Other 2 Dimensions of the Development Gap

 Deprivation
in developing countries is not simply a matter of low levels of per capita income. There are many other dimensions to the development gap between rich and
poor countries. Developing countries generally experience much higher levels of
unemployment — open and disguised than do developed countries. 

The levels of
education, health and nutrition are often abysmally low, and income
distribution tends to be much more in egalitarian. Policy in developing
countries is increasingly concerned with these other features of the
development gap. The basic reeds approach to development, pioneered by the
World Bank, is a reflection of this switch of emphasis from exclusive concern
with per capita income to these wider development issues.

Unemployment

The
developing countries contain a huge reservoir of surplus labour. For a long
time, poor countries, particular since the population explosion, have been
characterized by underdevelopment of disguised unemployment in rural areas (see
Chapter 5). What has happened in recent years is that disguised rural
unemployment has transferred itself into disguised and open unemployment in the
towns. 

Unemployment in the urban areas of developing counties ins another
dimension of the development problem and an increasingly serious one. The
rationale for rural-urban migration will be considered later, but first let us
outline some of the facts on employment and unemployment. According to the
International Labour Organisation (ILO) in Geneva, 1 billion people in developing
countries are either jobless or underemployed, which amounts to one-third of
the total working age population.

This
represents a colossal challenge, particularly as the workforce is expected to
grow oy another 1.5 billion by the year 2025. The ILO argues for a renewed
commitment by developing countries to the goal of employment creation, and not
to treat current employment levels as natural and the inevitable outcome of
market forces, as if nothing can be done. The ILO estimates that at least one billion
new jobs need to be created in the next ten years if the proportion of people
living in poverty is to be halved by 2015. The World Bank devotes its 1995
World Development Report to the conditions of employment in developing
countries, and it painted a sombre picture.

To
stop unemployment rising there has to be employment growth of at least 2 per
cent per annum, which requires output of at least 4 per cent per annum. Not
many countries are able to grow this rapidly. The statistical evidence across countries
tends to suggest that rapid employment growth is associate with the
implementation of market based policies and openness to trade. In particular
employment growth is strongly related to manufacturing export growth, which in
turn is closely linked to the skill to land ratio of countries.

All
this is very aggregative analysis. The issue still to be addressed is the
emergence of increasing urban unemployment. The problem is not so much one of a
deficiency of demand for labour in an aggregate demand sense. The causal
factors relate to the incentives for labour to migrate from rural to urban
areas, and the incapacity of the urban areas to provide employment owing to a
lack other necessary factors of production to work with labour particularly
capital. As far as migration is concerned, there are both push and pull factors
at work.

The
push factors have to do with the limited job opportunities in rural areas and a
greater willingness and desire to move, fostered by education and improved
communities. The pull factors relate to the development of urban industrial
activities that offer jobs at a higher real wage than can be earned in rural
areas, so that even if a migrant is unemployed for part of the year, he or she
may still be better off migrating to the town than working in the rural sector. 

If there is no work at all in the rural sector, the migrant loses nothing,
except perhaps the security of the extended family system. The rate of growth
of job opportunities in the rural sector depends on the rate of growth of
demand for the output of the rural sector and the rate at which jobs are being
‘destroyed’ by productivity growth.

As
we saw in our previous example (p.67) if the demand for agricultural output is
growing at 1.5 per cent and productivity is growing at 1 per cent, then the
growth of labour demand will be 0.5 per cent. But it the labour force is growing
at 2 per cent there will be a 1.5 per cent gap between the supply and demand
for labour. If the level of disguised unemployment in the rural sector does not
increase, this figure constitutes the potential volume of migrants. If the
urban labour force is one quarter of the size of the rural labour force, a 1.5
per cent migration of rural labour would represent a 6 per cent increase in the
urban labour force owing to migration.

On
average, this is about the extent of the influx from the rural sector into the
urban areas of developing countries. On top of this there is the natural
increase in the workforce in the urban areas to consider; this is of the order
of 2-3 per cent. If job opportunities in the urban areas are increasing at only
5 percent, then 4 per cent of the urban labour force will become unemployed
each year, thus raising the amount of urban unemployment year by year, forcing
labour into the informal service sector. In that case, unemployment shows up on
poverty.

Historically,
the process of development has always been associated with, and characterized
by, an exodus from the land, continuing over centuries. The uniqueness of the
present situations is not the migration itself but its magnitude and speed. And
the problem is that the urban sector cannot absorb the numbers involved. For
any given technology, the rate of which the urban (industrial) sector can
absorb migrants largely depends on the rate of capital formation. 

If labour and
capital must be combined in fixed proportions, and the rate of capital
accumulation is only 5 per cent, then the rate of increase is job opportunities
can be only 5 per cent also. Unfortunately, however, as we shall show in
Chapter 5, the problem is necessarily solved by a faster rate of capital
accumulation in the urban sector, because migration is not simply a function of
the actual difference in real remuneration between the two sectors, but also of
the level of job opportunities in the urban sector. If the rate of job creation
increases, this may merely increase the flow of migrants with no reduction in
unemployment.

 The solution would seem to be to create more
job opportunities in the rural sector. This will require, however, not only the
redirection of investment but also the extension of education and transport
facilities, which in the past few years have themselves become powerful push
factors in the migration process. Whereas formerly redundant labour might have
remained underemployed on the family farm, nowadays education and easy
transportation provide the incentive and the means to seek alternative
employment opportunities. While education and improved communications are
desirable in them, and facilitate development, their provision has augmented
the flow of migrants from rural to urban areas.

The
pull factors behind migration are not hard to identify. The opportunities for
work and leisure provided by the industrial, urban environment contrast sharply
with the conservatism and stultifying atmosphere of rural village life and
naturally act as a magnet for those on low incomes or without work, especially
the young. 

Given the much higher wages in the urban sector, even the prospect
of long spells of unemployment in the towns does not detract from the incentive
to migrate. Moreover, the choice is not necessarily between remaining in the
rural sector and migrating to the urban sector with the prospect of long
periods of employment. The unemployed in the urban sector can often find work,
or create work for themselves, on the fringes of the industrial sector — in
particular in the formal services sector of the urban economy. 

The wages may be
low, but some income is better than no income. In other words, unemployment in
urban areas may take the form of underemployment, or become disguised, just as
in the case of the rural sector — its manifestation being low income. This has
led to the notion of an income measure of unemployment, which needs to be added
to register unemployment to obtain a true measure of unemployment and the
availability of labour supply.

One
way of measuring the extent of unemployment disguised in the form of
low-productivity/low-income jobs is to take the difference between the actual
labour employment at the sub-standard income and the labour that would be
required to produce a given level of output of service at an acceptable level
of income per head. 

Before measurement can take place, of course, the
acceptable (standard) level of income has to be defined. It could be that level
set as the ‘poverty line,’ below which health and welfare become seriously
impaired. The income measure of unemployment would thus be that is, one-half of
the existing labour force is disguisedly unemployed in the sense that the level
of output is not sufficient for those who currently work to maintain an adequate
standard of living.

The
above analysis of employment and unemployment trends in developing countries
points to a number of policy implications that were also highlighted by the ILO
in 1969 when it first sponsored missions to several countries to undertake a
detailed diagnosis of the employment problem. Certainly an adequate rate of
output growth is required to employ workers entering the labour market for the
first time and to absorb the effects of productivity growth, but much more is
required. 

There is a case for the use of much more labour-intensive techniques
of production, and the issue of rural-urban migration needs to be tackled by
promoting more employment opportunities outside the urban centres, particularly
for young people. Without such measures, unemployment will continue to grow,
especially in urban areas.

Education

Another
dimension of the development gap is the difference in educational opportunities
between rich and poor countries, which manifest itself in much lower primary,
secondary and tertiary enrolment rates in developing countries; much higher
levels of illiteracy; and lower levels of human capital formation in general.
This has a number of adverse consequences for the growth and development
process. 

Low levels of education and skills make it more difficult to countries
to develop new industries and to absorb new technology; it makes people less
adaptable and amenable to change; and it impairs the ability to manage and
administer enterprises and organizations at all levels. 

<

p style=”line-height: 150%; text-align: justify;”>As the famous American
economist John Kenneth Galbraith once said: ‘Literate people will see the need
for getting machines. It is not so clear that machines will see the need for
literate people. So under some circumstances, at least, popular education will
have a priority over farms, factories and other furniture of capital
development’ (Galbraith, 1962).

Available
literature and statistics show the relative under provision of education
facilities and opportunities in many poor countries, and the low rate of literacy
in the poorest countries. In the primary and secondary sectors, the percentage
sometimes exceeds 100 per cent because the gross enrolment ratio is the ratio
of total enrolment, regardless of age, to the population of the age group that
official corresponds to that level of education. While primary education is
universal in high income countries, one quarter of children in poor countries
still receive no primary education. This amount to 125 million children, a
third of whom live in Africa. In 1990, the world’s governments pledged to
provide primary education for all by the year 2000, but clearly the commitment
has not been met. In 2000, the pledge was renewed (by the so- called ‘Dakar
Framework’) to provide universal primary education in poor countries by the
year 2015 (the same date as the poverty reduction target): indeed, this is one
of the `Millenium Goals.’ The estimates cost is $10 billion a year. This will
required a reorientation of priorities in poor countries (e.g. less expenditure
on arms and wasteful subsidies), more aid from donor countries, and more help
from the World Bank. The World Bank readily admits that, until the recent past,
it has neglected educational (and other social) expenditure in its lending
policies.

There
Is also a huge discrepancy in the provision of secondary education, with only
one half of the age group in low-income countries receiving and education
beyond the manifests itself in high level of adult illiteracy. A huge gender
gap is also evident. in low-income countries, 30 percent of males are
illiterate, and almost 50 per cent of females. Among the poor countries, China
performs well, but in many of the poorest countries in Africa female illiteracy
is way over 50 per cent. The gender gap narrows at higher income levels, but is
still evident.

Developing
countries neglect educational provision at their peril. Research also shows a
strong correlation across countries between levels of human capital formation
and growth performance.

In the following unit
we present an analysis of the theories of underdevelopment and dependency for
the simple reason of wanting to assess how relevant these theories are in
explaining the status quo of many developing countries, especially as it
relates to the characteristics outlined above. Furthermore, it would be
interesting, for the purpose of this course to apply these theories to the
apparent lack of human development in the Third World.