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“Work – the best means of combating poverty”

Interview with Prof. Dr Jochen Kluve, economist and head of the evaluation department at KfW Development Bank, about the value of work and the key factors that contribute to creating more jobs.

Dr Jochen Kluve
Jochen Kluve - the economist with renowned international expertise in labour market and development economics has been heading the Evaluation Department at KfW Development Bank since October 2019.

Author William Faulkner once said, “It’s a shame that the only thing a man can do for eight hours a day is work. He can’t eat for eight hours; he can’t drink for eight hours; he can’t make love for eight hours. The only thing a man can do for eight hours is work.” What do you infer from that?

Work is a key aspect of our lives. It structures our day, our year, even our life. Even children go to nursery and, later, to school. Education is our path to work. What’s more, we make a living by earning income through work. In many countries, people without work can quickly end up in a free fall. Work also has a social element because we meet and interact with people there. And it has a community aspect because we perform tasks at work that are useful for everyone in society. We could have a lively debate about whether a workday needs to be eight hours. Maybe six would also be enough. But there is no doubt that employment and work make up a significant part of today’s world.

In the past, people liked to use the term “honest work”. Does anything like that actually still exist today?

I think that effort and income stand in direct proportion to each other for a majority of workers, at least in industrialised countries. The fact that we have discussions about the minimum wage and how to set an appropriate amount for it is, I think, evidence that we are trying to keep work and income at an honest level, even if the endeavour is imperfect in some respects. The situation is different in developing countries. There often isn’t enough appropriately paid work, or what we might call “decent work”. Decent in the sense that the wage is enough to live on. So it is important that we work towards improving the economic situation in poorer countries while ensuring that labour market conditions provide decent payment at the same time.

Workers at the construction site for the expansion of the Zandvleit wastewater treatment plant in Cape Town
Workers at a sewage treatment plant construction site in South Africa.

Is work still the best means of escaping poverty?

Absolutely. That is true across all generations and all borders. The research findings are quite clear here. Work also plays a key role in social and economic status in a society, both here in Europe and in developing countries.

And yet work is a rare commodity. Even though the world is full of tasks and things that need to be done, organised and managed. Why is this the case? Why isn’t there enough decently paid work?

That is the million-dollar question, which is why I am not going to claim to have one single cure-all. Instead, we need a package of measures to create more jobs. Education is a critical element. If we are able to set people on a good path from the start, that will effect tremendous change – for their lives down the line and for societies as a whole. One key factor in the success of a society and a labour market is the individual educational careers available. This is why development cooperation needs to strengthen educational systems.

Due to population growth, Africa needs around 20 million jobs a year. Is it possible to do this with education alone?

Education is one component, but it is not the only one. Another element is creating an environment that promotes start-ups, especially small businesses. The private sector creates the majority of jobs worldwide. So we have to create the appropriate framework conditions for companies to emerge quickly, which means as few hurdles as possible and minimal bureaucracy. The third element is connecting job seekers and companies by improving the flow of information. Access to information needs to be improved in many African countries, for example. Graduates there often need two to three years to find their first position. That is far too long.

View in a kitchen of the confectionery chain Gourmandise in Tunis
Small and medium-sized enterprises employ a large proportion of the workforce, but rarely receive loans from banks.

Don’t vocational schools help here as they connect both sides during training already?

The dual system is extremely well suited for this. It overcomes the lack of information issue I just spoke about, and vocational schools close the gap between training and the market. There are many variations of this two-pronged educational approach; depending on the context, it can sometimes even take much less time than it does in Germany. They are all usually successful, as the evidence shows. And together with development cooperation, we can generate a substantial impact due to our experiences in Germany.

What are other key factors to create work?

Agriculture is also a key job driver. The vast majority of people in rural areas find work in this sector. Here, the primary focus is on making agriculture more productive, for example, by using modern cultivation methods, irrigation, new machines and better training. Africa has the most land that is still cultivable. And stimulating modernisation in areas that already have an active agricultural sector today would improve productivity immensely. There is still a lot of potential.

What impact has the coronavirus pandemic had on the labour market? We have all seen the many migrant workers who lost their jobs and returned to their villages in droves.

It has had major impacts. The number of jobs has fallen dramatically. According to the International Labour Organisation, the figure dropped close to 9% worldwide in 2020. That loss is around four times greater than the one we experienced during the financial crisis and it has hit young people the hardest. We will recover from this at some point, provided that there are enough vaccines available. But it will take a long time and will leave lasting marks on many peoples’ lives. Interrupted education and labour market shocks have long-term effects over the course of years, sometimes decades, for affected people who were just entering the labour market, usually in the form of lower wages and fewer promotion opportunities. Literature calls this a “scarring effect”.

Currently, the buzzwords are “green recovery” and “recover forward”, or the idea that state-run stimulus programmes from the coronavirus crisis can be used for green investments and green jobs. Is that a realistic scenario from your perspective?

This is an additional component as innovation typically drives job creation. We should use this post-coronavirus era as an opportunity to boost green economic methods with corresponding incentives. That is important, for our planet in any case, but also to generate employment.

So you said your building blocks are education and training, a promotional environment that fosters start-ups, bringing people and markets together, increasing agricultural productivity and “recovering forward”. How can KfW best play a supporting role?

KfW can start working on all of these issues with its projects and programmes, which it is doing. However, as a bank, it can offer particular support for the development of financial markets. Studies have shown that entrepreneurs who want to establish start-ups need the right expertise and, at the same time, require access to financial products. Without the latter, economic success usually fails to materialise. Even existing companies can only grow and create jobs if they are able to invest and have the appropriate funds to do so.

Employee and customer at a Bank counter during the granting of a microcredit
Business start-ups and expansions are not possible without access to financial products.

What role does evaluation play in this context? How can it improve development cooperation?

Evaluation identifies and assesses the impacts and target achievement of projects and can thus tell us what we did well, what we did less well, and where we really need to improve. In my department, we have three specific tasks. Firstly, we perform what we call ex post evaluations. This means that, a few years after a project ends, we examine the impacts the project had and if they have lasted. That has been our core activity for many years. Secondly, we support projects from the outset by measuring impacts. This means we share our findings during an ongoing programme that can then be changed, if necessary. This is a newer approach. And thirdly, we drive institutional learning and share our empirical results within the development bank in ways that are as targeted and as useful as possible. For example, we share evaluation reports, initiate discussions, but primarily, we use a new interactive app that contains all the evaluation results. We are trying to improve development work with these three instruments, also when it comes to the issue of work.

If a young African girl or boy from a poor household came to you and asked what she or he should do to find a good job, what would you say?

I would say try to learn as much as possible. It doesn’t need to be in the city or have to be a modern, trendy career. A solid education is enough, but it has to be completed, because learning is a critical aspect for success in life.

The interview was conducted by Friederike Bauer. (As of: 07.10.2021)