Thoughts on Employment Typologies

by BERRY, A. , 2007
Research Report, Employment Growth & Development Initiative, Human Sciences Research Council

Mineral (and other natural resource) exports promote development and employment, as long as the rents are used wisely and undesirable macroeconomic effects are avoided. However, many countries have failed to achieve this. Mineral rents are often wasted, either through corruption and theft or through inefficiencies and rent-seeking by private and public agents. Too often the ‘easy life’ from mineral rents discourages the learning process and the search for competitiveness in other areas. Mineral exports tend to create very few jobs. This, together with the disincentive they create for the production of other tradable, can leave the country with an employment and income distribution challenge. These principles are illustrated through the experience of six natural resource exporters: Venezuela, Nigeria, Chile, Brazil, Indonesia and Malaysia. The ‘waste’ of rents has been particularly notable among oil exporters. Exchange rate overvaluation had negative effects in Venezuela and Nigeria, where it fostered a binge of consumption of imported goods and disincentivised the production of other tradables. Chile, Brazil, Indonesia and Malaysia have made at least reasonably effective use of their natural resource export rents since the 1960s. (Venezuela also sustained a long period of growth based on oil exports from the 1920s to the 1970s, even though this was followed by a period of failure.) The employment and distributional outcomes have been most positive in Indonesia and Malaysia.