Sweden’s support to productive and decent employment for poverty reduction

Abstract

Tackling the significant employment challenge is at the heart of the Swedish International Development Cooperation Agency’s (Sida) efforts to reduce multidimensional poverty. By creating productive jobs and fostering employability, Sida’s approach focuses on improving the functioning of the labour market and decent working conditions, striving for sustainable employment results and poverty reduction at scale. Sida has supported employment programmes to reduce poverty in countries such as Bangladesh, Ethiopia, Georgia, Mozambique, Zambia and Tanzania, as well as through regional and global strategies.

This content is part of TIPs In Practice series on poverty and inequalities developed in collaboration with the Development Co-operation Report 2024: Tackling poverty and inequalities through the green transition.

Challenge

The global employment challenge is enormous: 600 million jobs will be needed by 2030 to absorb the growing global workforce and 2 billion people work in the informal economy, where most people living in poverty make a living.

Employment is the main link between economic growth and reducing income poverty and is, therefore, at the heart of Sida’s work on reducing multidimensional poverty. Productive jobs provide a direct route out of poverty, while decent jobs strengthen the quality of jobs, which is important for reducing other deprivations.

Approach

Employment has been a high priority for Swedish development co-operation since 2013 and plays a key role in its work on reducing income poverty. In 2022, Sida had employment objectives in 45 strategies, with a total portfolio of USD 650 million (30% of Sida’s total yearly budget). Sida’s support to employment gives priority to sectors and markets of relevance for people living in poverty, with a poverty focus guiding the selection of geographical areas or segments of the population in need, commonly including formally and informally employed persons and micro-, small and medium-sized enterprises (MSMEs), smallholder farmers, migrants and displaced persons.

Sida addresses both the demand and supply side constraints of the employment equation:

• the demand side – job creation – by supporting the development of markets, value-chain development, and improving the business environment and investment climate.

• the supply side – employability – by supporting access to labour markets, labour rights, skills development, women’s economic empowerment and social protection.

To this end, Sida encourages staff and partners to use the Market Systems Development (MSD) approach to identify and address the causes of poor performance in market systems relevant for people living in poverty, introducing systemic change to reach sustainable results at scale.

Results

• Job creation through Market Systems Development. In Zambia, Sida’s programme MUSIKA supports the functioning of markets. It has increased profitability for 412 000 small-scale farmers, including 108 000 women. It mobilised USD 19 million in private capital agricultural markets investments. In Tanzania, Sida’s support to sustainable agricultural practices among farmers’ co-operatives and farms through the Agriculture Markets Development Trust has contributed to 20-50% production increases and new market access for 13 000 farms.

• Improved employment conditions. Sida and the International Labour Organization support Mozambique’s employment policy through the MozTrabalha programme. The programme’s objective is to support the structural transformation of key economic sectors, create productive employment opportunities for women and youth, and enhance the capacity of stakeholders to address the constraints to pro-poor employment creation.

• Investment climate reforms. Between 2017 and 2021, Sida supported 204 investment climate reforms in 73 countries through the FIAS programme, streamlining regulations and permit processes. By 2021, the project had contributed to USD 70 million in new investments, expected to generate over 170 000 jobs.

• Labour markets and skills. The Livelihoods Improvement for Women and Youth programme in Ethiopia creates jobs through labour market development and private sector engagement. By addressing bottlenecks, such as matching the skills of the labour force with employment opportunities, it has increased the capacity and productivity of MSMEs, leading to growth, new jobs and higher incomes for 43 000 women and youth.

• Decent work. In Bangladesh, Sida is supporting a project in which the government and the International Labour Organization collaborate to empower textile industry workers to organise themselves in trade unions and improve their working conditions. In Georgia, Sida supports a network of 149 local companies and organisations through the Leadership for Sustainable Development programme, promoting sustainability, employment and decent work. To ensure respect of employees’ rights, a Business and Human Rights Guide for state-owned companies was developed with the Georgian government.

Lessons learnt

• A holistic approach. Addressing the employment challenge and achieving results at scale requires understanding both the demand and supply sides. Sida’s approach has been most effective when identifying and addressing constraints in labour markets, markets systems and/or for MSMEs, and balancing short-term poverty reduction through job creation in key sectors, with support for reforms and sectors that bring employment and poverty reduction in the long-term.

• There is no shortcut to institutional and policy reforms. The public sector has an important role in effectively regulating the private sector and creating an enabling environment. Addressing the employment challenge requires a broad set of institutional and policy reforms, including those related to business environment, trade, infrastructure, education and social protection. These reforms necessitate a joint employment objective and stakeholder-wide engagement, collaboration and consultation.

• Market Systems Development. Improving market systems is more likely to achieve sustainable employment results at scale. Efforts to support individual entrepreneurs or firms are less likely to succeed unless there are transformative effects or massive job creation. The MSD approach provides a solid foundation for development co-operation in the field of employment.

• Improve programming and measurement of results. A recent evaluation shows that there is scope for more effective programming and stronger institutionalisation of Market System Development (MSD) at Sida through more deliberate investments in staff capacity, active leadership, and fostering a culture of experimentation and learning. Improving guidelines for MSD project management and adjusting contracts and funding to provide implementers with greater flexibility can be beneficial. A forthcoming evaluation of Sida’s efforts to increase employment in Sub-Saharan Africa underscores the importance of monitoring both job creation and income increases. The Donor Committee for Enterprise Development's Results Measurement Standard can be a useful tool to do that at project-level.

Further information

Sida (2022), What Works? To Promote Productive Employement and Poverty Reduction, www.sida.se/en/publications/what-works

Sida (2022), “MDPA and MSD: What are the differences and how could they be combined?”, Poverty Toolbox, https://www.sida.se/en/publications/mdpa-and-msd-what-are-the-differences-and-how.

Sida (2022), Trade, Employment, and Poverty Reduction: An Evidence-based Overview, https://cdn.sida.se/app/uploads/2022/01/18125306/10205811_Sida_Brief_Trade_dec-2021_webb.pdf

Sida (2022), Employment Portfolio Overview, https://cdn.sida.se/app/uploads/2022/01/18125306/10205811_Sida_Brief_Trade_dec-2021_webb.pdf

Sida, “Sida’s work with employment”, www.sida.se/en/sidas-international-work/thematic-areas/employment

Sida, Market Systems Development Toolbox, www.sida.se/en/for-partners/methods-materials/market-systems-development-toolbox

Sida’s toolboxes: Poverty Toolbox and Market Systems Development Toolbox

EBA, Evaluation of Sida´s Efforts to increase Employment in Sub-Saharan Africa, forthcoming.

OECD resources

OECD (2024), Development Co-operation Report 2024: Tackling poverty and inequalities through the green transition, OECD Publishing, Paris, (forthcoming).

OECD (2021), “Understanding the multidimensional nature of poverty”, Development Co-operation TIPs Tools Insights Practices, OECD, Paris, www.oecd.org/development-cooperation-learning/practices/understanding-the-multidimensional-nature-of-poverty-059d28ba.

OECD (2001), Poverty Reduction, The DAC Guidelines, OECD Publishing, Paris, https://doi.org/10.1787/9789264194779-en.

OECD (2019), OECD Development Co-operation Peer Reviews: Sweden 2019, OECD Development Co-operation Peer Reviews, OECD Publishing, Paris, https://doi.org/10.1787/9f83244b-en.

To learn more about Sweden’s development co-operation see:

OECD, “Sweden”, in Development Co-operation Profiles, OECD Publishing, Paris, https://doi.org/10.1787/8a6be3b3-en.

See more In Practice examples from Sweden here: www.oecd.org/development-cooperation-learning?tag-key+partner=sweden#search.