GENERATING DEMAND FOR LABOR:ADDRESSING CENTRAL ASIA’S DEMOGRAPHIC AND POLICY CHALLENGES

ROBERT S. CHASE, PH.D.LEAD ECONOMIST, WORLD BANK GROUPASTANA ECONOMIC FORUMMAY 21, 2015

Astana Economic Forum

May 21, 2015

Foundations: World Development Report (2013) &

“Back to Work: Growing with Jobs in Europe and Central Asia” (2014)

More and better jobs central to reducing poverty…

… and promoting shared prosperity

Appropriate Role of Government in Mediating Jobs Supply and Demand?

Labor Market Institutions “Plateau”: At median levels, impacts are small

Source: Betcherman (2013)

Europe & Central Asia Employment Context: Reform Agenda

• Strongest reform record among middle income regions…

• … with significant variation in implementation speed of reforms

Esto

nia

Hung

ary

Slov

ak R

epub

licPo

land

Latv

iaLi

thua

nia

Bulg

aria

Croa

tiaRo

man

iaFy

r Mac

edon

iaSl

oven

iaTu

rkey

Alba

nia

Geo

rgia

Arm

enia

Mon

golia

Kyrg

yz R

epub

licRu

ssia

n Fe

dera

tion

Mol

dova

Mon

tene

gro

Ukr

aine

Serb

iaKa

zakh

stan

Bosn

ia a

nd H

erze

govi

naAz

erba

ijan

Tajik

ista

nU

zbek

ista

nBe

laru

sTu

rkm

enis

tan

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

Doing Business Indicator (Gap to Frontier) Transition Index (EBRD 2012)

Notes: ECA = Europe and Central Asia; LAC = Latin America and the Caribbean; EAP = East Asia and Pacific.

2006 2007 2008 2009 2010 2011 2012 201350

55

60

65

70

75

80

85

90

ECA LAC EAP OECD (EU) OECD (Non-EU)Turkey

Europe & Central Asia Employment Context: Demographics

Source: Back To Work: Growing with Jobs in Europe and Central Asia (2013).

Bulg

aria

Ukr

aine

Geo

rgia

Mol

dova

, Rep

ublic

of

Latv

iaLi

thua

nia

Bela

rus

Russ

ian

Fede

ratio

nCr

oatia

Rom

ania

Esto

nia

Bosn

ia a

nd H

erze

govi

naH

unga

ryPo

land

Serb

iaSl

ovak

iaCz

ech

Repu

blic

Slov

enia

Mac

edon

ia, T

FYR

Arm

enia

Mon

tene

gro

Alba

nia

Azer

baija

nKa

zakh

stan

Turk

eyKy

rgyz

stan

Turk

men

istan

Uzb

ekist

anTa

jikist

an

-20

-10

0

10

20

30

40

50Pe

rcen

t

Older workers will outnumber youth due to:Aging + Low

Fertility + Out-Migration

ECA Countries: Change in 15+ Population 2010 - 2030 (%)

Younger countries also face

demographic pressures:

Out-Migration, youth bulge, and long-run

aging

Preparing Workers for New Jobs – Incentives and barriersRebalancing social protection, work incentives and barriers to labor force participation and

formal employment

BLR

KAZ

KGZ

RUS

TUR

ITA

GRC

ISL

PRTESPARMAZE

BIH

BGR

HRVCZE

ESTGEO

LVA

LTU

MKD

MDAPOL

ROM

SVK

SVNDEU

BELDNK

LUX

NORALB

HUN

MNE

SRBUKR

GBR

SWE

AUT

FIN

IRL

NLD

BA

RR

IER

S

-1

-1/2

s.d

.

me

an

+1

/2 s

.d.

+

1

-1 -1/2 s.d. mean +1/2 s.d. +1

DISINCENTIVES

Low Middle High

Social Protection IndexBLUE GREEN RED

low high

low

hi

gh

low disincentives low barriers

low disincentives high barriers

high disincentives low barriers

high disincentives high barriers

Source: Back To Work: Growing with Jobs in Europe and Central Asia (2013).

Preparing Workers for New Jobs – Labor MobilityMany workers fail to move to areas with higher job creation potential

Percentage of adult (18+) population who moved to a different city in the last 20 years

Source: Back To Work: Growing with Jobs in Europe and Central Asia (2013).

France

Kyrgyzs

tan

Sweden

Germany

Kazakh

stan

Latvi

a

Armenia

Azerb

aijan

Belarus

Russia

Bosnia

Ukraine

Moldova

Kosovo

Hungary

PolandIta

ly0%

10%

20%

30%

40%

50%

60%

70%

11

Diverse Jobs-centered policy agenda:Overall Objectives

Rebalancing the work-social protection pillars of the growth and social model• Transition (modernization) legacy – Advancing reforms,

economic integration and diversification• Facilitate firm entry/exit• Create enabling environment for businesses for high potential to thrive and

create jobs and for others to “fail fast, fail cheap”

• Aging and demographic imperatives – • Create incentives and enable longer and more productive working lives • Promote labor market inclusion, particularly of new entrants

12

Diverse Jobs-centered policy agenda

• Short term:• Macro/fiscal policy to ensure fundamentals for economic recovery

• Longer term:• Promote superstar firms – Eliminate barriers to business

expansion and entrepreneurship• More adaptable workers - Generic skills and market-driven, life-

long learning• Make (formal) work pay – Remove disincentives and barriers to

work• More mobile workers – Remove impediments to labor mobility

13

Diverse Jobs-centered policy agenda: Priorities

• Business climate, labor market and public sector reform• Late modernizers: public sector restructuring; first generation

business climate reforms for productive diversification

• Skills• All countries: strong generic skills foundations among youth

• Incentives and barriers• Young countries: reforming tax and social benefit systems so as to

make formal work pay and smart activation policies

• Internal mobility• All countries: removing barriers associated with administrative

requirements and underdeveloped housing markets;