Opportunity and exploitation in urban labour markets: better economic opportunity does not always mean better work

Drawn by the promise of growth and opportunity, the world is increasingly urbanising: an estimated sixty percent of the world’s population are expected to be living in cities by 2030. But in reality, urban population growth does not always reflect urban economic growth and the expansion of employment and income generating activities in urban areas. As a result, urban inequality is rising and urban poverty has increased. In this context, a new briefing paper brought out by the Overseas Development Institute (ODI) examines urbanisation and urban poverty from a labour market perspective and proposes ways in which urban development can be better managed.

Labour is likely to be the most important asset for urban households and it is through labour that they benefit most directly from economic growth. But it is the way in which people enter the labour market that is key to urban poverty dynamics. While those who obtain and retain jobs in the formal sector may experience improved income levels, these jobs are rare in most developing cities.

With wage employment so limited, urban labour markets are increasingly marked by informal and casual work. Sometimes operated illegally or without registration, these are nonetheless activities in which poor people particularly engage. Rather than penalise casual labour markets, therefore, the brief suggests that countries support them, provided that they ensure the general well-being of workers. In this process, providing flexible terms of employment can make it easier for women to join the labour force, preferably on the same terms as men. More generally, however, since urban centres are disproportionately affected by national growth downturns, unskilled workers and the urban poor tend to remain vulnerable even when they are protected by labour policies.

Most municipal administrations have little understanding of the urban economy’s strengths and weaknesses, and tend to be ineffective in expanding people’s entry into the labour market and improve the quality of jobs for the urban poor. The brief suggests that they could start by improving the delivery of health, education and other services while making migration controls more flexible. 

Municipal governments can also:

• promote labour-intensive growth as a part of a national economic strategy
• put in place labour welfare legislation and social protection, for the benefit of casual workers particularly
• put in place flexible trading laws and land use regulation that is tolerant of informal labour markets
• encourage private and commercial sector investment that enables workers to transit from informal to formal activities