World Bank Group

04/22/2021 | Press release | Distributed by Public on 04/22/2021 08:50

Four ways Mozambique can achieve a faster jobs transformation and capture the demographic dividend

Mozambique has an untapped potential for accelerating the pace of poverty reduction. As the Mozambican working-age population is expanding quickly, there is an opportunity for sustaining economic growth, with the new generations supporting the smaller proportion of nonworking claimants. To take advantage of these transformative opportunities, however, Mozambican policy makers will have to overcome several important challenges.

The Jobs Diagnostic produced for the Let's Work Mozambique Country Pilot shows that over the last 20 years, the pattern of growth has become progressively less inclusive. If Mozambique continues with the same development pattern the resumption of growth is unlikely to translate into significantly faster poverty reduction. The challenge is to make sure that the growth process generates enough good jobs to employ the faster inflow of new workers into the labor force and in raising labor productivity. Mozambique needs better jobs for the 500,000 youth that enter the labor force each year. Otherwise, the inflow of more workers will result in more unemployment or more youth with bad jobs and low earnings.

In this blog, we outline four strategies highlighted by our new Jobs Policy Noteto accelerate the shift into higher value-added activities and better livelihoods for the mass of low-paid workers in Mozambique. The key motivating question is: How to accelerate Mozambique's structural transformation (in both sectoral and job quality terms) to improve jobs outcomes and reduce poverty?

  1. Jobs transformation needs a solid macro and fiscal framework to happen

Pillar 1 of this Jobs Strategy Note focuses on strengthening the public sector's financial and expenditure management capacity, while managing fiscal resources in an efficient and equitable manner. Mozambique's experience with the 'hidden debt' scandal underscores how critically important strong public institutions are for the effective management of public resources. So, strengthening macroeconomic and public sector management represents the first over-arching pillar of this strategy, because the potential damage from failing to do so is huge and could easily swamp all other jobs-creating measures discussed in the Note.

  1. Demand for Jobs is key to leveraging the demographic transition

The key objective of this Strategy is to achieve a faster jobs transformation and capture the demographic dividend of an expanding population. The creation of wage jobs in the modern formal sectors (manufacturing and services) is the most promising pathway toward sustained growth and poverty reduction in Mozambique. Boosting job creation in the formal sector, primarily through actions that raise the demand for wage labor in the short and medium term is the best response to the challenge of creating more, better and inclusive jobs. [1]Mozambique's capacity to expand public employment is limited by fiscal considerations, so the main source of increased demand for wage labor has to be the expansion of private sector firms. Pillar 2 of the Jobs Strategy Note outlines measures to increase demand for labor in the formal sector (which is demand-constrained). It looks first at economy-wide measures, and later discusses sector-specific measures. In parallel, it discusses labor market reforms to reduce the non-wage costs of employment and make hires more attractive to firms.

  1. Promoting inclusive growth means improving the jobs of the poor

Even though wage job creation offers the best pathway to sustained poverty reduction, there are limits to the speed with which the modern sector can expand. With the rapid growth of the labor force and the currently small share of wage employment, most Mozambicans will continue to work in household farms and nonfarm self-employment for the foreseeable future. So, Pillar 3 focuses on options for boosting productivity and earnings in the traditional sectors of the economy, which will continue to occupy most of the labor force in the medium term. Simulations in Jones and Tarp (2012) suggest that even if the number of nonfarm wage jobs increases at double the rate of growth of the labor force through 2050, the number of people working in nonwage jobs will still double over this period. These are the most vulnerable members of the labor force, and their problem is not a lack of jobs but rather the poor quality of their jobs, as reflected in low productivity and low earnings. Looking at the sources of low productivity in the traditional sectors of the economy, serious deficiencies can be spotted everywhere: low access to finance, limited access to improved technologies and agrarian inputs, poor access to market information, uncertain land tenure rights and limited access to public infrastructure (roads, irrigation, etc.). The Strategy Note presents measures that could raise the productivity of smallholder farmers and self-employed workers in the informal nonfarm sector.

  1. By leaving half of its population behind, and not investing enough in human capital, Mozambique can endanger its own future.

Mozambique has one of the lowest levels of Human Capital in the world, driven in large part by a lack of women's empowerment. Women who are empowered and can make decisions about marriage and fertility are, in turn, more educated, earn more, and invest in their families, so that society as a whole benefits. While Mozambique has made progress in its job transformation process, most of that has been concentrated in the capital city and the surrounding province (this is also reflected in the great disparity of poverty indicators across regions), and women have benefitted less than men. Women and rural residents are the most excluded from the jobs transformation process. On the other hand, in the right environment, a young, dynamic labor force can spur innovation and be an engine of growth, which drives up living standards. However, that also depends on investing to develop the human capital needed for productive employment, without leaving no one behind, and by investing on women's empowerment as to ensure better human capital outcomes for the future. So, Pillar 4 focuses on ensuring adequate human capital and skills development to meet the increased demand for labor in the formal sector in the medium and long term, while Pillar 5 focuses on fostering greater job inclusiveness, by empowering and educating women and including them in the economy, and by increasing geographical connectivity and reducing the urban/rural divide. If Mozambique does not address the gender and the geographical gap, and does not educate and empower its young population, the demographic dividend will be squandered.

[1]The services sector is showing considerable dynamism in the creation of private sector wage jobs. But there is also good potential for job creation in labor intensive agribusinesses, processing agricultural production for the growing urban population.