How to escape the low-pay, low-productivity jobs trap

The broken link between economic growth and employment is now widely recognised. Too often, structural transformation has failed to create enough work, especially for young people in developing countries such as Rwanda and Ethiopia, who are having a tough time gaining a foothold in the labour market.

The problem is not just that there are too few jobs but that too many are low quality: informal, unprotected, low productivity, low pay, offering little opportunity to learn or move up. Some 2.1bn workers (around 58 per cent of the global workforce) remain in informal employment. More worryingly, research indicates that the gradual reduction of informal jobs associated with economic growth has stalled in recent years.

There is a common assumption that when jobs are scarce, countries must choose between more jobs and better ones. Job quality, it is argued, can come later. But this mistakes short-term necessity for strategy.

Low-quality jobs may absorb surplus labour but they can also weaken skills, productivity, demand and resilience. In so doing, they diminish the foundational capacity to generate more and better jobs.

This poorly understood dynamic is clearest when it comes to education and training.

Economic transformation requires workers to keep improving their abilities. But they are more likely to do so when new skills are rewarded through better pay, greater security or prospects for advancement. When this link is fragile, workers have less incentive to invest in training, companies have less pressure to upgrade and economies risk being stuck in low-productivity competition.

Once again, this is a particular problem for young people whose first jobs often shape not only their income but their expectations, abilities and trust in the future. AI and other new technologies only make the issue more urgent. Without better jobs that allow workers to learn, adapt and share in productivity gains, tech advances may end up deepening existing divides.

Similarly, workers with protection against health and income risks can better cope with shocks and remain in the labour market.

There is therefore a strong economic case for investing in job quality through skills, social protection and support for productive small and medium-sized enterprises as part of strategies to avoid the low-pay, low-skill, low-productivity trap.

But decent jobs also create social and non-financial value for workers, families and communities. They shape personal identity, stability, health, education and trust. Poor-quality jobs, by contrast, can impose wide-ranging hidden social costs. Markets may not always recognise all of the positive externalities that come from high-quality employment, so it must be a job for policymakers.

This echoes Indian economist Amartya Sen’s idea of development as the expansion of people’s real freedoms and capabilities. Work matters because it can enlarge (or restrict) people’s ability to plan, learn, participate and move forward. These capabilities can only be cultivated by systematic and sustained investment in job quality.

The renewed focus on employment by global financial institutions, such as the World Bank’s jobs agenda, is therefore a real opportunity.

But it should not stop at counting jobs. Development finance needs to ask sharper questions: whether the jobs it supports raise productivity, improve pay and prospects, build skills, strengthen workers’ voices and eventually create social returns.

Development policy should be built on the real possibility of progress, not desperation. Continued reliance on poor-quality jobs will ultimately weaken the very process on which future economic growth depends.

This OpEd was published on the Financial Times on 1st October 2026