Industrialisation, employment and poverty

Abstract

Introduction Industrialisation1 is an important driver of employment growth and poverty reduction in developing countries. At the early stage of transition from an agrarian economy to a modern economy, the manufacturing sector in the typical developing economy has greater potential to absorb surplus labour compared to the services sector, which in the typical low-income country is dominated by informal services. While it is feasible to move unskilled workers from agriculture into better-paid jobs in manufacturing activities, it is not feasible to move them into the formal services sector. Formal services sectors such as banking, insurance, finance, communications, and information technology are characterised by relatively low employment elasticity and also employment in these sectors requires education to at least upper secondary school level. Unskilled workers can find employment only in informal services such as retail trade and distribution, passenger transport and construction, where wages and productivity are often low. By contrast, employment in manufacturing, particularly in traditional labourintensive industries such as clothing and footwear, require mostly on-the-job training. Show more