Graduated without passing? The employment dimension and LDCs' prospects under the Istanbul Programme of Action

Least Developed Countries’ (LDCs’) recent economic performance has sparked renewed optimism, although the remarkable trend in GDP growth has not been commensurate with employment creation and social development outcomes. Against this background, whilst the Istanbul Programme of Action for the LDCs (IPoA) implicitly acknowledges the link between structural transformation, employment creation, and inclusive growth, in practical terms its formulation is such that policy-makers’ attention is often captured by GDP growth targets (7 percent per year) and graduation prospects, i.e. the only two quantified targets in the IPoA. Combining secondary labour force data, with different growth scenarios based on historical employment elasticities of growth, the paper tests whether achieving the IPoA target of 7 percent growth rate until 2020 would be adequate for Least Developed Countries (LDCs) to generate sufficient employment. Results show that, even if the IPoA target were achieved, a number of LDCs may not be in a position to productively employ all the new entrants in the labour market, unless their pattern of growth shifts towards more diversified employment-intensive sectors. In other words, the pattern of growth is as critical as its quantitative level. This conclusion highlights the need to put the employment dimension at the centre of LDC development prospects, over and beyond GDP growth targets and graduation scenarios.