Blog / Why is it difficult for market systems programmes to create jobs?
16 April 2019

Why is it difficult for market systems programmes to create jobs?

Finding jobs isn’t always easy.

Market systems programmes have been remarkably successful. Even allowing for a healthy scepticism about their reported results, the best-know programmes have supported hundreds of thousands, maybe millions of farmers to increase their income.

But few market systems programmes have created significant numbers of jobs. The above programmes do report numbers of jobs created – but the results are miniscule. By the end of 2017, for example, Market Development Facility had raised incomes of 44,150 households; but created under a thousand jobs. A brief scan of the BEAM Evidence Map suggests that around 70% of the evidence pieces are on agriculture, with under 10% directly related to job creation. The exceptions are also suggestive, either reporting somewhat vague intermediate incomes; like “51,000 people changing behaviour as a result of watching the TV programmes” or just not reporting impacts at all.

There is increasing recognition that job creation is as important as rural development, and pressure from both donor and recipient governments to find solutions in this area. The justification is simple; rural poverty drives young people to the cities looking for work, and improved education systems are raising expectations from young people to access decent jobs. New programmes directly respond to this need – such as the Dar es Salaam urban jobs programme – and donors expect existing market systems programmes to pay greater attention to urban job creation.

So where are the success stories? Maybe they will come in time – but this blog argues that creating jobs and working in urban areas is harder than working in agriculture. This is for two reasons. Firstly, raising productivity is harder. Secondly, even if productivity is raised, gains won’t necessarily be captured by employees.

So why is raising productivity in urban settings hard? There are many well established, technical fixes to agricultural productivity, such as improved seeds, fertiliser, and  tweaks to agronomic practice. These have been honed with millions of pounds of research, implemented around the world, and are available for a development programme to pick up and run with. I’m not saying it’s easy – finding a sustainable, market-driven mechanism is challenging, and potential negative environmental effects are often ignored – but solutions are available.

Compare this to urban settings. Most people work in informal markets – for example, in Tanzania, recent urban migrants often work as shoe-shiners. How can you increase the productivity of a shoe-shiner, or someone selling mobile phone credit, or a barber shop? There’s no simple technical or managerial fix. In formal sectors, a lot of employment is generated by construction and (in some contexts) low wage manufacturing. These offer more potential for productivity improvements. But improving the productivity of large enterprises is harder than small ones. A factory might need many thousands of dollars of capital to expand – rather than just a few hundred for a smallholder farm. Managerial and technical improvements need to be adopted by a complex and (probably) dysfunctional hierarchy – rather than one farmer and their family.

Even if you do raise productivity, what would happen? In rural settings, if the farmer increases their income, then your target group has benefitted. Simple. But in urban sectors, unless you’re working with micro-enterprises, then the direct recipient of support is not the target group, but the business. Productivity improvements might eventually translate to job creation. But it’s more likely that additional value is captured by the consumer or the business. If the consumer, then fractionally cheaper products gives some overall economic benefit; but a 20 cents cheaper haircut does not make an exciting case study. If it’s the business, then increased business profits might lead to more entrants into the market, or sectoral growth– but this is a big assumption which in practice will never be verified within any typical project lifespan.

Consequently, I think market systems programmes will always struggle to create jobs at scale. So what are the options? If urban job creation is the aim, then here are two suggestions:

  1. Ignore direct job creation. Maybe the solution is for development programmes to not attempt to measure job creation, or worry overmuch about the direct impact on the poor. Find strategic sectors with growth potential, work hard to boost sales and productivity within these sectors, and simply assume that this will increase employment. In the long run, you’re probably right.
  2. Focus on urban services. In cities, market systems programmes need to get smarter and more focused on working with governments. In many rural programmes, the government can be ignored or treated as a stakeholder rather than a key market player; but in urban settings the government is typically much more active and functional. Treat that as an opportunity as well as a challenge.

Alternatively, even in urban settings job creation does not need to be the solution.

Instead, you could:

  • Focus on micro-enterprises. If you need to help poor people directly, the best way to do that is by looking to support micro-enterprises working in the informal sectors. This is where most of the poor people work – it might not create jobs, but it will at least raise incomes.
  • Focus on poor people as consumers, rather than employees. Another way to directly improve the lives of the poor is to look at the areas where they spend the most money – rent being an obvious example – and try to find market-based solutions to provide these services cheaper.