Opportunity and exploitation in urban labour markets - ODI Briefing Papers 44 - Briefing paper

• Most of the urban poor in developing countries spend their lives in insecure, poorly paid jobs • They participate in economic growth, and adjust to economic change, through urban labour markets • Pro-poor urbanisation requires labour intensive growth, supported by labour protection, flexible land use regulation and investments in basic services U rbanisation is taking place on a massive scale, and around 60% of the world’s people are expected to be living in cities by 2030. Growing urban centres are increasingly viewed as ‘engines of growth’ and as sites of opportunity – a welcome recognition of their role in national development. But enthusiasm should not mask the fact that high rates of economic growth do not always result in urban poverty reduction; and that rising urban inequality is a major concern. The urban poor are vulnerable to national growth downturns, and are affected disproportionately by macro-economic reforms, particularly in large urban centres. The poor engage in economic growth and adjust to economic change through their position in labour markets, but not all households adjust equally. The economic characteristics of the urban poor include: weak labour market positions; dependence on the informal sector; lack of employment; and casual employment. Generating demand for unskilled and semiskilled labour is critical. The reality, however, is that these sectors often contract as urban economies restructure. Urban population growth does not always reflect urban economic growth or the expansion of employment opportunities, but population growth is propelling structural changes in urban economies, with major implications for urban poverty dynamics. This Briefing Paper examines the benefits and constraints from the labour market perspective, and offers a series of policy ‘next steps’ for municipal governments. Urban labour markets and poverty dynamics Labour may be the most important asset for urban poor households and it is through labour that they benefit most directly from economic growth. The clear ‘pros and cons’ to urbanisation are summarised in Table 1. The over-arching reality is that most urban poor people have to work until they die, in insecure livelihoods that pay poorly and that limit their chances to escape from poverty. The way in which people enter the labour market is key to urban poverty dynamics. Those who are not poor tend to be clustered in formal employment, while chronic poverty is associated with casual labour or female business activities. Informal work is a mixed blessing – depending on context – offering an escape Opportunity and exploitation in urban labour markets