Servicing Development: Productive Upgrading of Labor-Absorbing Services in Developing Economies

The future of developing countries is in services as that that is where the jobs will be. Enhancing productivity in labor-absorbing services must be an essential priority, for reasons of both growth and equity. This paper provides a broad overview of what such a strategy might look like. Drawing on a wide range of existing programs, it presents four broad strategies for expanding productive employment in services. The first focuses on established, large, and relatively productive incumbent firms, and entails working with them to incentivize them to expand their employment, either directly or through their local supply chains. The second strategy focuses on smaller firms and aims to enhance their productive capabilities through the provision of specific public inputs. The third strategy focuses on the provision, to workers directly or firms, of digital tools or other forms of new technologies that explicitly complement low-skill labor. The final strategy is centered on less-educated workers and combines vocational training with “wrap-around” services, a range of additional assistance programs for job seekers to enhance their employability, job retention, and eventual promotion.