Jobs Diagnostics for Development: Identifying Constraints to Youth Employment and Beyond

September 21, 2021

This post is authored by Joseph Spanjers and Camille Parker from the Economics Team in the Center for Economics and Market Development and is part of a series of blogs focused on Youth Employment throughout September on Marketlinks and Agrilinks.

Jobs Crisis

The COVID-19 pandemic has led to a massive drop in labor income for workers around the world, including many in USAID partner countries. According to recent ILO analysis, more than 1.5 billion are employed in sectors most affected by the crisis, including one-third of all workers in low- and lower middle-income countries. Youth, unfortunately, are no exception: more than one in six young people became unemployed since the onset of the COVID-19 pandemic, and even those who have kept working have seen hours cut by nearly one quarter. Jobs are the primary source of income for most people and are a key contributor to growth, stability, and poverty reduction. In 2018, it was estimated that 470 million jobs would need to be created between 2016 and 2030 to accommodate new entrants to the labor market. The ongoing economic and health impacts of the pandemic have placed this goal even further out of reach for many low- and lower middle-income countries.

Identifying Binding Constraints to More and Better Jobs

As partner countries and USAID Missions transition from immediate crisis response into supporting economic recoveries, it is essential that they prioritize the most pressing issues impacting the greatest number of people and jobs. However, this is a difficult determination that requires quality evidence. To provide this evidence, USAID’s Center for Economics and Market Development has developed a jobs diagnostic (JD) methodology that can help Missions identify and prioritize constraints to jobs creation. This diagnostic seeks to answer the question: “What are the binding constraints to more and better jobs?”

The methodology is both inspired and informed by similar long-running efforts on JDs at the World Bank and the ILO. Like the JD efforts at those organizations, USAID’s approach examines the overall structure of the economy as well as a number of specific issues related to labor supply, labor demand, and labor matching. Notably, this approach explicitly incorporates potential challenges for both labor supply and labor demand. While there could be specific labor supply gaps to be addressed through training or other interventions, just as important is whether there is sufficient firm entry and labor demand to provide stable, productive, decent jobs. 

So what is a jobs diagnostic? What does it look like? 

Simply put, a JD uses economic theory to assess jobs-related data for either an entire economy or a specific sector of interest, such as agriculture. For those familiar with USAID’s work on inclusive growth diagnostics, it is similar in that it uses quantitative economic tests to benchmark performance on various indicators against comparator countries. Through this use of quantitative tests and comparator benchmarking, the methodology can be used to isolate key challenges in the labor market. Where possible, the diagnostic calls for the use of sex, age and location-disaggregated data in order to better understand the labor market challenges that may be unique to youth, women, or other marginalized groups. Additionally, national, regional, and local-level data is used wherever possible to allow for a greater degree of granularity and specificity. This quantitative analysis is then supplemented with a range of qualitative interviews with key stakeholders in the private sector (employers!), relevant government ministries, educational institutions, job-seekers (including youth), and civil society organizations to provide even greater specificity on the nature of reform, initiatives, and/or support needed to spur greater, better, and more inclusive job creation.  

Practically speaking, why might such an analysis be useful to USAID and those working on employment-related issues more broadly? The reasons are numerous and span across the life of a development project. While the tool clearly fits in the “diagnose” phase of the USAID Employment Framework’s three-step model, it can have real impact at a number of junctures. It is perhaps most relevant to country or regional strategic planning, where it can inform development goals and objectives at the macro level. These diagnostics can also be meaningful for activity design and implementation, helping define the development challenge and prioritize or tweak interventions. Finally, JDs support overarching analytical goals set out by USAID’s  economic growth approach. JDs can also inform policy dialogue and provide a basis for coordination with partner country counterparts and other development partners.

As the Center for Economics and Market Development continues to roll out the JD, you can expect to see these diagnostics informing more USAID strategies and programs. Already, a pilot JD is underway at one of our Missions in the Latin America and Caribbean region that will greatly inform ongoing and future activities, including an activity focused on at-risk youth. Be on the lookout for a public draft early next year, perhaps even here on Marketlinks and Agrilinks in a follow-up post.