World Bank Headline Seminar: Promoting Inclusive Growth and Employment
in Fragile Situations
Session 3. Employment Issues in Fragile Situations
By Christopher Cramer & John Sender
A. Clearing the Ground
1.
Unemployment, underemployment, low-productivity employment, poverty
wages, inequality in wage distribution, and rural-urban or spatial wage differentials
are NOT obviously or mechanically a cause of conflict, nor are they the main
explanation for the duration of conflict.

The empirical grounds for making such arguments – often, for example,
simply asserted in abstract models or suggested by indirect, proxy data – are
extremely weak. Simply combining demographic data (on the ‘youth bulge’)
with poor data on unemployment is no substitute for actual evidence on
processes involved. And where labour market conditions are relevant to the
origins of violent conflict such effects are only likely to be activated by
interaction with many other causes.

For example, careful analysis of available evidence leads recent researchers to
dismiss the significance of unemployment rates as a key or straightforward
cause of the incidence of xenophobic violence in South Africa in 2008.

Low income countries such as Zambia and Tanzania score badly on many of
the indices often associated with a propensity to violent conflict, e.g. they have
“bad neighbours”; they are natural resource dependent; and there is low labour
productivity and an inadequate rate of growth of formal employment. But
these countries have not experienced violent conflict or significant political
instability.

In several countries that have experienced violent conflict large numbers of
those volunteering to engage in armed organizations are employed rather than
unemployed prior to the violence. The same goes for those who engage in
‘terrorism’, according to much of the research literature.

During violent conflict the weakening of statistical agencies and the
difficulties of surveying mean we know even less about the realities of
employment/unemployment than in non-war developing countries.

As with ethnicity and inequality, it is possible that violent conflict tends to
create disparities in labour market conditions rather than being ‘caused’ by
them.

However, there is some evidence that the characteristics of labour markets –
when combined with other structural and contingent factors – can be relevant
to understanding different forms of violence. The literature on violent gangs in
the USA, for example, suggests that structural change leading to a decline in
unionized, regular employment opportunities in manufacturing and a rise in
both unemployment and non-unionised, irregular, service sector jobs with
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poor conditions was ONE factor in the evolution of Puerto Rican gangs in
Chicago and East Harlem. In West Africa there is evidence that tight controls
by older men over young men’s access to labour, to land, and to women, in
straitened economic conditions, played into the political economy of violent
conflict, e.g. in Sierra Leone. Brutally exploitative labour market conditions in
some rapidly growing urban areas in India have been a factor – again, far from
exclusively so – in the explanation of vicious pogroms.
2.
Therefore, the basis for a realistic design of appropriate policies in conflictprone or affected countries is NOT the expectation that they will succeed in reducing
the probability of violent conflict. Rather, the basic assumption here is that policies
should be designed to assist the most vulnerable/deprived people in these countries to
survive and to minimize threats to their standards of living in both the short and
medium term, whether or not violent conflict continues/becomes more severe.
3.
The starting point for the design of realistic policies is an empirical
identification of the characteristics of the most vulnerable/deprived people, plus a
clear analysis of their survival strategies and how precisely they have been able in the
recent past to minimize or mitigate the threats they face. These empirical questions
can be answered by examining the evidence not only from areas severely affected by
violent conflict, but also from many other poor areas, where violence is also endemic
though less “visible” than in countries widely regarded as “war zones”. The point is
that the same sort of people, who have similar characteristics and are forced to adopt
the same survival strategies and defence mechanisms, can be found in both contexts.
4.
Inappropriate and ineffective employment and social protection policies, that
have a minimal (or adverse) affect on the most vulnerable/deprived people, are
regularly funded by the Bank and other donors in many African countries, including
both fragile states/war zones and other poor countries. Most donors, NGOs, and
government agencies continue to believe as an article of faith that the vulnerability of
rural women can be effectively reduced by efforts to promote and subsidize selfemployment in micro-enterprises, rather than wage employment. There is far too little
evidence in Africa or elsewhere to justify belief in the poverty-reducing impact of
these conventional policies, let alone their impact on violence.
5.
If it is acknowledged that the most vulnerable rural women now rely, and will
increasingly depend in the future, upon wage incomes to survive and to escape from
violence and deprivation, then fashionable policies providing them with training to
grow food crops and make baskets, or offering them micro-credit to facilitate start-up
enterprises in rural environments already over-supplied with similar and failing
enterprises, should be abandoned. These failing policies are based on ideological
premises, rather than empirical research. The problem is not so much that one size is
unlikely to fit in all areas, but that these ideologically predetermined policies will be
inappropriate and ineffective wherever and whenever they are promoted.
6.
We also recommend a one-size-fits-all policy. But our recommendations are
based on much more realistic assumptions (and good empirical evidence) about the
specific problems faced by vulnerable people, about their employment prospects, and
about the structural changes required to reduce their vulnerability.
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B. Some Realistic Assumptions or Stylized Facts
B.1. Vulnerable/Deprived People
7.
Most of the following stylized facts about vulnerable people are not
controversial or disputed in the development literature. It is widely recognized that the
most deprived – the bottom 15 percent - live in rural households that can readily be
identified by examining a few simple demographic, anthropometric and asset indices:

These households contain women who have failed to complete many years of
education; in fact, they are unlikely to contain an adult woman who is literate.

A relatively high proportion of the women in these households will have
started to have children as teenagers.

A relatively high proportion of their children will have a low weight at birth
and will have died before the age of five; their surviving children will have
relatively low heights-for-age.

The types of houses in which these families live will clearly be inferior to
those of other rural households, in terms of the materials with which floors
and roofs are constructed, the number of rooms, quality of sanitation and
lighting facilities. They will not have access to radios, bicycles, watches or
other basic assets, including livestock, found in less deprived rural households.
8.
There are three other critical, but much less widely acknowledged, defining
features of the most deprived rural households:

The most vulnerable rural households contain women who work as manual
agricultural wage labourers, and such households rely upon these female
wages to survive.

The proportion of these poor households’ income that is derived from selfemployment is insignificant. Their survival strategy may include foraging or
an attempt to grow some foodstuffs on miniscule homestead plots, but the total
contribution to annual consumption of such desperate efforts is negligible.
Only in far wealthier rural households, with far more access to land, male
incomes, and other inputs, is self-employment a feasible option for women.
The more educated wives and daughters in these wealthier households would
not contemplate seeking arduous and demeaning manual work for wages on
their neighbours’ fields or as domestic servants, nor would their male relatives
allow them to engage in such labour for others.

These households must purchase a significant proportion of the calories they
consume. They are extremely vulnerable to spikes in the price of basic cereals,
because female money wage rates are unlikely to rise fast enough to allow
them to maintain already inadequate levels of calorie consumption. Given
excess supplies of poorly educated female rural labour, low productivity and
scattered employment opportunities, the poorest women lack sufficient
bargaining power to ensure stable real wages. If development experts continue
to extol the virtues of unregulated food grain markets, then these women will
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remain acutely vulnerable to frequent and large fluctuations in the price of the
most basic necessity.
B.2. Vulnerable/Deprived People in Conflict Areas
9.
These stylized facts also apply to many fragile and conflict-affected low
income states. In those states that have actually experienced violent conflict, they
apply in particular ways:

Violent conflict often accelerates labour force participation. Women and men
are often pitched by warfare into the most abusive forms of wage labour. It has
in the past been common to assume that war propels a ‘retreat into
subsistence’, that at the end of wars, in rural areas, it is appropriate to model
economies with ‘no labour market’. Where there is evidence, it sharply
contradicts this assumption.

In conditions of prevalent violence or organized violent conflict, the ability of
the poorest to secure decent conditions or wages for their labour is even
weaker and becomes an even greater policy priority.

In many countries affected by violent conflict the gender gap in life
expectancy falls: girls and women die more frequently than men, because of
direct violence and indirect effects of violence on their access to education,
food, and healthcare. The implication is that violence aggravates the stylized
facts above.
C. Processes Reducing Vulnerability/Deprivation
C.1. Stylized Structural Changes
10.
The stylized structural changes historically associated with reductions in
vulnerability in developing and developed economies are:

A growing proportion of deprived rural people, and of the total rural labour
force, become wageworkers. These rural people will initially work for wages
on farms and in the non-farm rural sector as domestic servants, cleaners,
waiters, construction and transport workers in small district towns.

An increasing number will migrate in search of similar forms of unskilled
wage employment. They will not only migrate to other rural areas and to
larger towns and cities, but also across national borders. Labour mobility is the
key dynamic feature in the reduction of vulnerability.

The history of most economies in which the percentage of people suffering
from acute deprivation has declined shows also that the percentage of the
labour force employed for wages in large enterprises increased.

In fact, higher wages and growing labour productivity are a feature of those
economies in which a relatively large proportion of the labour force is
employed for wages in technologically dynamic and rather large enterprises,
while only a small percentage of the labour force is self-employed or
employed in small family businesses.
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
Where there is rising employment and productivity within increasing numbers
of large enterprises, there has historically also been a steady increase in tax
revenue, which is one of the key pillars of state formation or ‘statebuilding’.
C.2. Reducing Vulnerability/Deprivation in Areas of Violent Conflict
11.
Violent conflict creates accumulation possibilities for some entrepreneurs.
Many others, particularly those with sufficient education or other resources, can also
escape the worst consequences of fragility and violent conflict by migrating within
and across national borders in search of reasonably remunerated forms of
employment. The survival strategies of illiterate rural women and their malnourished
children are much more constrained:

Large numbers of these poor rural people do try their best to migrate in search
of safety and work. They are often absorbed into unregulated labour markets
in neighbouring countries but on exploitative terms. Examples include
Mozambican women, children and men illegally crossing into South Africa
and working in a variety of sectors including export horticulture and sex-work;
Zimbabweans crossing into South Africa and Mozambique; refugees from
Somalia and Sudan attempting to obtain wage employment on Ethiopian and
Ugandan flower farms.

The conditions of such migration are typically dangerous and costly. Often the
most vulnerable and malnourished do not succeed. One policy priority is to
reduce the cost of such migration. Another is to promote investment in
activities most likely to create rapid increases in demand for unskilled female
wage labour. Many of these activities are likely to be in agriculture and the
greatest gains – in terms of labour absorption and contribution to
macroeconomic balances – are likely to be in export-oriented agriculture and
agro-processing.

Of course, investment in the construction of improved rural transport
infrastructure can facilitate migration directly, by reducing the difficulty and
costs of travelling out of conflict zones, and indirectly, by providing
employment opportunities in the construction sector.

Where violence is pervasive and the state is weak, there are few if any
institutions capable of regulating abusive employment practices or of
reflecting the ‘voice’ of poor wage workers, In war to peace transitions, these
gaps often persist. The typical weakness, for example, of trade unions is likely
to be intensified. In some countries, for example Colombia, violent conflict
has been accompanied by high levels of violence against trade union
members.

By encouraging investment in and by large enterprises in urban and rural areas
the bargaining power of vulnerable workers may increase. Large enterprises
have the advantage of clearer regulatory visibility (both nationally and
internationally) and can create scale economies of voice, facilitating some
feasible, limited improvements in governance of labour markets.

We therefore argue that far greater priority in war to peace transitions must be
given to the encouragement of such large enterprises but only in combination
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with interventions to support domestic state capabilities and institutions for
maximizing vulnerable workers’ gains from such investments. Negotiations
with large enterprises – over tax revenue, employment, training, and so on are
notoriously one-sided in many low-income and conflict affected countries.
Where there has been some improved contribution (limited by the consistently
and extremely low revenue flows to the state), such as through the Mozal
aluminium smelter in post-war Mozambique, it has been promoted by
international investors rather than by any strategic engagement by the state.

In many recent experiences of war to peace transition only very slow progress
has been made to relieve the deprivation and vulnerability of poor people. This
goes for ‘success stories’ such as Mozambique, where aid-dependent
macroeconomic growth has been accompanied by rapidly increasing
inequality, and little protection for many rural poor people, just as much as for
less successful experiences. This may be contrasted with some other, much
more impressive historical experiences of post-war economic recovery and
transformation. Notably, in the wake of World War II there was a widespread
commitment to a ‘gospel of growth’; sustained interventions to pursue full
employment that, while they varied from country to country, were common to
all major war-affected states. Among developing countries, the most obvious
experiences of rapid post-war growth, employment expansion, and the
reduction of vulnerability were in South Korea, Taiwan and Vietnam. In all
cases, large enterprises were encouraged and the state played an important role
in subsidising investments to increase agricultural productivity. In none of
these cases were policies to deregulate and increase the 'flexibility' of the
labour market central. However, all were also characterized by ongoing social
conflict mediated partly through labour market institutions.
D. Policy Implications
D.1. Unrealistic Assumptions and Ineffective Policy

Aid agency policies now focus on ‘capacity building’ in all manner of
ineffective, small-scale and often corrupt decentralised organizations – NGOs,
CBOs, Group Credit and other financial institutions, while any organization
with a realistic prospect of increasing the political and economic bargaining
power of the lowest-paid and vulnerable wageworkers is shunned, or
dismissed as potentially market distorting and, ipso facto, harmful to the poor.

There is barely even any discussion of the need to allocate resources to
support the formation of trade unions by seasonal agricultural labourers. Nor
is there support in the mainstream literature for effective legislation to
monitor, and investment to enforce, the rights of migrant domestic servants or
of refugee women exploited by unscrupulous employers. Indeed, any state
intervention that might create an ‘enabling environment’ for more effective
struggles by such workers is likely to be rejected on the grounds that it might
compromise the viability of small enterprises. In fact, the voluminous
literature on poverty published by the aid bureaucracy and its consultants
studiously avoids mentioning the specific organizations, legislation, or
institutions that have historically been most significant in defending the
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human rights and living standards of the poor in capitalist labour markets and
in periods of post-war reconstruction.

At the same time, there is no discussion of the economic policies and the
precise forms of state investment and intervention that might be capable of
promoting the growth of female wage labour-intensive enterprises. There is
clear evidence that particular crops, agro-processing and other export
industries employ relatively large numbers of women for wages. However,
appropriate sectoral policies and industrial strategies are unlikely to be
developed, if the most influential development economists insist that poverty
can be reduced only when markets are deregulated and when states abandon
their old-fashioned aspirations to formulate industrial policy.

Donors have failed to develop effective policies to promote the massive
investments in agribusiness and rural infrastructure required to increase the
demand for female wage labour in rural Africa. In fact, the share of official
development assistance (and of government public expenditures) devoted to
agricultural investments in Africa has remained remarkably small. It is
negligible in conflict affected areas.

Despite evidence of the success of state interventions to stabilize the price of
the food grains consumed by the poorest people in Asia, donors and
policymakers in Africa have failed to invest in interventions to mitigate the
harsh effects of food price spikes in Africa in recent years.
D.2. Some Alternative Policies:

There are synergies between macroeconomic gains, productivity enhancement,
and the reduction of deprivation and vulnerability to be gained by prioritizing
support in fragile and conflict affected states for a rapid expansion in high
value agricultural exports and agro-processing.

These activities typically have high levels of labour demand relative to output.
They generate foreign exchange in contexts where GDP growth is foreign
exchange constrained. They are often most efficiently pursued by relatively
large enterprises, which also have the advantage of generating linkages to
smaller enterprises in manufacturing, services, and agriculture.

They require large investments in infrastructure. Together with an improved
spread of information through radio and other media, and institutional
reforms, these infrastructural investments can also have the effect of reducing
the barriers to mobility and migration. Such a strategy – given the significance
of cross-border migration – needs to be undertaken on a regional rather than
country-specific basis.

Migrants from violence prone rural areas with low productive potential are
more likely to survive and succeed in the labour market if they are literate and
numerate. Reducing the vulnerability of these migrants, particularly of those
facing the greatest risks, therefore depends on sustained investment in the
education of rural women and girls. Unfortunately, there is little evidence of a
commitment to such a targeted policy by donors or the state in anywhere in
Africa.
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
The historical record is replete with examples of enterprises and individuals
who have accumulated capital and know-how during and thanks to war
conditions and who then continue to make important contributions to post-war
economic development. Internationally, these include L’Oreal, Krups, and
Mitsubishi. War is often laundered in peacetime economic conditions. The
policy challenge in fragile and conflict affected developing countries is to find
ways – economic incentives combined with taxation and controls – to increase
the propensity of wartime entrepreneurs to reinvest in higher productivity,
high labour demand activities that also pay taxes and help state formation.
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