IFC jobs study “fragmentary”

12 February 2013

The claim that International Finance Corporation investments create jobs was put to the test by the IFC jobs study, released in January. The report, produced in parallel to the World Development Report on jobs (see At Issue, Update 83), sought “to assess the direct and indirect effects of private sector activity on job creation” as a way to bring evidence to the debate about the IFC’s impact. The study divided job creation into direct (jobs in investees), indirect (jobs in suppliers and distributors), second-order (economy wide jobs), and net (accounting for job losses in competitors).

The report found “among IFC client companies, the number of direct jobs created, net of job losses, tends to be relatively small, but the number of indirect jobs generated can be significant, though more difficult to measure.” The report admitted that numbers of “direct jobs tell only a small part of the story and can be misleading” and that the number of indirect and second order jobs “vary significantly depending on factors like management style, the capital intensity of a particular project, the business cycle, and the regional and country context.” The study only provided data from one evaluation that quantitatively assessed net job creation, and that was from a 2007 publication on solar energy investment in the United States. In the end with few specifics on net job creation the study argued that “Better data and comprehensive methodologies are needed to create a more complete picture of job generation resulting from specific activities and to clearly attribute the new jobs to these activities.”

Peter Bakvis of the International Trade Union Confederation said the study “frequently reads as an attempt at self-justification of the IFC’s current policies through a ‘jobs lens'”. He went on to say: “In reality, the Jobs study provides only fragmentary and approximate assessments of the jobs impact of IFC loans and investments, and in a few cases seems to gloss over valid critiques of some types of IFC investments that have been made by analysts in other divisions of the World Bank Group.”

frequently reads as an attempt at self-justification of the IFC's current policies through a 'jobs lens'

The report also included a section on the constraints to private sector job creation, reporting on the findings of enterprise surveys. In contrast to the impression given by the Doing Business report (see Update 83), only 12 per cent of businesses said that their biggest constraint was related to government regulation of some type. The most frequently cited constraints were access to finance, access to electricity, and informality, with 42 per cent of surveyed firms reporting one of these.