Job creation leads to poverty reduction

This page lists evidence that job creation leads to poverty reduction and improved welfare for the poor.

Most of the academic evidence available focuses on global studies of the relationship between employment and poverty reduction, rather than attributing poverty reduction to jobs created due to a donor-funded programme. Note that there is a sizable body of evidence though on how donor programmes have increased productivity and incomes of the poor (see here).

  • A literature review by Melamed, Hartwig and Grant (2011) looked at research on 24 growth episodes from the 1980s, 1990s and 2000s in various countries worldwide. In 18 of these, poverty had fallen. In 15 of these cases, poverty reduction has been facilitated by a rise in employment in services, in ten cases by a rise in industrial employment, and in six cases by a rise in employment in agriculture (six saw rises in employment in two of the three sectors, but there was no case of increased employment in all three sectors simultaneously).
  • Loayza and Raddatz (2006) present cross-country empirical evidence that poverty reduction is largely driven by growth in labor-intensive sectors.

There is also research suggesting that employment has welfare impacts on the poor beyond increased revenues, such as educational, health and social improvements, including for women. 

  • An analysis of the role growing employment opportunities in the ready-made garment manufacturing industry the lives of Bangladeshi women by Heath and Mobarak (2015) finds that sizeable effects on parents’ propensity to keep younger girls in school, and older girls’ propensity to engage in wage work. Both of these factors allowed women to postpone marriage and childbirth. The data are based on a survey of 1395 households in sixty villages in four sub-districts of Bangladesh.