November 21, 2012 | Contribution by
HAROLD ALDERMAN By Harold Alderman, Consultant, World Bank Social Protection Team Public works programs clearly have a central role in explorations of how labor and social assistance policies can help create good jobs – actually the subject of the recent 4th South-South Learning Forum in Hyderabad, India, "Building Resilience and Opportunity". Somewhat curiously, however, the panels on this key safety net tool have been featured in the sessions on opportunity rather than resilience. Is there a risk in over-emphasizing this dimension of public works programs and perhaps losing sight of the primary function?
South South Learning Conference, Hyderabad, 2012
Public works, growth, and poverty The role of public works as a crisis response is well known, and their ability to provide a predicable income support is increasingly documented. But to a large degree, their contribution to economic growth is less apparent. Still, as the notion of productive safety nets implies the merging of the concepts of resilience and opportunity, it is important to ask how might low-skill job opportunities contribute to growth. It is not merely that a well run public works program can stabilize incomes. That they do. But so do direct cash transfers. So what motivates the extra costs and logistics of public works programs? In part, they are popular because only poor individuals will choose to apply for low-wage tasks. But this self selection often leaves out the labor poor, a group that is generally among the most vulnerable. There is, in addition, a political dimension: most non-poor and many poor see more dignity in a job, even at low wages, than in what many term a hand out. Justifications for these programs that rest not only on their contribution to poverty reduction, but also on their potential contribution to growth are outlined in an upcoming World Bank book:
Yet another way public works programs contribute to poverty reduction – which was discussed at the South-South Forum – is the possibility that a public works of the scale observed in India's Mahatma Gandhi National Rural Employment Guarantee scheme might have a sufficient impact on labor markets to raise wages offered even to non-participants. But this pathway is double edged. Although a defensible floor on wages adds teeth to minimum wage legislation, its role in enhancing equity may well boost costs to other producers. It's resilience and opportunity How much emphasis should be placed on the contribution to growth? Despite promising evidence that successful safety net programs can contribute to local economic opportunities, the core objective of most public works program is to protect the income of the poor. It matters whether the question on the table is "Is this investment the best way to create jobs?" or whether we are asking, "Given our objective is preventing destitution, are public works also providing additional value?" Few, if any public works will provide as many miles of roads or permanent jobs created per dollar spent as a transport or IT project. But the joint output in terms of both equity and also growth may justify the investment. That said, the apples of equity and the oranges of growth do not easily add up. Absent the ability to place a dollar figure on the value society puts on consumption of a poor laborer relative to that of the average citizen a direct comparison of direct investments, say in infrastructure, with a public works program does not put both categories of expenditures on the same metric. Only in rare cases will a public works program produce outputs on the same magnitude as could be achieved with direct investments. Of course, public works is not just – or even mainly – about contributing to growth. Even though there is a clear potential contribution there, it cannot by itself validate or defend the claim for limited public funds. Their justification rests on the combination of directly effecting poverty reduction along with contributing to growth. The South-South Forum can rightfully highlight the opportunities from public works as they are the less familiar and may help distinguish the better programs from the rest. But, as a proponent and sometime contributor to the design of public works, I nevertheless doubt this is the argument that closes the deal. The bottom line is that the case for public works should still be made in terms of resilience as well as opportunities.
- • Public works may offer training and skills development;
- • They may create public assets such as roads and watershed protection that enhance private earnings;
- • hey facilitate savings and financial inclusion and;
- • They are directly linked to other investments such as agricultural promotion or nutrition and thus create program synergies.