[Excerpt] Economic development is generally understood to involve improvements in economic well-being for a society and its members. Despite the generalized unfolding of economic opportunity that accompanies economic growth, the specific goal of poverty reduction should be the most pressing component of a development agenda. Labor market policies that foster the creation of “good” jobs and prepare the population to hold these jobs will alleviate individual economic privation

Fields, Gary S

English

The ILR Impact Brief series highlights the research and project based work conducted by ILR faculty that is relevant to workplace issues and public policy.  The Briefs are prepared by Maralyn Edid, Senior Extension Associate, ILR School.[Excerpt] Economic development is generally understood to involve improvements in economic well-being for a society and its members. Despite the generalized unfolding of economic opportunity that accompanies economic growth, the specific goal of poverty reduction should be the most pressing component of a development agenda. Labor market policies that foster the creation of “good” jobs and prepare the population to hold these jobs will alleviate individual economic privation.brief_24Fields.pdf: 850 downloads, before Oct. 1, 2020

Fields, Gary S.

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ILR Impact Brief - Economic Development, Labor Markets, and Poverty Reduction

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Cornell University ILR School 
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Policy & Issue Briefs ILR Collection 
December 2007 
ILR Impact Brief - Economic Development, Labor Markets, and 
Poverty Reduction 
Gary S. Fields 
Cornell University, gsf2@cornell.edu 
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ILR Impact Brief - Economic Development, Labor Markets, and Poverty Reduction 
Abstract 
[Excerpt] Economic development is generally understood to involve improvements in economic well-being 
for a society and its members. Despite the generalized unfolding of economic opportunity that 
accompanies economic growth, the specific goal of poverty reduction should be the most pressing 
component of a development agenda. Labor market policies that foster the creation of “good” jobs and 
prepare the population to hold these jobs will alleviate individual economic privation. 
Keywords 
poverty, labor markets, economic development, economic growth, public policy 
Comments 
Suggested Citation 
Fields, G. (2007). Economic development, labor markets, and poverty reduction (Impact Brief #24). Ithaca, 
NY: School of Industrial and Labor Relations, Cornell University. http://digitalcommons.ilr.cornell.edu/
briefs/38 
For a more in-depth analysis, please see: Fields, G. (2006). “Labor Markets and Economic Development”. 
Journal of Eastern Caribbean Studies, 31(2), 72-84. 
The ILR Impact Brief series highlights the research and project based work conducted by ILR faculty that 
is relevant to workplace issues and public policy. The Briefs are prepared by Maralyn Edid, Senior 
Extension Associate, ILR School. 
Required Publisher Statement 
Copyright by Cornell University. 
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The Impact Brief series highlights the research and project-
based work conducted by ILR faculty that is relevant to
workplace issues and public policy. Please visit http://
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Economic Development, Labor Markets, and Poverty Reduction
Research question: What is the most critical aspect of
economic development beyond macro-level economic
growth?
Conclusion: Economic development is generally under-
stood to involve improvements in economic well-being
for a society and its members. Despite the generalized
unfolding of economic opportunity that accompanies
economic growth, the specific goal of poverty reduction
should be the most pressing component of a develop-
ment agenda. Labor market policies that foster the cre-
ation of “good” jobs and prepare the population to hold
these jobs will alleviate individual economic privation.
Policy implications: The choices governments make
regarding development goals and the policies that re-
sult largely determine whether the outcomes are more
or less favorable for businesses, individuals and
groups of individuals, and governments and non-gov-
ernmental organizations (NGOs). A government’s
choices also influence how effectively the labor market
contributes to economic growth and conveys to partici-
pants the gains from growth. Economic development
encompasses more than increases in economic activity
and is unlikely to evolve from free, unfettered markets.
National governments should intervene with country-
specific policies to promote outcomes that yield widely
dispersed benefits.
Abstract: Economic development entails the relaxation
of constraints on choice, those limitations being the
hallmark of economic underdevelopment. As opportuni-
ties open up for workers, businesses, and government,
policy makers should not lose sight of the importance
of poverty reduction. Hard-core privation is prevalent
in many parts of the world, where nearly three billion
people are living on the equivalent of less than two
U.S. dollars a day. The International Labour Organisa-
tion (ILO), a specialized agency of the United Nations,
estimates that the “working poor” are seven times more
numerous than those without any work at all.
Realistic and pragmatic policies may improve the
chances that economic development will be win-win-win.
In such a scenario, businesses sell more products in
more markets, individuals earn more money and enjoy
enhanced benefits and services, and governments and
NGOs collect more taxes and contributions, respectively,
enabling them to deliver better services and programs.
The decision taken by many East Asian countries dur-
ing the past few decades to produce for world markets
generated this type of broad-based economic success.
Although economists concede that development helps
some individuals more than others, assertions that ex-
port-oriented growth strategies benefit a few at the
expense of the many lack supporting evidence. Public
policies that protect and potentially enhance incomes,
such as worker retraining and trade adjustment assis-
tance, may mitigate whatever inequities do arise.
The central role played by labor markets in distributing
the gains from growth make them potentially effective
by GARY FIELDS
Professor of Labor Economics and International and
instruments of poverty reduction. In the traditional sup-
ply and demand model, where wages are set by the
market—that is, by the intersection of the demand for,
and supply of, labor—employment and output are both
maximized. During periods of economic growth, de-
mand for labor increases and wages rise accordingly.
But if the government inhibits the market by artificially
setting wages, say, or by limiting employers’ ability to
hire and fire, the rate of economic growth suffers along
with individuals’ earning opportunities.
Crafting the growth strategy that suits the reality of any
given country is the primary challenge facing policy
makers. Both Africa and the Caribbean, for example,
have long been characterized by what economists term
“dualistic” labor markets; i.e., two distinct segments,
each with its own supply and demand structure and in-
stitutions: formal and informal in the Caribbean, rural
and urban in Africa. Take Kenya, where prior to the
1970s high-wage jobs were located in the cities and the
resulting out-migration from low-wage rural areas
caused urban unemployment to rise. Ultimately, the
government implemented a rural development strategy
that drew migrants home from the cities; over time, ur-
ban unemployment fell.
This paper argues that labor market policies intended
to foster economic development should target job qual-
ity rather than maximum levels of employment. Aim-
ing at the latter only ensures unacceptably low wages
and overlooks terms and conditions of employment,
such as health and safety, workers’ rights, and job se-
curity. The ILO has formulated a set of core labor stan-
dards that prohibit forced labor, child labor, and dis-
criminatory hiring and that also guarantee freedom of
association and collective bargaining; it has urged all
member states, now numbering 175, to adopt and en-
force these standards.
Poverty reduction through the creation of more and bet-
ter jobs requires government intervention. To increase
the demand for labor, governments could i) implement
employment-friendly labor market policies, such as
avoiding onerous regulations against dismissals, and
ii) maintain a sound business environment, wherein
property rights are secure, contracts are enforced, for-
eign investment is welcome, domestic capital is retained,
and corporations are properly governed. To augment
the supply of labor, governments should focus on the
quality of human capital by supporting education, train-
ing programs, and other initiatives that develop the
skills demanded by a globalized economy; provision of
health care and child care would encourage individuals
to supply more of their labor. And finally, governments
could tweak the workings of the labor market by pro-
viding abundant information about job openings and
devising laws and institutions that create realistic pos-
sibilities for occupational and/or geographic mobility.
Greater savings, investment, and capital formation may
be the standard tools of economic growth, but labor
markets are the most effective mechanism for spread-
ing the wealth.
Methodology: Decades of research, including field
work in Africa, Asia, and Latin America, by the author
informed this document.
Source publication: “Labor Markets and Economic De-
velopment” appeared in Journal of Eastern Caribbean
Studies, 31(2): 72-84, June, 2006.
Comparative Labor (ILR)


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