Revitalizing economic activity has been the broad objective for countries seeking to recover from the shocking impact of COVID-19 pandemic.
In pursuit of that, the International Monetary Fund (IMF) has revealed that one of best ways countries can recover from the distressing impact of COVID-19 pandemic, is by creating more jobs.
As such, governments’ expenditure on infrastructure has the tendency of providing several jobs.
“For countries on the path to recovery, reviving economic activity is a major priority. And what better way to support a come-back than by creating jobs. Our new IMF staff research shows that when governments spend on infrastructure, they create many new jobs.”
IMF
IMF explained that the research was based on a 19-year dataset from over 5,600 construction companies from 27 advanced economies and 14 emerging market economies.
However, for low-income developing countries there is no available data. Consequently, their estimation is based on inference from advanced and emerging market economies.
IMF further indicated that they adopted state-of-the-art methods to ascertain the impact of public infrastructure expenditure across sectors such as electricity, roads, schools, hospitals, etc.
“We use innovative approach to measure the direct employment effect of $1 million of infrastructure spending by country income group and sector; electricity, roads, schools, hospitals, and water and sanitation.”
IMF
Clarifying how jobs are created, IMF revealed that the quantity of job creation depends on how willing and easy for labor to move across companies within sectors.
They further defined labor intensity as “the labor effects down the supply chain in a sector”.
According to the IMF, about 35 jobs are generated for every $1 million invested in water and sanitation, particularly in emerging markets with high labor mobility and high labor intensity.
Conversely, for emerging markets with low labor mobility and low labor intensity, that number decreases to about 8.
Meanwhile, in advanced economies, $1 million of expenditure possess the possibility of creating an average of 3 jobs in schools and hospitals. Given that labor mobility and labor intensity are at average levels, about 6 jobs or more can be generated in the energy sector.
Additionally, IMF discovered that for low-income developing countries, “the estimates are much larger and range from 16 jobs in roads to 30 jobs in water and sanitation”.
Employment Impact of Public Investment
Per the Direct Employment Impact of Public Investment by IMF, a unit of public infrastructure investment can create more direct jobs in electricity in high-income countries and more jobs in water and sanitation in low-income countries.
That notwithstanding, IMF also indicated that investment in research can create more jobs typically, for high skilled workers.
“Investment in research and development can also create jobs though mostly, if not exclusively for high skilled workers.”
IMF
These outcomes, according to the IMF, indicates that public spending on infrastructure can make a considerable contribution to job creation.
IMF further noted that generally, one percent of global GDP in public investment expenditure is likely to create more than seven million jobs globally through direct employment effects alone.
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