Pro-employment macroeconomic policies

23 October 2025

Empirical experience underscores that macroeconomic stability alone has been insufficient to support sustained and inclusive structural transformation and broad-based productive employment creation, as evidenced by sluggish economic performances — despite periods of stability — in a large set of countries and continued high levels of unemployment, underemployment and working poverty.

The Great Recession of 2008-2009 and the COVID-19 pandemic led to a reconsideration of the prevailing consensus on macroeconomic policies, including a greater appreciation of counter-cyclical fiscal and monetary policies in fighting recessions and of policy frameworks that support inclusive growth and productive employment.

In the face of climate change and biodiversity loss, macroeconomic frameworks have been increasingly called on to integrate climate and biodiversity goals and smooth the impacts of these shocks on economies and ensure a just transition in labour markets.

How can macroeconomic policies be “pro-employment”?

The specific elements of such a pro-employment macroeconomic policy framework that has the explicit goal of creating decent jobs, in line with SDG 8, will differ with country needs and circumstances and shifting political, economic, environmental, and social realities - Table 1 identifies a number of areas that could make the national macroeconomic policy stance more employment friendly and contribute to gender equality outcomes.

Table 1. Making macroeconomic policies pro-employment and gender responsive

Monetary Policy	Fiscal Policy	Exchange rate policy and capital account management
Set targets for inflation within a range/ adopt a dual mandate for the central bank encompassing price stability and full employment Strengthen supervisory and regulatory functions to promote effective and efficient systems of financial intermediation, ensuring an adequate supply of credit for small and young firms and start-ups Enhance financial inclusion of poor “unbanked” persons and small enterprises, being mindful of interest levels and spiralizing debt Using transparent and consistent criteria, facilitate allocation of credit to enhance productivity and priority sectors and industries tobolster job creation, in particular for women, and structural transformation Evaluate distributional and gendered impacts of monetary policies (interest rate and reserve policies; quantitative easing, lending, and loan guarantees)	Adopt a counter-cyclical fiscal policy stance that works hand-in-hand with monetary policy Build up capacities and institutional arrangements to maintain “fiscal portfolios” that comprise a balanced mix of automatic stabilizers, such as unemployment insurance and social protection, together with discretionary countercyclical measures Mobilize resources to provide fiscally sustainable support to public works programmes, employment-intensive public investment in infrastructure, employment guarantee schemes; training and retraining and other active labour market policies (ALMPs) Tax and financial incentives for small and young firms and households Broaden the tax base Engender fiscal space by reallocating expenditures, using tax and financial incentives, and use resources to explicitly support gender equality Use gender-responsive budgets as a monitoring tool	Use a managed float to gear towards a stable real exchange rate and avoid overvaluation Build up foreign exchange reserves as a prudential buffer for self-insurance against market volatility, avoiding excessive accumulation Engage in active capital account management by reducing the impact of disruptive short-term capital flows and thus reduce exposure to international financial volatility and speculation Monitor external borrowing and currency mismatches by resident firms and banks Ensure conditions for cross-border long-term financial and productive investments that can stimulate structural transformation and employment creation

Monetary Policy

Fiscal Policy

Exchange rate policy and capital account management

Set targets for inflation within a range/ adopt a dual mandate for the central bank encompassing price stability and full employment
Strengthen supervisory and regulatory functions to promote effective and efficient systems of financial intermediation, ensuring an adequate supply of credit for small and young firms and start-ups
Enhance financial inclusion of poor “unbanked” persons and small enterprises, being mindful of interest levels and spiralizing debt
Using transparent and consistent criteria, facilitate allocation of credit to enhance productivity and priority sectors and industries tobolster job creation, in particular for women, and structural transformation
Evaluate distributional and gendered impacts of monetary policies (interest rate and reserve policies; quantitative easing, lending, and loan guarantees)

Adopt a counter-cyclical fiscal policy stance that works hand-in-hand with monetary policy
Build up capacities and institutional arrangements to maintain “fiscal portfolios” that comprise a balanced mix of automatic stabilizers, such as unemployment insurance and social protection, together with discretionary countercyclical measures
Mobilize resources to provide fiscally sustainable support to public works programmes, employment-intensive public investment in infrastructure, employment guarantee schemes; training and retraining and other active labour market policies (ALMPs)
Tax and financial incentives for small and young firms and households
Broaden the tax base
Engender fiscal space by reallocating expenditures, using tax and financial incentives, and use resources to explicitly support gender equality
Use gender-responsive budgets as a monitoring tool

Use a managed float to gear towards a stable real exchange rate and avoid overvaluation
Build up foreign exchange reserves as a prudential buffer for self-insurance against market volatility, avoiding excessive accumulation
Engage in active capital account management by reducing the impact of disruptive short-term capital flows and thus reduce exposure to international financial volatility and speculation
Monitor external borrowing and currency mismatches by resident firms and banks
Ensure conditions for cross-border long-term financial and productive investments that can stimulate structural transformation and employment creation

For example, monetary policy mandates depending on country circumstances can include full employment in addition to price stability. While not explicit mandates, a number of central banks in developing countries, including in Asia (such as Bangladesh, Bhutan, Fiji, Pakistan, the Philippines and Thailand) identify the broader objectives of supporting inclusive economic growth, financial inclusion or development in their vision or mission statements. Financial inclusion — promoted by central banks and financial regulators — can act as catalyst for job creation by expanding access to financial services, thereby stimulating economic activity and generating employment.

Institutional capacities to undertake countercyclical policies to manage aggregate demand over the business cycle can be strengthened to achieve full and productive employment. In terms of foreign exchange policies, stable and competitive exchange rates can also play an important role in supporting economic diversification and managing cyclical swings in capital flows. An exchange rate framework of that kind can support the development of the non-resource tradable sector (agriculture and manufacturing) and also of sectors with large “learning spillovers”, leading to the dissemination of new technologies.

Country and region-specific contexts matter in the design of pro-employment macroeconomic frameworks. In Africa, for example, in light of commodity dependence, high levels of informality and working poverty, and a fast-expanding labour force, macroeconomic policy needs to widen its focus from a stabilizing role to a “transformative” role which actively targets decent and productive employment that is inclusive and sustainable. In this regard, a three-pronged approach developed by the ILO with the Institute for Economic Justice, involving: (i) direct employment creation where policy space allows; (ii) resolving macroeconomic imbalances that retard employment generation; and (iii) advancing structural transformation and supporting complementary sectoral and labour market policies can increase aggregate demand in the economy without unduly increasing imports while expanding domestic supply.