Industrial Policy for Good Jobs

A core challenge that has animated the recent resurgence of industrial policy is the lack of good jobs. This all-pervasive challenge is one that afflicts advanced economies as much as it does emerging economies, and has a range of demand and supply side dimensions. We invited speakers from a variety of country contexts to shed light on how the tools of industrial policy may be applied to the jobs challenge.

The panel on Industrial Policy for Good Jobs featured Eliana Carranza, Senior Economist and global co-lead of the Labor and Skills unit at the World Bank; Andres Valenciano Yamuni, Director of the Washington, D.C. Office of the Economic Commission for Latin America and the Caribbean; and Nimrod Zalk, Chief Research Officer for Climate and Development at the University of Cape Town’s Nelson Mandela School of Public Governance. The panel was moderated by Gordon Hanson, the Peter Wertheim Professor of Urban Policy at Harvard Kennedy School and faculty Co-Director of the Reimagining the Economy Project. Here are some of the main takeaways from the discussion.

• Creating good jobs requires both supply and demand side interventions

In the past, labor market interventions have focused either entirely on the supply side (i.e. reskilling and retraining workers) or on the demand side (i.e. encouraging companies to create new jobs). However, Carranza emphasized the need for comprehensive and multi-sectoral policy that integrates interventions across every dimension. Exclusively growth-based strategies are insufficient for creating jobs. There must also be a focus on building institutions and linking labor demand to skills development and employment programs. These types of multidimensional approaches allow policymakers to better coordinate with firms and workers so that they can better meet the needs of both.

Yamuni - who served as both Minister of Foreign Trade in Costa Rica and as Executive President of the Instituto Nacional de Aprendizaje - illustrated how this approach may look in practice. At the Instituto, he was in charge of technical and vocational education in the country. In his work to bring companies to Costa Rica, he communicated with companies to understand what skills they needed and used those conversations to develop retraining programs for local Costa Ricans. This collaboration proved mutually beneficial as firms had access to a greater skill pool and local workers could move up to higher level positions in their companies.

• Job policies must be adaptive and context-specific

Scaling up job interventions is difficult because they must be specifically tailored to local conditions. Interventions that work in one country may not work in another. Carranza noted how the labor market constraints in lower-income countries will differ from those in lower-middle-income countries or higher income countries. For example, lower-income countries tend to have higher constraints on the demand side of the market – companies just aren’t in these countries to employ enough people. However, focusing too much on the demand side can lead to blind spots on the supply side. As such, there is no one-size-fits-all intervention that will work perfectly across contexts. Policies, instead, must be designed to address a country’s specific issues and characteristics.

The types of interventions needed not only change across locations but also with time. Job policies need to be flexible and adaptive so they can adjust to a rapidly evolving labor market. Yamuni emphasized the need for life-long learning and designing education systems that allow for constant retraining so that people can remain relevant in the workplace throughout their career. As technology advances, the types of skills that workers need will change too. As such, embedding adaptivity into interventions is necessary so that they remain effective.

• Solutions will involve collaboration between the private and public sectors

In order to create effective job policies, the public sector needs private sector buy-in. Governments cannot succeed in these ventures by themselves. Companies play an important role in job policy because they hold both knowledge about what skills are most needed in the labor market as well as the power to hire workers. As such, governments need to collaborate with the private sector on program design and provide incentives  to encourage private sector engagement – companies need to have skin in the game so that they are also committed to the success of these programs.

The orange industry in South Africa is an example of this cross-sector collaboration. Zalk - formerly  Deputy Director-General in the South African Department of Trade, Industry and Competition and non-executive Director of the Industrial Development Corporation of South Africa - highlighted the complementary roles of the public and private sectors for advancing fruit production in the country. Aided by government support, South Africa’s horticulture sector was able to grow to become the second largest citrus exporter in the world and bring with it substantial job growth in rural areas. Good jobs require both private sector innovation and public sector protections. While private companies can bring a plethora of good jobs, the government is needed to provide resources to companies as well as labor protections and social services for workers to ensure that the benefits of job growth are widespread and long lasting.