Does Climbing the Jobs Ladder Promote Poverty Reduction?

Abstract

This paper explores trends in and the potential determinants of the types of jobs held by workers, and their relationship with poverty reduction, in an unbalanced panel of 89 countries over the past 30 years. Jobs are classified into five categories according to formality, occupation or level of skills required, and wage work versus self-employment. Net shifts into "upper tier" or skilled informal wage jobs, defined as professionals, managers, technicians, or clerks, from "lower tier" or lower skilled informal jobs were strongly associated with poverty reduction at the $1.90 and $3.20 lines. In contrast, net shifts into formal wage jobs from lower tier informal jobs were associated with modest poverty reductions at the $5.50 poverty line. The share of workers in informal upper tier jobs represents less than 2 percent of the workforce and has increased little over the past 30 years in low- and middle-income countries. The findings show that increases in upper tier informal wage jobs are associated with shifts of the workforce from microenterprises to small firms in lower- and upper-middle-income countries, but they are not discernibly associated with higher educational attainment or urbanization. In contrast, increases in the share of formal wage jobs are strongly associated with increases in the share of workers with post-secondary education, driven by high-income countries. The results suggest that upper tier informal wage jobs and the skills they require play a potentially important role in poverty reduction but are not automatically generated by increased educational attainment, urbanization, or firm size.