 So, what I want to talk to you today about is the more specific case of Mozambique. The title is Anatomy of a Jobs Crisis Mozambique. So I guess I'm taking down from the more general discussions we've heard from the previous two speakers and looking particularly at the specific case of Mozambique. This is work that is, this talk is loosely based on some work I've been doing with Fintarp over the last few years. On the wider website there's a paper that came out, I think at the beginning of this year called Something Like Understanding Mozambique's Growth Experience through an Employment Lend. So, if you're interested in reading a bit more about Mozambique and some of the material about Mozambique is in that paper, I would encourage you to do so. So, as an agenda for my brief talk, I just want to talk a little bit about what we mean by jobs crisis, then look more specifically about what we know about the situation in Mozambique and then think a little bit about what can be done. I don't want to be too ambitious in terms of claiming that I have some set of policy recommendations that's going to revolutionize Mozambique's job situation, but at least some food for thought that perhaps could help lead into the discussion. So, the focus, the questions, so turning that around and saying, well, what am I actually trying to do here? I'm going to answer a little bit what we mean by a jobs crisis. And I think the previous speakers mentioned a little bit that there has a lot of different nuances to the idea of a jobs crisis. So it might help to think, well, what do we mean in this specific case? And then I will show you what I think is the nature of the jobs crisis in Mozambique. And as I said before, look at what might be done. So yeah, we often use the term jobs crisis in many different contexts. It's easy to go to the US and the UK and hear jobs crisis from one day to the next. But do we always mean the same thing? No, I think there's three broadly main uses of the term. So the first one could be seen as the idea of a crisis of high cyclical unemployment. You had a lot of jobs, you lost jobs. It's a jobs crisis. It's just an idea here taken from the US, a large number of vacancies and a dramatic increase in vacancies associated with the global financial crisis. Some countries have done better than others in coming back to pre-crisis levels. But that was in itself a jobs crisis. The second form of discussion of a jobs crisis is more of a structural form. In economics we can sometimes speak of a beverage curve, which is the relationship between the number of available vacancies in an economy and the rate of unemployment. So the first crisis would be about we're down at the bottom of the curve and we want to move back up it in a sense. So you want to have more vacancies available and less unemployment. But the structural issues in the labour market are often about the position of the curve itself. How well matched is the demand for workers with the supply of workers? And we often hear of a skills mismatch. Again, this is often heard both in developed countries and developing countries. I was just reading yesterday about some people claiming that there's six million graduates in China that can't find jobs because there's a difficulty in matching the demands from the labour market, demands from firms with the supply of educated workers. So this is just an example, I can't actually remember where it's from. But again, giving you a sense that there's a mismatch in terms of opportunities and available workers. Lots of people who are potentially available to work in construction chasing a few jobs and less so in education and other areas. The third form of the discussion of jobs crisis is something along the lines of jobless growth. So the economy is ticking along nicely, doing very well, thank you very much. But it's not producing jobs at the same rate as growth in the economy overall. This is often being discussed for a long time with reference to India and this again just gives you a little sense of that. So between 2004 to 2005, so if you look at the bottom line there, you see growth in India was extremely high, around let's say an average of around 8% over that period. But between 2004, 2005 and 2009, 2010, only 5 million workers were added to the economy in terms of formal sector employment. So there's something going on there and that's often been discussed as this crisis of jobless growth. So I think the issue to just bring to your attention perhaps, I'm sure you were all very much aware of it already, but is to say that jobs crisis means different things in different contexts. And so we need to be aware of what form the jobs crisis is taking and what is the relevant context and aspects of that in that situation. And just to discuss a little bit more about jobless growth, of course that's more often not exclusively applied to developing countries. And here we often hear about challenges of structural transformation in which the benefits of growth are not producing higher productivity jobs. And in particular it's important to note that in three, the jobless growth situation, it's not necessarily the case that people aren't working. People do have economic activities, they're too poor not to work. The problem is persistent levels of underemployment. I think you've probably guessed now what I'm going to talk about with respect to Mozambique, right? The short version, and what I'm going to do in the next slides is just go through point by point with a little bit more evidence. But the short version for those, the short version of the story is that Mozambique has achieved a very impressive recovery and continued economic growth after a protracted conflict that started in around the late 1970s and ended in 1992. So since that period of time, growth has been relatively consistent and at a high rate. For in many respects, at least until recently, Mozambique has been called a donor darling. It's achieved a lot of improvements. There have been improvements in welfare but at the microeconomic level, poverty reduction we can say has been relatively modest and some concerns have been raised regarding the quality of growth. And in particular, once we start looking at the nature of structural transformation or where people are working, we find the structure of employment has been relatively stagnant. In fact, a little bit linking into what Carol said, we see large and widening productivity differences between economic sectors. So rather than productivity coming together, we see actually the opposite. And as a result, we don't see the signs of positive structural change that we would normally associate with high levels of sustained growth. And in addition to that, the demographic pressures are mounting and quickly, so the challenge is becoming even more acute. So just to put some meat on the bones of that short version, here's a graph that shows the macroeconomic success of Mozambique. As we can see from in the 80s, basically growth was pretty choppy and actually declined in per capita terms. The bar is just a measure of US dollar per capita income and the red line is the real growth rate. But as we can see from the early 1990s onward, incomes have been consistent and growth has been more stable at a robust level. Great, well done Mozambique, Tic. But let's look at what's happened to output. If we look at the structure of output, so which sectors are producing more or less output? We don't see so many changes. We see that agriculture remains an important component of GDP, at least approximately around 30%. It has reduced a little bit. So these sectors are now the largest sector by output and we see what's often described as a missing middle, relatively small manufacturing sector, that's the green bar, increased a little bit in the mid-2000s. That was actually associated with one very large firm basically that entered. And mining has recently increased as a share of GDP associated with particularly with coal but also with some large-scale gas investments. I'll talk about that in a bit. But as we can see, no dramatic shifts in terms of the composition of output, what is being produced by the economy in broad terms. What about where people are working? So where people are working, we see a continued very large percentage of individuals in agriculture. So roughly three out of four members of the working-age population are working in agriculture, broadly speaking. What we mean by agriculture is essentially smallholder, small-scale farming. What we have seen is a moderate shift into services. But as we can see, if we just go back on slide, we see an increase in the number of people working in the services industry but actually no major change in the production of that industry, the relative production of that industry in relation to the rest of the economy. So essentially what that means is that the labor productivity, the relative labor productivity in services is falling. So the idea, and I think this is important to understand, what we've seen is a shift of workers out of very low productivity agriculture into low productivity services and the productivity of the services sector is falling. So in a sense, we have a concern that perhaps we're getting a saturation of individuals into the service sector and by services, that's obviously a wide range of activities, but a lot of services in Mozambique are informal commerce. So people might be, to put it crudely, you're going from the farm to selling tomatoes by the side of the street. Actually, you get more money for selling the tomatoes, unfortunately, but it's not the kinds of fundamental structural transformation associated with a more sustained progress. This graph probably may be a little bit difficult to work out. So this is relative labor productivity in each sector. So relative to the average, which sectors have higher or lower labor productivity? And as we can see, here, we actually have the bars widening. So they're going away from each other. So if sectoral productivity was coming together, so similar levels of labor productivity in each sector, we would see those bars coming together. We see widening and in particular driven by mining. So the growth of the mining sector that I mentioned here going from around 2% in 1996 to 9% in 2014, this is by production, hasn't been associated with lots more people working in that sector. In fact, less than 1% of workers work in the mining sector. So what that means, in fact, is that the productivity of labor has jumped dramatically in mining, but it's actually lost workers as a share of the total number. So the share of workers in the economy in mining has fallen over time. Again, this just gives a sense of where things are going in the economy. I don't think we need to get into the details, but the underlying story here is that there hasn't been a trend of positive structural change in the labor market, and that is an ongoing concern. So added to that, so that's a snapshot of where we are today, up to 2014, 2015, when we have the latest data, the concern is what's going to happen in the future. And one of the challenges in Mozambique and like many other sub-Saharan African countries is that fertility rates have been high. Even in the latest DHS survey, the expected number of live births per fertile women was still around five. So that's the average expected number of births that women are expected to occur, and that hasn't fallen much over time at all. And so what that's done is that is locking in for a generation, basically of a relatively high population growth, by definition. It's a certainty that this will occur, essentially. The projected population size in terms of the working age population is going to go from around 12, 13 million today, and that's going to easily double in size within a generation. And here, in addition to that, what I've shown here is the total working age population with projected levels of education. So today, well, 2010, six years, well, 2015, 2010, we have roughly 10 million working age individuals who have not yet completed a full cycle of primary education. They may have done a few years, but dropout rates have been very high and access has been problematic historically. So the majority of working age people in Mozambique don't have a completed primary education. That is improving, but clearly it's just an improving slowly. And even if we project at the most optimistic rates of what can be achieved in terms of improving access and ensuring that dropout rates fall, it's still very likely to be the case that within a generation, still the majority, the majority of workers have not completed a full cycle of education. So that's a challenge. So the challenge is not only significant population pressure looking for jobs, we also have the challenge that they are largely unskilled or low-skilled in general. Just to put some more numbers of that, we could think about, how quickly would the formal sector have to grow to absorb the number of new entrants coming into the labor force? So it was interesting to hear what Carol was saying about the importance of large firms and they're more productive and they do create higher quality jobs. I totally agree. The challenge is that in a country like Mozambique, you can name the firms. So even if every single large firm in Mozambique was to, let's say, double its employees every year, that would be a drop in the ocean in terms of the numbers of individuals coming into the labor market. I'm being a bit colourful, perhaps, with the language, but just to give you a sense, right? So if we look at these, again, these are kind of thought experiments. They're not strict projections. But in terms of a thought experiment, if we look at the formal sector growth rate of employment of around 3%, so that's what we've been seeing historically around, 3% additional in terms of the formal sector, we would actually see the informal sector continuing to rise in absolute terms. So if we keep on going where we are and the formal sector keeps ticking over, keeps creating some jobs, and the rest go into the informal economy, agriculture, petty services, and so on, we would see the absolute size of the informal sector double. At a 5% growth rate, so that would be much better than it is now, 5% growth rate of formal sector employment, it would still be rising and would only be peaking by about 2050. At an 8% growth rate, so if formal sector employment was growing by 8% a year, so much higher than the rest of the economy, we'd still see growth in the informal sector until around 2030 when it would peak and then it would start falling, so it would reach a tipping point and then fall. I mean, these are broad, very crude back of the envelope calculations, but it just gives you a sense of the magnitude of the challenge. So even if we get the formal sector really rocking and rolling, really producing and generating new jobs at a fantastic rate, the reality in a country like Mozambique, and I'm not trying to say that every country is like Mozambique, the reality in Mozambique is that at least for the next 10, 15, 20 years, we're dealing with a growing informal economy. Okay, so what can be done? Well, I think when we start thinking about policy interventions, I think it's helpful to distinguish between what we might call microeconomic or very narrow style interventions versus the interventions that operate at a macroeconomic or structural level, thinking about what is the nature of the growth, what is the pattern of growth occurring in the economy. And I think I probably have hinted already a little bit at it. Of course, the latter in Mozambique, we believe, is more critical. The reason is it's because the challenge is really so large. And also because the nature of economic growth over recent years has been problematic. So just to round off, I just want to just give you a sense of where... I'm not trying to say this is where growth has come from, but over the last, probably last 10 years, we have seen a huge explosion of FDI to Mozambique. And this is an estimate of the stock of capital, the stock of capital financed by domestic credit, not by domestic equity, we don't have that, versus FDI. So there has been a huge shift of FDI into Mozambique, and the stock of that FDI has grown hugely. Where has it gone to? Well, it's gone into, no surprise, extractive industries and largely transport communications. If you look at the green bar, you might just be able to see at the bottom, it's very difficult to see. So really, the vast majority of external investment has been pumped into what you might call relatively capital intensive activities. And that helps understand a little bit of what we saw in terms of the labor productivity challenges, given that remember, three out of four workers are in agriculture. So in terms of what we can do, well, I'm not going to go into details, but I think we should think about three areas. Well, first of all, we have to think where are people working and where are they likely to be working over the next 20, 30 years? I would love to see growth rates of the formal sector employment higher than 8%, higher than 10%. That would be wonderful. And I think that is possible. But at the same time, the feasible areas for some of these large scale formal isn't always in labor intensive sectors. And where workers are really is in agriculture. And it's very difficult to see any form of significant changes in terms of the jobs crisis, in terms of reducing poverty without a more serious and considered attempt to address productivity in agriculture. We can talk a little bit about what that might mean perhaps in the discussion. There are also what we have described as anti-job policy distortions. So there are certain policy, I don't know what the right word is, policies out there like minimum wage legislation that would seem to inhibit job creation. And that is a concern. And overall, a little bit what Carol was saying, raising external competitiveness. So how do we do that? Building better infrastructure, making sure that exporters can get their exports out, making sure that imports can come in quickly so that you can develop that kind of opportunities for trade that weren't there in the past. Yeah, I'm not gonna summarize what I just said, but I do want to bring into attention the fact that Mozambique is now facing a major crisis. So what's all that about? Well, devaluation of 100% in the last 18 months. Huge challenges there and of course that has meant that some of the big investors, the FDI has been on hold. But at the same time, I do believe it could be, could be a window of opportunity to boost labor intensive export sectors. These are the kinds of policy shocks that although they are extremely damaging in the short term, do provide some windows of opportunity to reset the economy and find a new path. I look forward to seeing those opportunities being taken. I'll finish here, I think. Thanks very much. Thank you.