Poverty, Work and the Private Sector

Feb 2, 2015

When thinking and talking about poverty reduction, the potential role of the private sector is not exactly the first thing that springs to mind. Probably because reducing poverty is still very much seen as an act of charity, deriving from the ostensibly noble desire to ‘help’ rather than the wish to produce economic gain. This interpretation of poverty reduction as mere ‘charity’ has been criticized by Muhammad Yunus: 

“When we want to help the poor, we usually offer them charity. Most often we use charity to avoid recognizing the problem and finding the solution for it. Charity becomes a way to shrug off our responsibility. But charity is no solution to poverty. Charity only perpetuates poverty by taking the initiative away from the poor”1. 

In other words: discourses of charity perpetuate the imagery of poor people as the passive recipients of ‘help’. This portrayal is not only inaccurate but also problematic. Not in the least, because it ultimately feeds into the idea that poor people are nothing more than a burden to the city and the state. If we on the contrary depart from the idea that poor people do have something valuable to contribute to the economy and society at large – their labour for instance – the potential role of the private sector all the sudden becomes significantly more important.

Labour Markets 

The labour of poor people, although often disregarded, plays a pivotal role in the functioning of urban industries all over the world. Participation in the labour market, however, does not necessarily mean a ticket out of poverty. For especially where employment is unsafe and payments irregular, work hardly offers more than a temporary relief from the insecurities of poverty. Caterina Ruggeri Laderchi2, an economist with the World Bank, has argued that gaining decent and stable employment is one of the major challenges facing the urban poor. “The key asset of the poor”, she writes, “is human capital, which they can monetize through the labour market”. This process of monetization, however, is not without obstacles as it is often hampered by a lack of education and weak integration in social networks that provide access to ‘good’ jobs.

How then can poor city dwellers gain access to ‘good’ jobs and decent wages?  How to make sure that their labour not only benefits the economy but also paves the way out of poverty? One way in which UPPR tries to enable access to more permanent forms of employment, is by granting poor women and men the possibility to develop skills that are likely to improve their chances in the job market3. UPPR works together with communities to identify opportunities for skill development and offers apprenticeship grants to cover the costs of a six month vocational training trajectory.  

The Role of the Private Sector 

Effectively securing a more permanent place in the job market, however, is not a matter of skill development alone. In fact, a recent outcome study of the UPPR apprenticeship scheme4 pointed at the importance of thorough market needs assessments in making sure that the skills that are acquired through vocational training correspond adequately with labour market needs. In order to facilitate a better match between apprentices and the job-market UPPR is now partnering with firms and organisations in the private sector, such as Bangladesh Garment Manufactures Export Association (BGMEA).

The importance of market-based vocational training, carried out in mutual consultation with the private sector, has also been recognized by the International Finance Cooperation5. In an elaborate report on the link between job creation and poverty reduction the IFC identifies a mismatch between the skills available in the economy and those in demand as the core driver between unemployment. The fundamental challenge they recognize is to understand both what drives and obstructs job creation, especially in relation to the private sector. For, as the authors argue, the private sector provides about nine out of ten jobs in developing countries and is therefore, by default, a principal player when it comes to reducing urban poverty 

Social Insurance and Safety Nets 

So far we have seen that engagement with the private sector is crucial when it comes to tailoring livelihood strategies to market demands. However, it is important to bear in mind that the relation between poverty and employment, although strong, is not unidirectional. Employment by no means necessarily cures poverty. In fact, labour markets are the key channel through which the poor are exposed to macroeconomic volatility6. Social insurance and safety nets are necessary to mitigate such negative effects. The formation of public and private partnerships to create jobs should therefore always go hand in hand with fostering a critical discussion on what constitutes safe and decent work. And more importantly, on the measures that are necessary to ensure compliance with such standards of decency.

Notes

1 See ‘Banker to the Poor: Micro-Lending and the Battle Against World Poverty’ (2007) by Muhummad Yunus, p. 249.

2 See ‘Working One’s Way Up: The Urban Poor and the Labor Market’ by Caterina Ruggeri Laderchi; Chapter two of the World Bank publication ‘The Urban Poor in Latin America’ (2005): http://www.gfdrr.org/sites/gfdrr/files/publication/The%20Urban%20Poor%20in%20Latin%20America.pdf#page=63 

3 Read more about UPPR’s livelihood strategies: http://www.upprbd.org/areasofwork.aspx?ID=1 

4 Read more about this outcome study in the UPPR report ‘Building Confidence, Creating Livelihoods: Study of Short Term Outcomes for Apprenticeship and Block Grant Recipients’: http://www.upprbd.org/projectrpts.aspx 

5 See the ‘IFC Job Study. Assessing Private Sector Contributions to Job Creation and Poverty Reduction’ (2013):

http://www.ifc.org/wps/wcm/connect/0fe6e2804e2c0a8f8d3bad7a9dd66321/IFC_FULL+JOB+STUDY+REPORT_JAN2013_FINAL.pdf?MOD=AJPERES 

 

6 Catarina Ruggeri Laderchi has elaborated on this point in the aforementioned article.

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