Development and Globalization: Facts and Figures2016 United Nations Conference on Trade and Development

Target 8.3: Productive activities

Promote development-oriented policies that support productive activities, decent job creation, entrepreneurship, creativity and innovation, and encourage the formalization and growth of micro-, small- and medium-sized enterprises, including through access to financial services.

Economic growth is dependent on productive employment. This is facilitated by a business environment that provides the ground for entrepreneurship, creativity and innovation, particularly for micro-, small- and medium-sized enterprises, to promote labour demand, as well as by ensuring open access to education and training, so that people ready to work can match their skills to the needs of production. In this regard, globalization has brought about new opportunities. Today, technological innovations spread around the world more quickly than ever before. These innovations have enhanced work methods and created job opportunities with comparatively high pay, particularly in newly emerging sectors. Furthermore, goods and services can be traded all around the globe with continuously decreasing transport and transaction costs. Barriers to international capital movements have been lifted, and mobility of the higher skilled workers has increased.

Fundamental international labour standards against forced labour, child labour and discrimination each cover more than 70 per cent of the world population.

From a sustainable development perspective, labour should not only be productive, as measured by economic output per worker, but should also be decent. Child labour, forced labour, inappropriate health and security conditions, violence and harassment in the workplace are extreme examples of indecent work conditions that persist all around the world (UNDP, 2015). A side effect of the increasing interconnection of the world economy and international mobility of capital and goods is that workers all around the world are under growing pressure to adapt to a rapidly changing environment. They increasingly need to adjust to fluctuations in product demand, resulting in unforeseeable changes in their working conditions and requiring greater geographic mobility and job flexibility. Today, acquired skills can become obsolete very quickly compared with the past, and new skills need to be acquired more rapidly in order to avoid unemployment and low pay. Competition among workers worldwide has intensified, allowing an erosion and avoidance of national labour regulations (ILO, 2011, 2016a; Organization for Economic Cooperation and Development (OECD), 2015; UNDP, 2015).

Figure 8.6. World population covered by fundamental labour conventions (Percentage) Download data
Figure 8.6: Bar chart
Sources: UNCTAD, UNCTADstat and ILO, Normlex.
Note: The numbers of the underlying ILO Conventions and their date of issuance are given in parantheses.

In most developed countries, human development was accompanied by the formation of workers’ movements that successfully struggled to establish workers’ rights in national legislation, such as minimum wage levels, the right for freedom of association and the right to strike. These prevent workers from having to accept work that does not comply with certain minimum standards. At a global level, conventions pursued by ILO on a wide range of problem areas, and ratified by national governments, have provided a basis for certain minimum rights for workers all around the world (ILO, 2014). Among the various subjects addressed by the 188 conventions issued since 1919, ILO considers as most fundamental: freedom of association and recognition of the right to collective bargaining; elimination of all forms of forced or compulsory labour; abolition of child labour; and elimination of discrimination in respect of employment and occupation (ILO, 2014). As figure 8.6 shows, today the international standards addressing forced and compulsory labour, child labour and discrimination each cover more than two thirds of the world population. Their coverage has increased considerably over the last 15 years. Legal protection from child labour, which was strengthened in 1999 with the Convention concerning the Prohibition and Immediate Action for the Elimination of the Worst Forms of Child Labour, and legal protection from work-related discrimination (ratified by China in 2005), have seen the greatest increase in coverage. By contrast, the international standards on freedom of association and recognition of the right to collective bargaining have been ratified by a smaller number of governments. Today less than half of the world’s population are protected and this coverage has increased only slightly over the last 15 years.

Informal employment in developing economies is connected with low labour productivity

While coverage of formal labour standards is increasing, indecent conditions of work are most prevalent among workers in informal employmentInformal employment includes all remunerative work that is not registered, regulated or protected by existing legal or regulatory frameworks.
, as informal workers are not recognized or protected under a country’s legal and regulatory framework. These usually represent the most vulnerable group of employed persons. Many of them are denied legal or social protection, are unable to enforce contracts, have limited access to public infrastructure and benefits and are reliant on informal, often exploitative, institutional arrangements. They are highly dependent on the attitudes of public authorities and relatively exposed to harassment by them. Empirical studies have shown that informal workers have a higher propensity to work long hours and receive lower pay relative to formal workers. Their incomes are also typically more irregular (ILO, 2002, 2011; OECD, 2015).

Informal activities not only reflect a deficit in the decency of work, they are also on average relatively labour intensive and thereby associated with low output per worker (Palmer, 2008). Accordingly, they do not tend to contribute greatly to economic growth. The empirical relationship between labour productivity and informal employment, observed throughout the set of transition and developing countries for which ILO has collected nationally representative and internationally comparable data, is depicted in figure 8.7. The data illustrate the negative relationship between informality of employment and output per worker. In African countries, such as Madagascar and Uganda, informal employment is particularly widespread, accounting for around 90 per cent and more of total employment and, correspondingly, productivity is, with less than US$5,000 per worker, extraordinarily low. Most transition economies in the sample, namely Armenia, the Republic of Moldova and Serbia form a group of their own characterized by low informality of employment despite below-average labour productivity.

Figure 8.7. Labour productivity and informal employment in developing and transition economies, 2012-2013 (US$ constant international; informal employment in percentage) Download data
Highlighted economies
Sources: ILO, ILOStat and World Bank, Word Development Indicators.
Notes: GDP per person employed is expressed in constant international US$, PPP 2011. Circles represent the latest available pair of figures in 2012 and 2013.