is incoherence as the IFIs promote liberalization of trade policies etc., without due regard to employment ramifications. Similarly among ministries finance and commerce & industry typically focuses on growth exclusively at the cost of other concerns such as equity and ‘decent work’ of the labor ministry.

6. Policy incoherence can arise due to different cultures, objectives, as well as different stakeholders for various ministries and the Planning Commissions. Therefore there is a need for an integrated approach to policy making instead of the current piecemeal one, however this is likely to be an uphill struggle. This meeting is a first step in initiating a debate on these issues.

7. There was consensus regarding the need for a social security system providing some income security for workers, including those in the informal sector. An innovative proposal was presented that would require 0.5% of GDP to cover around 360 million people.

8. Representatives from labor feel that the blame is unfairly laid on labor laws and protections as hampering growth, whereas equal blame can be laid on employers and the government for failing to efficiently utilize the investment. The former should enhance efficiency (modernizing) and the latter should provide better governance (lower corruption) and infrastructure to attract more investment.

9. Sequencing of reforms as suggested by some is not a good idea since although labor loses its protection with labor market reforms, the accompanying social protection that is promised in its stead is often delayed and never implemented due to budgetary constraints. They should ideally go together and not sequentially.