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Reema Nayar, Pablo Gottret, Pradeep Mitra,

Gordon Betcherman, Yue Man Lee,Indhira Santos, Mahesh Dahal, and

Maheshwor Shrestha

South Asia Development Matters


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2012 International Bank for Reconstruction and Development /International Development Association orThe World Bank1818 H Street NWWashington DC 20433Telephone: 202-473-1000Internet: www.worldbank.org

1 2 3 4 14 13 12 11

This volume is a product of the staff of The World Bank with external contributions. The findings,

interpretations, and conclusions expressed in this volume do not necessarily reflect the views of TheWorld Bank, its Board of Executive Directors, or the governments they represent.

The World Bank does not guarantee the accuracy of the data included in this work. The boundaries,colors, denominations, and other information shown on any map in this work do not imply any judg-ment on the part of The World Bank concerning the legal status of any territory or the endorsement oracceptance of such boundaries.

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of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2422;e-mail: [email protected].

ISBN (paper): 978-0-8213-8912-6ISBN (electronic): 978-0-8213-8913-3DOI: 10.1596/978-0-8213-8912-6

Library of Congress Cataloging-in-Publication DataMore and better jobs in South Asia / World Bank. p. cm. (South asia development matters) Includes bibliographical references. ISBN 978-0-8213-8912-6 ISBN 978-0-8213-8913-3 (electronic)

1. Labor marketSouth Asia. 2. Labor policySouth Asia. 3. EmploymentSouth Asia. 4. SouthAsiaEconomic policy. 5. South AsiaEconomic conditions. I. World Bank.HD5812.57.A6M67 2011

331.120954dc23

Cover photo: Ray Witlin, The World BankCover design: Bill Pragluski, Critical Stages, LLC


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Contents

Foreword . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xvii

Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xix

Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxi

Abbreviations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xxiii

1 Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

South Asias track record . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Determinants of job quality and the employment challenge . . . . . . . . . . . . . . . . . . . . . . . . 9 Improving an inconducive business environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Improving workers skills . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27 Reforming labor market institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Creating jobs in conflict-affected areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 Annex 1A Summary statistics on South Asian countries . . . . . . . . . . . . . . . . . . . . . . . . . 42 Annex 1B Definition of key labor market terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Annex 1C What is a better job, and which jobs are better? . . . . . . . . . . . . . . . . . . . 43 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

2 Growth and Job Quality in South Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49

Economic growth in South Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 Sources of future growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 The track record on employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 The urgency of reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68


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Annex 2A Methodology for decomposing growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 Annex 2B Sources of average annual growth in output per worker . . . . . . . . . . . . . . . . . 70 Annex 2C Shares of agriculture, industry, and services in employment and GDP . . . . . . 72

Annex 2D Methodology and data sources for labor force projections . . . . . . . . . . . . . . . 72 Annex 2E Poverty rates and the number of working poor in South Asia . . . . . . . . . . . . . 75 Annex 2F Analysis of poverty and unemployment in India . . . . . . . . . . . . . . . . . . . . . . . 79 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82

3 A Profile of South Asia at Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

Overview of employment and labor force participation in South Asia . . . . . . . . . . . . . . . . 86 The nature of employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 Where are the better jobs? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 Who holds better jobs? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111 Annex 3A Definitions and criteria used in profile of South Asia at work . . . . . . . . . . . 117 Annex 3B Regional employment patterns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122

4 What Is Preventing Firms from Creating More and Better Jobs? . . . . . . . . . . . . . . . . . . . 125

Methodological framework . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125 Constraints in the urban formal sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127 Constraints in the rural nonfarm and informal sectors. . . . . . . . . . . . . . . . . . . . . . . . . . . 140 Demand-side policy options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144 Constraints facing potential firm entrants: Business entry regulations . . . . . . . . . . . . . . 153 Annex 4A Business environment constraints in high- and low-income

states in India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155 Annex 4B Tax rates as a constraint to firms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155

Annex 4C Constraints facing nonbenchmark firms . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158 Annex 4D Access to finance as a constraint to firms . . . . . . . . . . . . . . . . . . . . . . . . . . . 159 Annex 4E Policy options for increasing access to finance . . . . . . . . . . . . . . . . . . . . . . . . 162 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 166

5 Opening the Door to Better Jobs by Improving Education and Skills . . . . . . . . . . . . . . . 171

Education and skills in South Asian labor markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172 Education and access to better jobs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176 The education challenge . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181 The next 20 years: Can South Asian countries improve the educational attainment

of their labor forces? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .187 Addressing disadvantages before school: The role of early childhood development . . . . . 189 Primary and secondary education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 192 Tertiary education and preemployment training systems . . . . . . . . . . . . . . . . . . . . . . . . . 199 On-the-job training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .206 Annex 5A Additional tables and figures on education and skills . . . . . . . . . . . . . . . . . . 210 Annex 5B Projections of the educational attainment of South Asias population

and labor force . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 224

6 The Role of Labor Market Regulations, Institutions, and Programs . . . . . . . . . . . . . . . . 229

Labor market institutions, policies, and programs in the formal sector . . . . . . . . . . . . . . 229


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Labor market institutions, policies, and programs in the informal sector . . . . . . . . . . . . 246 Annex 6A Additional tables and figures on labor market regulations

and institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 262

Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 272 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 276

7 Creating Jobs in Conflict-Affected Areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 281

Characteristics and intensity of armed conflict in South Asia . . . . . . . . . . . . . . . . . . . . . . 282 Constraints to job creation in conflict-affected areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . 284 Armed conflict and labor markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 285 Facilitating private sector job creation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 291 Education service delivery in conflict situations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 299 Labor market policies and programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 301 A jobs transition path in conflict zones . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 308 Annex 7A Definitions of high-conflict and low-conflict regions in selected

South Asian countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311 Annex 7B Labor market characteristics and educational attainment in

high-conflict and low-conflict areas of selected South Asian countries . . . . . . . . . . . . . . 312 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 316 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 318

Appendixes

A Household surveys used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 323B Methodology used to analyze labor transitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 326

Boxes

1.1 Increasing productivity in agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151.2 Options for reforming the power sector in South Asia . . . . . . . . . . . . . . . . . . . . . . . . . 241.3 The critical role of nutrition in early childhood development . . . . . . . . . . . . . . . . . . . 312.1 International migration in Nepal and its effects on poverty . . . . . . . . . . . . . . . . . . . . . 632D.1 Trends in female labor force participation in southeast and East Asian

comparator countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 743.1 Child labor in South Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 893.2 Composition of the labor force by employment status . . . . . . . . . . . . . . . . . . . . . . . . . 983.3 Determinants of informality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1013.4 Trends in Indias formal manufacturing sector, 19982007 . . . . . . . . . . . . . . . . . . . 1094.1 Electricity challenges facing South Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1314.2 Corruption in South Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135

4.3 Bringing light to rural consumers in Gujarat, India . . . . . . . . . . . . . . . . . . . . . . . . . . 1474.4 Improving performance of state-owned power suppliers in Andhra Pradesh . . . . . . 1484.5 Cutting red tape to reduce corruption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1494.6 Legislative and administrative interventions to reduce corruption in

East Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1504.7 Public-private collaboration to implement reforms in the Cambodian

garment industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1524.8 Effects of easing business entry regulations on firm entry, employment,

and formalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1534E.1 Successful approaches to small and medium-size business banking . . . . . . . . . . . . . . 1644E.2 Scaling up microfinance institutions: The case of BRAC Bank . . . . . . . . . . . . . . . . . 164


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5.1 Recruiting teachers based on merit in Sindh, Pakistan . . . . . . . . . . . . . . . . . . . . . . . . 1955.2 Teacher incentives schemes in Andhra Pradesh . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1965.3 The Reaching Out-of-School Children project in Bangladesh . . . . . . . . . . . . . . . . . . 198

5.4 Vocational education provided in the public school system . . . . . . . . . . . . . . . . . . . . 2005.5 Learning from Australias systemic reforms of training and tertiary education . . . . . 2025.6 Providing scholarships for tertiary education in Nepal . . . . . . . . . . . . . . . . . . . . . . . 2065.7 Industry-government cooperation: The Penang Skills Development Centre . . . . . . . . 2086.1 Severance reforms in Austria and Chile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2446.2 Unemployment benefit proposals for Sri Lanka . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2456.3 Nongovernment players in South Asias informal labor market . . . . . . . . . . . . . . . . . 2476.4 Key features of Indias Mahatma Gandhi National Rural Employment

Guarantee Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2496.5 Mexicos proactive approach to supporting small and medium-size enterprises . . . . 2556.6 Training informal workers: Kenyas Jua Kali experience . . . . . . . . . . . . . . . . . . . . . . 2566.7 Business training and financial support for self-employed women in Sri Lanka . . . . 259

7.1 Private sector solutions to the security constraint: Lessons from Afghanistan . . . . . 2947.2 Community-led infrastructure provision: Afghanistans National Solidarity

Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2967.3 Improving the land rights framework in India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2987.4 Improving the regulatory framework in a postconflict situation: Lessons

from Liberia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2997.5 Improving schooling despite armed conflict through community schools

in Nepal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3007.6 Lessons from efforts to reintegrate Ugandan youth . . . . . . . . . . . . . . . . . . . . . . . . . . 3037.7 Training and employing displaced people: The case of Asocolflores

in Colombia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3047.8 Implementing public works in a postconflict environment: Sri Lankas

Northern Province Emergency Recovery Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . 305

Figures

1.1 Annual growth in working-age population, employment, and labor forcein selected South Asian countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

1.2 Distribution of employment by type in South Asia, by country . . . . . . . . . . . . . . . . . . . 41.3 Average annual increases in mean real wages in selected countries in

South Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51.4 Percentage of workers in households below the poverty line in selected

South Asian countries, by employment status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61.5 Average number of months without work in the past year, casual laborers

in India, by sector, 1999/2000 2009/10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61.6 Distribution of rural and urban workers in selected South Asian countries,

by employment type . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71.7 Conditional probability of moving into and out of better jobs in rural India,

by education and gender, 2004/052007/08 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81.8 Annual growth in GDP per capita, by region, 1960s2000s . . . . . . . . . . . . . . . . . . . . . 91.9 Annual growth in GDP per capita in South Asia, by country, 1960s2000s . . . . . . . . . 91.10 Sources of annual growth in labor productivity, by region, 196080 and

19802008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101.11 Sources of annual growth in labor productivity in selected countries in

South Asia, by country, 196080 and 19802008. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11


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1.12 Sources of annual growth in total factor productivity in China, India,Pakistan, and Thailand, by sector and reallocation effects . . . . . . . . . . . . . . . . . . . . . 13

1.13 Median wage and value added per manufacturing worker in India, by

firm size and type, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131.14 Share of manufacturing employment in India, by firm size and type,

19942005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141.15 Ratio of working-age to nonworking-age population in South Asia, by

country, 19602008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161.16 Severity of constraints reported by South Asian benchmark firm in the

urban formal sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201.17 Cross-country comparisons of reported severity of electricity constraint

and power outages for a benchmark firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211.18 Percentage of firms expected to give gifts to public officials, by type

of interaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .221.19 Severity of constraints identified by South Asian benchmark

(nonexpanding) and expanding firm in the urban formal sector . . . . . . . . . . . . . . . . . 221.20 Severity of constraints reported by micro benchmark firm in urban and

rural sectors of Bangladesh, Pakistan, and Sri Lanka . . . . . . . . . . . . . . . . . . . . . . . . . 261.21 Severity of constraints reported by micro benchmark firm in Indias

urban formal and informal sectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 261.22 Employers perceptions of skills of recently graduated engineers in India . . . . . . . . . . 281.23 Wage premiums in selected South Asian countries, by level of education . . . . . . . . . . 291.24 Share of South Asian labor force with no education, with international

comparisons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 301.3.1 Percentage of children under five with malnutrition, by region and country . . . . . . . . 311.25 Employment protection indicators in selected countries . . . . . . . . . . . . . . . . . . . . . . . 331.26 Weeks of wages required to be paid in severance in regions, country income

groups, and selected South Asian countries, by length of service . . . . . . . . . . . . . . . . . 341.27 Cross-country comparison of reported severity of the labor regulation constraint . . . 351.28 Proportion of country-years in armed conflict, by region, 200008 . . . . . . . . . . . . . . 371.29 Severity of business environment constraints (average) reported by firms in

low-conflict and high-conflict areas of Afghanistan, 2008 . . . . . . . . . . . . . . . . . . . . . 381.30 Unemployment rates in the Northern and Eastern provinces of Sri Lanka,

19972001 and 200204 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 391C.1 Percentage of workers in households below the poverty line in Bangladesh,

India, and Nepal, by employment status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 441C.2 Ratio of rural nonfarm and urban wages to agricultural wages in Bangladesh,

India, and Nepal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 452.1 Annual growth in GDP per capita, by region, 1960s2000s . . . . . . . . . . . . . . . . . . . . 50

2.2 Annual growth in GDP per capita in South Asia, by country, 1960s2000s . . . . . . . . 502.3 Sources of annual growth in labor productivity, by region, 196080 and

19802008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 512.4 Sources of annual growth in labor productivity in selected countries in

South Asia, by country, 196080 and 19802008. . . . . . . . . . . . . . . . . . . . . . . . . . . . 522.5 Ratio of working-age to nonworking-age population in South Asia, by

country, 19602008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 532.6 Sectoral shares of GDP and employment in selected countries in South Asia,

1980s2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 552.7 Shares of agriculture and services in employment and GDP in South Asian

and comparator countries, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56


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2.8 Sources of annual growth in total factor productivity in India and Pakistan,by sector and reallocation effects, 19802008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

2.9 Sources of annual growth in total factor productivity in China, India,

Pakistan, and Thailand, by sector and reallocation effects . . . . . . . . . . . . . . . . . . . . . 582.10 Annual growth in working-age population, employment, and labor force

in selected South Asian countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 592.11 Average annual increases in mean real wages in selected countries

in South Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 602.12 Percentage of workers in households below the poverty line in selected

South Asian countries, by employment status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 612.13 Percentage of workers in households below the poverty line in India,

by employment status and gender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 622.14 Average number of months without work in the past year, casual laborers

in India, by sector, 19992010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 632.15 Distribution of per capita household expenditure in India and Nepal,

by employment status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 642.16 Distribution of rural and urban workers in selected South Asian countries,

by employment type . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 652.17 Distribution of rural nonfarm workers in India, by employment type,

19832009/10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 662.18 Labor transitions in rural areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 672.19 Probability of moving into or out of better jobs in rural Bangladesh, India,

and Nepal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 673.1 Total employment in South Asia, by country, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . 863.2 Employment rates in lower- and lower-middle-income countries . . . . . . . . . . . . . . . . . 873.3 Male and female employment rates in South Asia, by country . . . . . . . . . . . . . . . . . . 873.4 Trends in employment rates in South Asia, by country . . . . . . . . . . . . . . . . . . . . . . . . 88

3.1.1 Percentage of child workers attending school in South Asia, by age groupand country . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90

3.5 Female labor force participation rates in South Asia, by age groupand country . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

3.6 Annual percentage increases in number of employed workers in South Asia,by sector and country . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94

3.7 Distribution of employment in South Asia, by sector and country . . . . . . . . . . . . . . . . 953.8 Percentage of rural workers in the nonfarm sector in South Asia,

by country . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 963.9 Percentage of rural workers in the nonfarm sector in China and India,

19832008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 973.10 Rural nonfarm sector employment in South Asia, by economic activity

and country . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 973.2.1 Distribution of per capita household expenditure in India and Nepal,

by employment status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 983.11 Percentage of employment in South Asia classified as informal, by country . . . . . . . . 1003.12 Percentage of labor force not covered by pension schemes, by region . . . . . . . . . . . . 1013.13 Percentage of workers in households below the poverty line in Bangladesh,

India, and Nepal, by employment status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1033.14 Ratio of median rural nonfarm and urban wages to agricultural wages

in selected South Asian countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1033.15 Ratio of median industry and service sector wages to agricultural wages

in selected South Asian countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104


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3.16 Average wage, value added, and capital per manufacturing worker in India,by firm size and type, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106

3.17 Share of manufacturing employment in India, by firm size and type,

19942005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1073.18 Share of manufacturing employment by firm size in India and selected

East Asian economies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1083.4.1 Employment in Indias formal manufacturing sector, by firm size, type,

and location, 19982007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1093.19 Average wage, value added, and capital per service sector worker in India,

by firm size and type, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1103.20 Share of service sector employment in India, by firm size and type, 2001

and 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1103.21 Percentage of workers with some education and percentage of workers

with secondary education or above in South Asia, by employment typeand country . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112

3.22 Percentage of rural workers in the rural nonfarm sector in South Asia,by gender and country . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113

3.23 Percentage of rural workers in the rural nonfarm sector in India, Nepal,and Pakistan, by gender and age cohort, 19992009/10 . . . . . . . . . . . . . . . . . . . . . . 114

3.24 Decomposition of wage gap between male and female workers inSouth Asia, by country . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115

3.25 Decomposition of wage gaps between nonethnic minority and ethnicminority workers in India, Nepal, and Sri Lanka . . . . . . . . . . . . . . . . . . . . . . . . . . . 116

3B.1 Regional variations in employment rate in South Asia, by country . . . . . . . . . . . . . . 1204.1 Severity of constraints reported by South Asian benchmark firm in the

urban formal sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1284.2 Cross-country comparisons of reported severity of the electricity constraint . . . . . . 129

4.3 Cross-country comparisons of power outages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1304.4 Cross-country comparison of reported severity of corruption constraint . . . . . . . . . 1344.5 Cross-country comparison of bribe payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1344.2.1 Percentage of firms expected to give gifts to public officials, by type

of interaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1354.6 Cross-country comparison of reported severity of political instability

constraint . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1364.7 Cross-country comparison of reported severity of tax administration

constraint . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1374.8 Severity of constraints reported by South Asian benchmark

(nonexpanding) and expanding firm in the urban formal sector . . . . . . . . . . . . . . . . 1384.9 Severity of constraints reported by South Asian benchmark (manufacturing)

and service firm in the urban formal sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1404.10 Severity of constraints reported by micro benchmark firm in urban and

rural sectors of Bangladesh, Pakistan, and Sri Lanka . . . . . . . . . . . . . . . . . . . . . . . . 1414.11 Severity of constraints reported by micro benchmark firm in Indias

urban formal and informal sectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1434A.1 Severity of constraints reported by benchmark firm in urban formal

sector in high- and low-income states in India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1554B.1 Cross-country comparison of reported severity of tax rate constraint . . . . . . . . . . . . 1564B.2 Tax revenue as a percentage of GDP in South Asia . . . . . . . . . . . . . . . . . . . . . . . . . . 1574B.3 Highest marginal corporate tax rate in South Asian countries and

selected comparator countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157


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4C.1 Severity of constraints reported by benchmark firm and firm with60 employees in the urban formal sector in Nepal and Sri Lanka . . . . . . . . . . . . . . . 158

4C.2 Severity of constraints reported by benchmark (nonexporting) and

exporting firm in the urban formal sector in South Asia and Bangladesh . . . . . . . . . 1594D.1 Cross-country comparison of reported severity of access to finance constraint . . . . . 1604D.2 Percentage of firms with credit line or loan from financial institution,

by firm size and region . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1615.1 Employers perceptions of skills of recently graduated engineers in India . . . . . . . . . 1735.2 Evolution of skills content of urban wage workers in India, 19942010 . . . . . . . . . . 1745.3 Wage premiums over elementary occupations in India, 19942010. . . . . . . . . . . . . . 1755.4 Wage premiums in selected South Asian countries, by level of education . . . . . . . . . 1755.5 Share of South Asian labor force with no education, with international

comparisons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1775.6 Predicted probability of working in rural nonfarm and urban regular

wage jobs in selected South Asian countries, by level of education and gender . . . . . 178

5.7 Conditional probability of moving into and out of better jobs in ruralIndia, by education and gender, 200508 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180

5.8 Conditional probability of moving into and out of better jobs in urbanIndia, by education and gender, 200508 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181

5.9 Share of young cohorts with completed primary, secondary, and tertiaryeducation in South Asia, by country . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183

5.10 Mean years of education of 1534 year olds in South Asia, by genderand country . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184

5.11 Reading and arithmetic achievement in rural India and Pakistan, by class, 2010 . . . 1865.12 Public expenditure on education as a share of GDP, in South Asia and

other regions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1875.13 Educational attainment of the South Asian labor force in 2010 (estimated)

and 2030 (projected), by country . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1885.14 Projected shares of prime-age (3549) and oldest (5064) labor force

participants in South Asia with no education or only primary attainmentin 2030, by country . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189

5.15 Percentage of children under five with malnutrition, by region and country . . . . . . . 1905.16 Share of primary and secondary enrollments in public and private institutions

in selected South Asian countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1935.17 Percentage of graduates from public and private industrial training institutions

employed in the organized sector in three states of India, 2002/03 . . . . . . . . . . . . . . 2015.18 Share of preemployment training and tertiary education enrollment in

public and private institutions in South Asia, by country . . . . . . . . . . . . . . . . . . . . . . 2055.19 Percentage of firms providing on-the-job training in regions and selected

South Asian countries, by firm size . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2075A.1 Educational attainment in the labor force in South Asia, by country . . . . . . . . . . . . . 2125A.2 Share of labor force with at least primary, upper-secondary, and tertiary

education, in South Asia and international comparators . . . . . . . . . . . . . . . . . . . . . . 2135A.3 Gross and net enrollment rates in primary and secondary education, by

region and country . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2155A.4 Enrollment in vocational education and training as a share of secondary

enrollment, by region and country . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2165A.5 Gross enrollment rate in tertiary education, by region and country . . . . . . . . . . . . . 2165A.6 Share of young cohorts with completed primary and lower-secondary

education in South Asia, by gender and country . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217


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5A.7 Share of young cohorts with completed upper-secondary and tertiaryeducation in South Asia, by gender and country . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218

5A.8 Mean years of education of 1534 year olds in selected South Asian

countries, by caste/ethnicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2195A.9 Share of 2028 year olds in Afghanistan and Nepal with different years

of education completed in Afghanistan (2008) and Nepal (2004), by genderand socioeconomic status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220

5A.10 Percentage of children under age 5 with stunting in selected South Asiancountries, by socioeconomic status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220

6.1 Percentage of workforce not covered by formal pension scheme . . . . . . . . . . . . . . . . 2316.2 Percentage of wage employees in India and Sri Lanka covered by social

security, by type of worker . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2316.3 The continuum of employment protection legislation . . . . . . . . . . . . . . . . . . . . . . . . 2346.4 Weeks of wages required to be paid in severance in regions, country

income groups, and selected South Asian countries, by length of service . . . . . . . . . . 236

6.5 Employment protection indicators in selected countries . . . . . . . . . . . . . . . . . . . . . . 2376.6 Job turnover rates and labor regulations in Indian states . . . . . . . . . . . . . . . . . . . . . . 2386.7 Cross-country comparison of reported severity of the labor regulation

constraint . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2396.8 Minimum wages as a proportion of median formal sector wages in

Nepal, Pakistan, and Sri Lanka . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2406.9 Participation of women and members of scheduled castes and tribes in the

Mahatma Gandhi National Rural Employment Guarantee Program,2006/072010/11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251

6A.1 Trade union membership in India, 19872006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2626A.2 Trade union membership in Pakistan, 19992008 . . . . . . . . . . . . . . . . . . . . . . . . . . . 2626A.3 Trade union membership in Sri Lanka, 19872006 . . . . . . . . . . . . . . . . . . . . . . . . . . 263

6A.4 Percentage of unionized workers in India, by employment status and sector,1994 and 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 264

6A.5 Job creation and destruction flows in Sri Lanka and selected groupsof countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 265

6A.6 Tax wedges in South Asian and international comparator countries . . . . . . . . . . . . . 2666A.7 Ratio of minimum wage to median casual and formal sector wage, by

states in India, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2677.1 Proportion of country-years in armed conflict, by region, 200008 . . . . . . . . . . . . . 2827.2 Top 15 countries in number of deaths from armed conflict, 2008 . . . . . . . . . . . . . . 2837.3 Effects of conflict on demand for and supply of labor . . . . . . . . . . . . . . . . . . . . . . . . 2847.4 Annual growth in GDP and number of battle deaths in India and Nepal,

200008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 286

7.5 Unemployment rates in the Northern and Eastern provinces of Sri Lanka,19972001 and 200204 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 286

7.6 Percentage of working-age population employed in high-conflict andlow-conflict areas of India and Nepal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 287

7.7 Percentage of working-age population employed in high-conflict areas ofNepal, by gender, 19962004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 287

7.8 Urban workers as share of all workers in India and Nepal. . . . . . . . . . . . . . . . . . . . . 2897.9 Percentage of workforce employed in unpaid family labor in India,

200008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2907.10 Percentage of working-age population with completed lower-secondary

education in low- and high-conflict areas of selected South Asian countries . . . . . . . 291


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7.11 Severity of business environment constraints (average) reported by firms inlow-conflict and high-conflict areas of Afghanistan, 2008 . . . . . . . . . . . . . . . . . . . . 292

7.12 Sri Lanka infrastructure accessibility index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 295

7.5.1 Primary school enrollment rate in Nepal among children 610 years old,19962004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300

7.13 Central government debt as a percentage of GDP in conflict and nonconflictareas of South Asia and the world, 1990s and 2000s . . . . . . . . . . . . . . . . . . . . . . . . 307

Tables

1.1.1 Returns to agricultural growth from investments in public goods andsubsidies in India, 1960s90s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

1.1 Top five constraints reported by South Asian benchmark firm in the urbanformal sector, by country . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

1.2 Top five constraints reported by South Asian benchmark (nonexpanding)

and expanding firm in the urban formal sector, by country . . . . . . . . . . . . . . . . . . . . . 231.3 Top five constraints reported by micro benchmark firm in the urban and

rural sectors of Bangladesh, Pakistan, and Sri Lanka . . . . . . . . . . . . . . . . . . . . . . . . . 251.4 Top five constraints reported by micro benchmark firm in Indias urban

formal and informal sectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 261A.1 Summary economic statistics of South Asian countries . . . . . . . . . . . . . . . . . . . . . . . . 421B.1 Definitions of key labor market terms used in this book . . . . . . . . . . . . . . . . . . . . . . . 432.1 Labor productivity in South Asia and East Asia, by sector, 2008 . . . . . . . . . . . . . . . . 582.2 Decomposition of decline in worker poverty rates . . . . . . . . . . . . . . . . . . . . . . . . . . . 662.3 Correlations of country growth rates of per capita GDP across decades . . . . . . . . . . . 692B.1 Sources of average annual growth in output per worker, by region,

19602008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

2B.2 Sources of average annual growth in output per worker in South Asia, bycountry, 19602008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

2C.1 Regressions of shares of agriculture, industry, and services in employmentand GDP, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

2D.1.1 Female labor force participation in Bangladesh, India, and Pakistan andAsian comparator countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

2E.1 Percentage of workers in households below the poverty line in Bangladesh,by employment type, 200010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

2E.2 Number of working poor in Bangladesh, by employment type, 200010 . . . . . . . . . . 762E.3 Percentage of workers in households below the poverty line in India, by

employment type, 19832004/05 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 772E.4 Number of working poor in India, by employment type, 19852005 . . . . . . . . . . . . . 78

2E.5 Percentage of workers in households below the poverty line in Nepal,by employment type, 1995/96 and 2003/04 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

2E.6 Number of working poor in Nepal, by employment type, 19952005 . . . . . . . . . . . . 792F.1 Official and authors estimated poverty rates for urban, rural, and all

workers in India, 19832004/05 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 803.1.1 Incidence of child labor in South Asia, by age group and country . . . . . . . . . . . . . . . . 893.1 Male and female labor force participation, employment, and unemployment

rates in South Asia, by country . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 903.2 Factors associated with participation of women in urban areas . . . . . . . . . . . . . . . . . . 923.3 Reasons why urban women in South Asia do not participate in the labor

force, by country . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93


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3.4 Distribution of employment in South Asian countries, by location and sector . . . . . . . 943.5 Distribution of employment in South Asian countries, by type of employment . . . . . . 993.6 Distribution of formal and informal manufacturing firms in India, by

location and size, 2005. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1053.7 Distribution of service firms in India, by location and size, 2006 . . . . . . . . . . . . . . . 1093.8 Average years of education in South Asian countries, by sector of employment . . . . . 1113A.1 Definition of employment and unemployment used based on national surveys . . . . . 1173A.2 Definition of formal and informal workers used based on national surveys . . . . . . . 1184.1 Top five constraints reported by South Asian benchmark firm in the urban

formal sector, by country . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1294.1.1 Selected energy indicators in South Asia, by country . . . . . . . . . . . . . . . . . . . . . . . . 1324.2 Electricity constraints faced by firms, by developing region . . . . . . . . . . . . . . . . . . . 1324.3 Top five constraints reported by South Asian benchmark (nonexpanding)

and expanding firm in the urban formal sector, by country . . . . . . . . . . . . . . . . . . . . 1394.4 Top five constraints reported by micro benchmark firm in the urban and

rural sectors of Bangladesh, Pakistan, and Sri Lanka . . . . . . . . . . . . . . . . . . . . . . . . 1414.5 Top five constraints reported by micro benchmark firm in Indias urban

formal and informal sectors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1434.6 Private investment in electricity in South Asia, by country, 19992000

and 200110 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1454.7 Market reforms in the power sector in selected countries in South Asia . . . . . . . . . . 1454A.1 Top five constraints reported by benchmark firm in the urban formal

sector in high- and low-income states in India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1555.1 Perceived demand for and deficiency in skills in programming and

software engineering in Sri Lanka . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1735.2 Routine and nonroutine skills categories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1745.3 Main issues, interventions, and expected outcomes in early childhood

development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1915.4 Mechanisms for funding tertiary education in South and East Asia,

by economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2045A.1 Share of Indian labor force requiring high concentration of nonroutine

cognitive analytical and interpersonal skills, 19942010 . . . . . . . . . . . . . . . . . . . . . 2105A.2 Mean years of education of 1534 year olds in South Asia, by gender

and country . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2105A.3 Summary of randomized experiments on teacher incentives . . . . . . . . . . . . . . . . . . . 2115B.1 Assumptions underlying scenarios used to project educational attainment

of population in South Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2215B.2 Educational attainment of the South Asian labor force in 2010 (estimated)

and 2030 (projected) under various scenarios, by country . . . . . . . . . . . . . . . . . . . . . 222

6.1 Correlation coefficients among union membership, social security coverage,and employment in firms with 10 or more employees, India, 2010 . . . . . . . . . . . . . . 232

6.2 Percentage of workers with access to formal protection instruments in Indiaand Sri Lanka, by worker characteristic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233

6.3 Year of ratification of International Labour Organization core conventions,Declaration on Fundamental Principles, and Rights at Work, by country . . . . . . . . . 233

6.4 Selected hiring and redundancy rules in South Asia, by country . . . . . . . . . . . . . . . . 2356.5 Stylized characteristics of protecting workers versus protecting jobs . . . . . . . . . . . . . 2426.6 Selected public works programs in South Asia, by country . . . . . . . . . . . . . . . . . . . . 2486.7 Participation in the Mahatma Gandhi National Rural Employment Guarantee

Program, by consumption quintile, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250


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6.8 Skill requirements in the informal sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2536.9 Coverage of microfinance in South Asia, by country, 2009/10. . . . . . . . . . . . . . . . . . 2566.10 Selected programs supporting self-employment and microenterprises in

South Asia, by country . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2586A.1 Selected aspects of employment protection in India . . . . . . . . . . . . . . . . . . . . . . . . . . 2696A.2 Job creation and destruction rates in large manufacturing firms in India,

by employment type, 200108 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2706A.3 Minimum wage policies in South Asia, by country . . . . . . . . . . . . . . . . . . . . . . . . . . 2717.1 Major internal armed conflicts in South Asia since 1978 . . . . . . . . . . . . . . . . . . . . . . 2837.2 Armed conflicts in South Asia, by conflict stage, geographic scope, and

number of casualties per thousand people . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2847.3 Labor market transitions in postconflict zones . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3087.4 Policy interventions in the initial postconflict stages . . . . . . . . . . . . . . . . . . . . . . . . . 3107B.1 Labor market characteristics in high-conflict and low-conflict areas of

Afghanistan, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 312

7B.2 Labor market characteristics in high-conflict and low-conflict areas of India,2000 and 2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 312

7B.3 Labor market characteristics in high-conflict and low-conflict areas of Nepal,1996 and 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 313

7B.4 Labor market characteristics in high-conflict and low-conflict areas ofSri Lanka, 2004 and 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 314

7B.5 Educational attainment in high-conflict and low-conflict areas of South Asia,by country . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 315

A.1 Labor force and living standards surveys used . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324


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Foreword

It is my great pleasure to introduce theinaugural issue of South Asia Develop-ment Matters. More and Better Jobs in

South Asiais timely because of its relevanceto the regions 490 million young peoplewho can make South Asia the region ofthe future. Despite having one of the low-est female participation rates in the devel-

oping world, South Asia will add at leastone million people to its labor force everymonth. The significant additions to thelabor force could be a demographic divi-dend or a curse, which is why this reportis so important: the key to future peaceand poverty reduction in South Asia is thecreation of enough good-quality jobs in thedecades to come. Future generations willthank this one for using this opportunityto create an environment for progressivelybetter jobs, which are the only sustainable

pathway out of poverty.The South Asia Development Matters

series will be published annually under thesupervision of Kalpana Kochhar, Chief Econ-omist for the South Asia Region. I hope theseries will promote dialogue and debate withall our partners, not only policy makers butalso civil society organizations, academic

institutions, development practitioners, andthe media. This series will serve as a vehiclefor voicing an in-depth synthesis of economicand policy analysis on key development top-ics for South Asia.

Next year we will address the theme ofinequality, the challenges faced by individ-ual countries in South Asia, and the ways in

which inequality can be addressed so thatcountries can grow and develop with equity.I hope that the knowledge gathered in theSouth Asia Development Matters series willbenefit the entire region and that it promotesdebate and builds consensus of all those whocare about stimulating development anderadicating poverty in South Asia.

I would like to thank the team membersfor their high-quality product. They wereable to tackle a very difficult issue in a waythat examined technical quality, with great

openness to views from different professionalstreams. This was a tough topic, and theyhave produced important recommendationsto promote policy debate.

Isabel GuerreroVice President, South Asia Region

The World Bank


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Preface

More and Better Jobs in South Asialaunches the series South AsiaDevelopment Matters. When

selecting the first topic in the series, we had nodoubt that it should focus on jobs. South Asiancountries will add 1.0 million to 1.2 millionnew entrants to the labor force every monthfor the next two decades and will contribute

about 40 percent of the total new entrants tothe global working-age (1564) population. Itis not surprising that we decided to focus ourattention on the changes in policies necessaryto create a larger number and higher qualityof jobs. Identification and implementationof these policies are central to South Asiasemployment challenge of absorbing the grow-ing number of entrants to the labor force atrising levels of productivity.

Recent global events have helped shinea brighter light on this issue. According to

the International Labour Organization,as many as 30 million people worldwidelost their jobs as a result of the 2008 crisis.Youth unemployment is especially high, andinequality has increased in many countriesaround the world. As recent events duringthe Arab Spring in the Middle East andNorth Africa demonstrate, joblessness andinequality can trigger political instability

and unrest. Closer to home, labor is the mostimportant, if not the only, asset of the poor.

South Asia, despite impressive growthand poverty reduction over the past twodecades, remains home to more than half abillion poor people, large numbers of whomhave little or no education and suffer frompoor health. Part of the reason is that South

Asia has some of the worst nutrition indi-cators in the world. Research clearly showsthat a persons cognitive development beginsin the early years of life, long before formalschooling begins. Nutrition and early child-hood development have a strong positiverelationship with educational achievementand significant payoffs for lifetime learningand labor market productivity. The chal-lenge of generating more productive jobs isintensified because most of the countries inthe region are still in conflict or have only

recently emerged from it and many peopleface serious problems related to access toopportunities based on gender, caste, andsocioeconomic status.

More and Better Jobs in South Asiaattempts to answer three questions:

Has South Asia been creating an increas-ing quantity and quality of jobs?


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What are the determinants of the qualityof job creation and what is the employ-ment challenge going forward?

What demand- and supply-side bottle-necks need to be eased to meet SouthAsias employment challenge in the face ofintensifying demographic pressure?

Although details vary by country, overallthere is reason for cautious optimism. Overthe past two decades, the region has createdmore jobsat a rate largely comparable togrowth in the working-age populationandbetter jobs, in terms of higher pay for wageworkers, lower poverty for self-employedworkers, and reduced risk of low and uncer-tain income for the most vulnerable group ofworkers. Yet, there is no room for compla-cency because the challenges are big. Not onlydo a larger number of jobs need to be created,but the jobs also need to be more produc-tive and make workers less vulnerable. Ourstudy shows that creating a larger numberof more productive jobs for a growing laborforce calls for a multisectoral reform agendathat includes improving access to electricityfor firms across all sectors in urban and ruralsettings, dealing decisively with issues of gov-ernance and corruption, improving access toland and transport links between town andcountry, improving nutrition in early child-hood, equipping workers with skills relevantfor the world of work, and reorienting labormarket regulations and programs to protectworkers rather than jobs.

This book is divided into seven chapters.Chapter 1 is an overview. Chapter 2 reviews

South Asias recent track record with regardto the quantity and quality of job creation.It traces the relationship of such job cre-

ation mostly to overall economic growth andattempts to answer what needs to be doneto meet South Asias employment challenge.Chapter 3 discusses the key features oflabor markets in South Asia, including wherethe better jobs are, who holds them, andthe implications for the employment chal-lenge ahead. Chapter 4 reviews the busi-ness environment constraints affecting, inparticular, those firms that have expandedemployment and discusses policy options forovercoming the most binding business con-

straints in South Asia. Chapter 5 analyzes thedimensions of the education and skills chal-lenge in the region and discusses policy pri-orities for improving the quality and skills ofgraduates of education and training systems.Chapter 6 reviews the role of labor marketpolicies and institutions in encouraging jobcreation and protecting workers in the formaland informal economy and discusses possibledirections for labor market policies, includingoptions to increase the access of informal sec-tor workers to programs that help them man-

age labor market shocks and improve theirfuture earnings potential. Finally, chapter 7reviews the key constraints to job creationand the policy priorities for creating moreand better jobs in conflict-affected areas.

Kalpana KochharChief Economist, South Asia Region

The World Bank


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Acknowledgments

More and Better Jobs in South Asiais the first in a series of flagshipreports conceived and launched

by Isabel Guerrero, Regional Vice Presidentof the South Asia Region. It is the product ofa collaborative effort by many professionalsand institutions from both inside and out-side the World Bank.

The report was prepared by a team led byReema Nayar and Pablo Gottret, under thedirection of Kalpana Kochhar, Chief Econ-omist of the South Asia Region. The coreteam comprised Pradeep Mitra, Yue ManLee, Indhira Santos, Gordon Betcherman,Mahesh Dahal, and Maheshwor Shrestha.Wendy Carlin, Amit Dar, Lakshmi Iyer, TobyLinden, and Mark Schaffer made significantcontributions to specific chapters.

Many people provided written inputs andcontributions on various issues. Early think

pieces and background papers were preparedby T. N. Srinivasan, Barry Bosworth, PeterB. Hazell, Derek Headey, Alejandro NinPratt, Derek Byerlee, David Robalino, Ash-ish Narain, Ernest Sergenti, Pierella Paci,David Margolis, Mario Di Filippo, TanjaLohmann, Tenzin Chhoeda, Mark Dutz,Hong Tan, Stephen OConnell, Lucia Madri-gal, and Meera Mahadevan. The report alsodraws on specific contributions or analytical

pieces by Shaghil Ahmed, Harold Alderman,Sudeshna Ghosh Banerjee, Hai Anh Dang,Puja Vasudeva Dutta, Madhur Gautam,Rana Hasan, Benjamin Herzberg, InaHoxha, Kalim Hyder, Karl Jandoc, Maria

Jos, Samir KC, Somik Lall, Peter Lanjouw,Norman Loayza, David McKenzie, ClaudioMontenegro, Martin Moreno, Rinku

Murgai, Denis Nikitin, Sheoli Pargal, HarryPatrinos, Zhiheng Png, Shumaila Rifaqat,Hiroshi Saeki, Mehnaz Safavian, VibhorSaxena, Claudia Ines Vasquez, Jessica Ville-gas, Tomoko Wada, and Karar Zunaid. Theteam also benefited from papers preparedby colleagues at various institutions in theregion, including Nazneen Ahmed, RushidanRahman, R. Shamsunnahar, and MohamadYunus (Bangladesh Institute of DevelopmentStudies); Farzana Munshi (BRAC University,Dhaka); Bibek Debroy (Center for Policy

Research, New Delhi); Koushik Dutta (inde-pendent consultant); Ramani Gunatilaka(adjunct research fellow, Faculty of Businessand Economics, Monash University); AmritaDutta, Ann George, Dev Nathan, PreetRustagi, Alakh Sharma, and Ravi Srivas-tava (Institute of Human Development, NewDelhi); and Nisha Arunatilake, Roshini

Jayaweera, and Anushaka Wijesinha (Insti-tute of Policy Studies, Colombo).


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The team benefited from advice and com-ments from Eliana Cardoso and AndrewSteer (former Chief Economists of the South

Asia Region), Martin Rama, Michal Rut-kowski, and Marcelo Selowsky. Arup Banerji,Emmanuel Jimenez, and Ana Revenga werepeer reviewers for the report. The team isgrateful for the contributions of participantsat various panel discussions and brainstorm-ing sessions. They include Janamitra Devan,Tamar Manuelyan Atinc, Shanta Devarajan,Ariel Fiszbein, Ernesto May, John HenryStein, Roberto Zagha, Rachid Benmessaoud,Ellen Goldstein, Nicholas Kraft, SusanGoldmark, Asli Demirg-Kunt, Kaushik

Basu, Nadeem Haque, Michael Walton,Dilip Mukherji, Siddiqur Osmani, ManishSabharwal, Binayak Sen, and the late SureshTendulkar. The team gratefully acknowl-edges comments and assistance from Faizud-din Ahmed, D. H. C. Aturupane, RoshanDarshan Bajracharya,Dan Biller, AndreasBlom, John Blomquist, Jose Roberto Calix,Eliana Carranza, Anthony Cholst, MariaCorreia, Halil Dundar, Simeon Ehui,Ejaz Syed Ghani, Sangeeta Goyal, MaryHallward-Driemeier, Zahid Hussain, Nalin

Jena, Dean Mitchell Jolliffe, Sanjay Kathuria,Ayesha Khan, Gladys Lopez-Acevedo, EricDavid Manes, Nkosinathi Mbuya, JulieMcLaughlin, Cem Mete, Hanid Mukhtar,

Karthik Muralidharan, Somil Nagpal, Has-san Naqvi, Claudia Nassif, Naveed Naqvi,

John Newman, Thomas OBrien, Robert

Palacios, Dilip Parajuli, Giovanna Prennushi,Jasmine Rajbhandary, Dhushyanth Raju,Mansoora Rashid, Susan Razzaz, SilviaRedaelli, Francis Rowe, Deepa Sankar, Tah-seen Sayed, Hisanobu Shishido, VenkateshSundararaman, and T. G. Srinivasan. Manyindividuals from a variety of research, pol-icy, and academic institutions and interna-tional development agencies in Bangladesh,India, Nepal, and Pakistan participated inand provided extremely useful insights atconsultation meetings held in the countries.

Unfortunately, it is not possible to name themindividually here.

The report would have not been possiblewithout the able assistance of Izabela AnnaChmielewska, Julie-Anne Graitge, MarjorieKingston, and Elfreda Vincent. The teamalso gratefully acknowledges financial sup-port from the Multi-Donor Trust Fund forTrade and Development, the Poverty andSocial Impact Analysis (PSIA), and the WorldBank Research Committee. Aziz Gkdemir,Patricia Katayama, Andrs Meneses, Santi-

ago Pombo-Bejarano, and Janice Tuten of theWorld Banks Office of the Publisher coor-dinated the editing, design, production, andprinting of this book.


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Abbreviations

ANTA Australian National Training AuthorityCDC community development councilCPI Competitiveness Partnership InitiativeCSSP Community School Support ProgramDDR disarmament, demobilization, and reintegrationEPZ export processing zonesFATA Federally Administered Tribal AreasFPD Financial and Private Sector Development

GDP gross domestic productGET Global Education TrendGHTDP Great Himalaya Trail Development ProgrammeGPSF GovernmentPrivate Sector ForumGW gigawattsIFC International Finance CorporationILO International Labour OrganizationMCTEE Ministerial Council for Tertiary Education and EmploymentMGNREGA Mahatma Gandhi National Rural Employment Guarantee ActMSME micro and small and medium-size enterpriseMW megawattNATO North Atlantic Treaty Organization

NCEUS National Commission for Enterprises in the Unorganised SectorNGO nongovernmental organizationNSDC National Skills Development CorporationNSP National Solidarity ProgramNTFP nontimber forest produceNWFP-KP North West Frontier Province (Khyber Pakhtunkhwa)OECD Organisation for Economic Co-operation and DevelopmentPAF Poverty Alleviation FundPPP public-private partnershipPPP purchasing power parity


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x x i v A B B R E V I A T I O N S

PRI Panchayati Raj InstitutionsPSDC Penang Skills Development CentreSEZ special economic zone

TEWA Termination of Employment of Workmen ActTFP total factor productivityUCDP/PRIO I Uppsala Conflict Data Program and Centre for the Study of Civil Warat

theInternational Peace Research InstituteUNESCO United Nations Education, Scientific and Cultural OrganizationUNICEF United Nations Childrens FundWHO World Health Organization

Note:All dollar amounts are U.S. dollars (US$) unless otherwise indicated.


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Message 1: South Asia has created many,

mostly better jobs.

Job creation in South Asia averaged almost800,000 a month between 2000 and 2010.The rate of employment growth broadlytracked that of the working-age (1564) pop-ulation. Open unemployment is low.

Real wages rose for wage workers, and povertydeclined for the self-employed as well as alltypes of wage workers. Wages and poverty are

the primary criteria for improved job qualitythat guide the analysis in this book. A reducedrisk of low and uncertain income for the mostvulnerable group of workers is a secondarycriterion for improved job quality. It could bemonitored only in India, where it is satisfied.

The improvement in job quality has beenassociated with accelerating economic growthin Bangladesh and India since the 1980s. InNepal, where growth has been slow for severaldecades, massive out-migration in response tolimited opportunities at home has improved

labor market prospects for those who remain.Workers remittances have reduced povertyacross a wide swath of households.

Message 2: The region faces an enormous

employment challenge, but its demography can

work in support of the reforms needed to meet it.

An estimated 1.01.2 million new entrants willjoin the labor market every month over the nextfew decadesan increase of 2550 percent

over the average number of entrants between1990 and 2010. The employment challenge forthe region is to absorb these new entrants intojobs at rising levels of productivity.

Aggregate productivity growth in South Asiaover the last three decades was driven by anextraordinary surge in the growth of totalfactor productivity (TFP) (a combination ofchanges in the efficiency with which inputs areused and changes in technology). Its contribu-tion was larger than in the miracle growth

years of high-performing East Asian econo-mies (excluding China). Going forward, rap-idly growing countries in South Asia need tosustain and slow-growing countries to ignitegrowth by easing constraints to physical andhuman capital accumulation. Higher rates offactor accumulation, alongside more typicalrates of TFP growth, which will vary accordingto country circumstances, will allow the regionto absorb new entrants to the labor force at

rapidly rising levels of labor productivity. Aggregate TFP growth should also increasethrough a faster reallocation of labor fromagriculture to industry and services, where TFPgrowth is higher. Reallocation across sectorsneeds to be complemented by moving laborout of lower-productivity firms in manufac-turing and services, where the overwhelmingmajority of South Asians who are employedin these sectors work, into higher-productivityfirms within those sectors. Reallocation acrossand within sectors will require physical capital

accumulation (in electricity, for example, thelack of reliable supply of which is reportedby job-creating firms as an obstacle to theiroperation). It will also require investment inhuman capital to provide workers with theskills necessary to access better jobs.

The demographic transitionthe periodduring which the number of workers growsmore rapidly than the number of dependentscan provide a tailwind in support of policyreform for the next three decades in much ofSouth Asia, as the resources saved from hav-

ing fewer dependents provides a demographicdividend. This dividend can be used for high-priority physical and human capital invest-ments necessary to absorb the growing numberof entrants into the labor force at rising wagesand more productive self-employment. The div-idend can be reaped, however, only if a policyframework is in place that can channel the extrasavings into priority investments (including, forexample, an efficiently intermediating financialsector and a business environment conducive

CHAPTER 1 Overview

Key Messages


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to firms carrying out those investments). In

the absence of such a framework, productiv-ity will grow slowly or remain stagnant, andthe dividend will go uncashed. The window ofdemographic opportunity is expected to closearound 2040 for all countries except Sri Lanka,where it closed around 2005, and Afghani-stan, where it will stay open beyond 2040. Thedemographic transition will eventually giveway to old age dependency, as the share of theelderly in the population increases.

Continuance of high economic growth, whichhas been an important driver of improved job

quality, is not assured. Globally, correlations ofcountry growth rates across decades are low.Thus policy reforms required to ease bottle-necks to improving job quality are needed,irrespective of whether there is a demographicdividend, in order to maintain and increasethe pace of creation of better jobs, even inlower growth environments. The window ofdemographic opportunity lends urgency to theagenda, since policies take time to bear fruit.

Message 3: Creating more and better jobs for agrowing labor force calls for a reform agenda

that cuts across sectors.

Investing in reliable electricity supply is criti-cal. South Asian firms of all typesrural andurban, formal and informalrate electricity asa top constraint to operations. Reported poweroutages are consistent with reported sever-ity: Afghanistan, Bangladesh, and Nepal havesome of the highest reported outages in theworld. The gap between demand and supplyof electricity is large. Reforms need to manage

the required expansion of capacity efficientlyand improve the financial and commercialviability of the power utilities. They involve acombination of investment and reform of gov-ernance in the sectorboth are critical.

Formal urban firms cite corruption in interac-tions with the state, especially in transactionsinvolving tax administration and utilities, asan important constraint to their operations.

Informal urban firms in India report inad-

equate access to land among their leading

constraints. Rural-based industry and ser-vice firms in Bangladesh, Pakistan, and SriLanka report as a top constraint inadequatetransport, which inhibits their access tomarkets that would make them less depen-dent on local demand.

Agriculture will continue to be the largestemployer in much of South Asia for the fore-seeable future. Boosting TFP growth in thesector through accelerated diversificationinto cash crops and high-value activitieswill require investment in key public goods.

Investment in agricultural research anddevelopment has much higher returns thanpower, fertilizer, and credit subsidies.

Education reform and action before childrenenter school are key. Poor nutrition in earlychildhood, where South Asia has the weak-est indicators in the world, impairs cognitivedevelopment before children get to school,reducing the payoff from subsequent educa-tional investments. Policy makers must alsostrengthen the quality of learning at all levelsto equip tomorrows workers, not only with

academic and technical skills, but also with thebehavioral, creative thinking, and problem-solving skills employers increasingly demand.

Moving away from protecting jobs to pro-tecting workers is essential for formal sectorjob creation in India, Nepal, and Sri Lanka.Enterprise managers in the urban formal sec-tor report labor regulations as being a moresevere constraint to the operation of their busi-ness than is the case for countries at their levelsof per capita income. High costs of dismissingregular workers are, in effect, a tax on hiring

them. Reforms to encourage job creation inthe formal economy should lower these costs,which protect a minority of workers. Thesereforms must go hand in hand with reformsthat strengthen labor market institutions andprograms that formal and informal sectorworkers can use to help them adjust to labormarket shocks and improve their future earn-ings potential. Building incrementally on exist-ing schemes is likely the best way forward.


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3

Overview

This book investigates how more andbetter jobs can be created in SouthAsia.1It does so for two reasons. First,

this region will contribute nearly 40 percentof the growth in the worlds working-age(1564) population over the next severaldecades. It is important to determine whatneeds to be done to absorb them into employ-

ment at rising levels of labor productivity.Second, creating more productive jobswithjobs defined to include all wage work and self-employmentis the most reliable route out ofpoverty for a region that is home to more than40 percent of the worlds absolute poor.2

The book addresses three major questions.

Has South Asia been creating an increas-ing number of jobs and better jobs?

What determines the quality of job cre-ation, and what is the employment chal-lenge going forward?

What demand- and supply-side bottle-necks need to be eased to meet SouthAsias employment challenge in the face ofintensifying demographic pressure?

South Asias track record

This section examines South Asias trackrecord in creating jobs. It looks at the

quantity of jobs, the quality of jobs, and labormobility.

Job quantity

Employment grew in South Asia over thepast decade, broadly tracking growth inthe working-age (1564) population (figure

1.1). Lack of safety nets precludes high ratesof open unemployment, which averageda little over 3 percent in the region. Thusemployment growth tends to broadly mirrorgrowth in the labor force. As the propor-tion of the working-age population that is inthe labor force changes slowly, the growthof the labor force tends to track that of theworking-age population. Together theseobservations imply that employment growthcan be expected to broadly reflect that of theworking-age population.

Among five of the larger countries inthe region, employment growth since 2000was highest in Pakistan, followed by Nepaland Bangladesh, India, and Sri Lanka.Total employment in South Asia (excludingAfghanistan and Bhutan) rose from 473 mil-lion in 2000 to 568 million in 2010, creatingan average of just under 800,000 new jobsa month.

1


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4 M O R E A N D B E T T E R J O B S I N S O U T H A S I A

In all countries except Maldives and SriLanka, the largest share of the employedare the low-end self-employed (figure 1.2).3Nearly a third of workers in India and afifth of workers in Bangladesh and Pakistanare casual laborers. Regular wage or sala-ried workers represent a fifth or less of totalemployment.

Job quality

South Asia has created better jobs, definedprimarily as those with higher wages forwage workers and lower poverty levels forthe self-employed and secondarily as jobsthat reduce the risk of low and uncertainincome for the most vulnerable group of

FIGURE 1.1 Annual growth in working-age population, employment, and labor force in selected South

Asian countries

Sources: Authors, based on data on working-age population from UN 2010 and data on employment and labor force from national labor force surveys.

1.0

2.3 2.32.8 3.0

1.2

2.2

2.5

3.33.6

1.0

2.2

2.6

3.33.6

0

1

2

3

4

Sri Lanka

200010

India

19852010

Bangladesh

200010

Nepal

19952010

Pakistan

200010

percent

working-age population employment labor force

FIGURE 1.2 Distribution of employment by type in South Asia, by country

Source: Authors, based on data from national labor force and household surveys.Note:The data for Maldives and Sri Lanka do not allow the separation of wage employment into regular wage or salarie d workers and casual laborers.

9 14 21 17

821

14

22 4

32

10

1757 550.5

2

1

8

9 9

2

13

7762

75

43 34 36

80

50

0

20

40

60

80

100

Afgh

anist

an

2007/0

8

Banglad

esh

2005/06

Bhutan

2007 In

dia

2009/10

SriL

anka

2008

Maldive

s

2004 Ne

pal

2007/0

8Pa

kistan

2008/0

9

percent

regularwageorsalaried casualwage allwages self -employed(highend) self-employed(lowend)


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O V E R V I E W 5

workers. By these measures, results havebeen positive:

Real wages for wage workersbothcasual and regular wage or salariedgrew 0.12.9 percent a year during vari-ous subperiods between 1983 and 2010for which comparisons can be made(figure 1.3).

A higher proportion of self-employedworkers (on whom information on earn-ings is not available) are now in house-holds above the national poverty line inBangladesh, India, Nepal, Pakistan, andSri Lanka. This figure is used as a proxyfor improving job quality for this segmentof the labor force (figure 1.4).4Increas-ing proportions of casual and regularwage or salaried workers in Bangladesh,India, and Nepal and all wage workersin Pakistan and Sri Lanka are also nowin households that are above the povertyline. Indeed, poverty rates for all types ofworkers during all time periods show adecline when the data are disaggregatedby location (rural or urban) or gender.Thus, the primary criterion for better jobsis satisfied.

In India over the period 1999/2000through 2009/10, there was a decline

in the average number of months forwhich all casual laborers were withoutwork despite looking for it (figure 1.5).

Thus, the secondary criterion for betterjobsthat they should reduce the risk oflow and uncertain incomes for the mostvulnerablehas been met in India. Thisis not necessarily the case in other coun-tries in South Asia. (For a discussion ofthese criteria and the way in which theyare used to rank jobs by quality, seeannex 1C.)

Notwithstanding the variation in wagesand poverty rates across employment typesand their changes over time, there is astable pattern of association between pov-erty and the type of employment that hasbeen maintained over time. Regular wageor salaried workers have the highest wagesand lowest poverty rates; the self-employedhave higher poverty rates; and casual work-ers, especially in agriculture, have the low-est wages and highest poverty rates (seeannex 1C).

The proportion of workers in differentemployment types has remained largelyunchanged over time (figure 1.6). At thislevel of aggregation, better jobs have beencreated mainly as a result of increasing

FIGURE 1.3 Average annual increases in mean real wages in selected countries in South Asia

Source: A

Documents

More and Better Jobs in South Asia