One million new jobs needed each month to sustain growth and reduce poverty in South Asia

South Asia has seen an accelerated job growth and a substantial decrease in poverty over the past three decades, second only to East Asia.

The region will be the largest contributor to the global workforce over the next two decades. More and better jobs are needed to sustain growth and reduce poverty, says a World Bank report released today.

According to the report, ‘More and Better Jobs in South Asia,’ the region — defined by the World Bank as Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka — will need to add between one and 1.2 million additional jobs every month for the next 20 years, equivalent to about 40% of the increase in the global labour force. Reforms will have to be accelerated if the region is going to meet the challenge of providing better jobs for them.

“The key asset to South Asia is its people. South Asia has a young population and the second lowest female participation rate in the labour force. The demographic transition will result in more than 350 million people to enter the working age population over the next two decades,” said Isabel Guerrero, World Bank South Asia Vice President. “Creating jobs for them will contribute to growth, equity, and peace in the region.”

South Asia created nearly 800,000 jobs per month between 2000 and 2010. However, despite growth, the region is still home to the largest number of the world’s poor—a half billion people. Since labour is the primary asset of the poor, having more and better jobs is the key employment challenge facing the region.

“The number of additions to the labour market over the next few decades will result in a 25–50 percent increase over the historical average,” said Pablo Gottret, co-author of the report. “Going forward the region faces an enormous employment challenge, but its demography can help if countries choose to reform.”

Education is key to labour mobility. Education attainment remains low and well over 25 percent of the labour force in all countries except Sri Lanka lacks any education at all. More education facilitates labour mobility to more productive employment, from rural agriculture to rural-based industry and service jobs and from urban casual work to urban-based regular wage and salaried industry and service jobs.

“It’s not only the quantity of jobs but the quality of the jobs being created in the region that is relevant,” said Kalpana Kochhar, Chief Economist for the World Bank ’s South Asia Region.

“There has not been much change in the composition of employment, that is  between casual labourers, the self-employed and regular and salaried wage earners, but there has been an increase in real wages and poverty reduction within these categories.  However, the share of wage employment and high-end self-employment are stagnant.”

Additionally, South Asia has some of the highest rates of malnutrition in the world as well as high levels of anaemia and iodine deficiency. Malnutrition rates are higher even than Sub-Saharan Africa. Poor nutrition results in lower productivity of the labour force.

“Despite significant progress in recent years, the contrast between increasing demand for higher levels of education and the educational attainment of the labour force could not be starker. Education reform is key,” said Reema Nayar, co-author of the report. “The biggest payoff in quality may well come from addressing poor nutrition and other factors in early childhood before children enter formal schooling.”

Since the demand for labour is derived from businesses, it is important to address constraints of electricity shortages, corruption and political instability in some parts of the region. A lack of electricity was ranked highest and the report outlines the electricity reform agenda to tackle the issue. The reform agenda is not only about investment. Improvements in the regulatory framework and governance of the sector are equally critical.

Growth has varied within the region. The demographic transition—when the number of workers grows faster than their dependents—can provide a tailwind for the next three decades in much of South Asia.

This is because the resources saved from having fewer dependents to support, provided it used for high-priority investment, can support rapid growth of labour productivity.

“Such a reform agenda is challenging, but it is feasible,” said Pradeep Mitra, co-author of the report. “It will be helped if governments use the resources made available by South Asia’s demographic transition wisely.