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METROPOLITAN ECONOMIC STRATEGY
GROWING OUT OF
POVERTY: URBAN JOB CREATION AND THE MILLENNIUM DEVELOPMENT GOALS
Marja Kuiper and
Kees van der Ree
Introduction
Improving the life
of slum dwellers is a compelling mission. Creating decent work for all
is a similarly ambitious goal. But the day-to-day reality for poor
people living in rapidly expanding urban centers is lack of appropriate
shelter and the absence of proper jobs. This escalating situation is
driving them to work on their own solutions, with their own means.
Local governments
and their partner organizations, together with the agencies that support
them, can turn these often desperate initiatives into valid
opportunities for job creation and better livelihoods. For that to
happen, there are two prerequisites — political will, and popular
support for integrated approaches that build on and strengthen community
organizations and the local private sector. Certainly, national
governments need to create the space for local government authorities to
act and should facilitate the resources this requires. International
agencies should provide the necessary technical and financial support
that will enable local actors to move forward.
Slums are a physical
manifestation of urban poverty. Many of those living in slums are
deprived of adequate shelter and lack access to most basic services.
They often do not enjoy any security of tenure, nor can they effectively
participate in municipal policymaking. At the root of urban poverty
lies the shortage of jobs and of the opportunity to earn an income
through decent work. If upgrading programs and empowerment strategies
address explicitly the need for jobs, they will be far more successful.
Policies to improve
the lives of slum dwellers and to provide adequate alternatives to new
slum formation should therefore incorporate employment promotion. This
article documents the employment dimension of urban poverty reduction
strategies in general and slum upgrading in particular. It builds the
argument that employment generation for the urban poor can be
effectively promoted at the local level through the simultaneous
application of key policy measures and tools, producing outputs which
are far greater than the inputs required. Employment generation should
not be left to “trickle down” as the outcome of policies and
interventions in other areas. Pro-poor job creation can and should be
actively promoted as a key step out of poverty and an important stride
towards greater social integration.
This article
explains how improvements in infrastructure, housing, and services would
be much more sustainable if supported by the simultaneous promotion of
decent employment opportunities to reduce urban poverty. Employment
provides households with the financial means necessary to ensure access
to adequate housing, essential services, and basic needs. A decent
living requires decent work. The challenge is twofold: not only are
many more jobs required to absorb the ever-growing urban workforce but,
equally important, strategies are also needed to enhance the quality of
urban work in terms of returns to labor productivity, workers’ incomes,
and working conditions.
Urban Poverty, Income, and Employment
“In facing the
challenge of slums, urban development policies should more vigorously
address the issue of livelihoods of slum dwellers and urban poverty in
general, thus going beyond traditional approaches that have tended to
concentrate on improvement of housing, infrastructure, and physical
environmental conditions.” (United Nations Human Settlements Programs,
Global Report on Human Settlements, 2003)
This excerpt is one
of the main messages of UN-Habitat’s recent global assessment of slums.
It puts the “cities without slums” challenge squarely in the global
fight against poverty, and underscores that urban policies and programs
should not only address the physical aspects of slums, but focus much
more explicitly on the fundamental problems of un- and underemployment,
lack of income-generating activities, disempowerment, and exclusion, as
well as rising income inequalities.
Slums and urban
poverty increase worldwide
The worldwide number
of slum dwellers was 924 million in 2001. By 2030, this number is
projected to increase to 2 billion. Slums will continue to expand, even
in fast-growing developing country economies. They are the physical
manifestation of rising urban poverty, also known as the urbanization of
poverty: an increasing number of the world’s poor are living and working
in cities and towns. Currently, close to 30 percent of the urban
population in developing countries lives below official poverty levels.
It is estimated that by 2020 this proportion could reach 45 to 50
percent of the total population living in cities — a 297 to 355 percent
rise in absolute numbers (from 128 million households in 2000 to between
381 and 455 million households in 2020). As Box 1 shows, the speed and
magnitude of urbanization pose an urban management challenge,
particularly in sustaining the provision of adequate jobs,
infrastructure, and basic services, especially in developing countries.
Box 1: The
increasing urbanization of poverty in Africa
■ In
the next 25 years, roughly 400 million people will be added to
the African continent’s urban population, putting tremendous
pressure on cities.
■
Africa is likely to host an exceptionally large slum population
in the years to come. From 1990 to 2001, African urban slum
populations increased by about 65 million, at an average annual
rate of 4.49 percent, or about 2 percent more than the total
population growth (2.68 percent).
■
Based on these estimates, if no effective pro-poor policies are
implemented, urban slum populations are likely to double, on
average, every 15 years, while the total population doubles
every 26 years. |
Urban management:
The jobs challenge
How does
accelerating urbanization affect employment and the labor market? Over
the next 10 years, the International Labor Organization (ILO) estimates
that 500 million people will join the world’s job markets, most of them
young people in developing countries with secondary level education and
training. They will join the 180 million unemployed and the 550
million working poor, seeking to use their talents and abilities in a
productive and gainful manner. About 1 billion jobs need to be
provided by the end of this decade simply to employ new entrants to the
labor market. This would require both faster economic growth and
policies to promote the creation of decent and productive work
opportunities. In view of global trends, pro-poor and pro-jobs policies
and programs are urgently needed in urban areas. So far, the inability
of cities to absorb the influx productively and to generate enough jobs
of decent quality has led to increasing levels of urban informality,
poverty, and insecurity.
Urban poverty is a
multidimensional phenomenon. Lack of access to employment and adequate
income is the main determining factor of poverty, especially in urban
areas. Urban dwellers are required to spend a larger proportion of
their cash income on basic goods and services (food, fuel, water,
shelter, sanitation) than rural dwellers. The urban poor also suffer
other deprivations such as inadequate housing and job insecurity,
disempowerment and lack of basic infrastructure and services,
insufficient social protection, and lack of access to health care,
education, and personal security.
The linkages between
the income dimension of urban poverty, its causes, and its impacts on
other dimensions of urban poverty are summarized in Table 1.
Employment is the
first step out of poverty and an important stride towards greater social
integration. It is the key to creating wealth, and the primary
instrument for its equitable redistribution. Employment directly and
positively affects the other dimensions of urban poverty.
“Nothing is more
fundamental to poverty reduction than employment. To treat it as a
residual outcome of macroeconomic and sectoral policy is wasteful and
wrong.” (Global Employment Agenda, ILO, 2002).
Employment
generation should be a top priority for urban planners, managers, and
policy-makers. Well-defined policies are necessary to promote
employment for the urban poor. Efforts to improve living conditions in
low-income settlements can by themselves be a source of employment and
wealth creation. Conversely, jobs are more easily destroyed than
created, hence the need for the municipal planning and regulatory
framework to facilitate and steer, rather than obstruct, the informal
and small-enterprise sector.
Table 1:
The income dimension of urban poverty |
Visible
causes or
contributing factors |
Policy-related causes |
Impacts on
other
dimensions
of poverty |
Underemployment: Staunch competition for low-paid and
low-productivity jobs.
High degree of income insecurity, of wage earners (casual work)
and self-employed workers (informal sector).
Lack of social protection and vulnerability: Illness, accident
or death can take a whole family from mere poverty to extreme
poverty.
Unskilled wage labor/lack of qualifications to get well-paid
jobs.
Inability to hold a job due to bad health.
Lack of access to job opportunities — the urban poor often have
to trade off between distance to jobs and cost of housing. |
Macroeconomic
crises reduce real incomes.
Failure of public services such as education, health,
infrastructure, and transportation to keep up with demand and to
serve the urban poor (including issues such as resource
allocation, accountability, pro-poor planning and
implementation, civic participation, and political rights).
Regulatory constraints on small enterprises perpetuate
“informality” of work available to the poor, discourage asset
accumulation and access to credit, and increase vulnerability of
workers. |
Inability to afford housing and land, thus, underdeveloped
physical capital assets.
Inability to afford adequate quality and quantity of essential
public services, e.g., water supply and solid waste removal,
thus unhygienic living conditions and health risks.
Poor
human capital — bad health and educational outcomes due to
stress, food insecurity, and inability to afford education and
health services.
Depreciated social capital, high inequalities, and frustration
such as youth unemployment lead to violence and crime, further
impeding local economic development.
Occurrence and persistence of child labor. |
Informal employment
is growing
Over the past few
decades, the formal sector proved unable to generate enough job
opportunities to meet the growth in urban job-seekers, and both the
qualified unemployed and people with low employability were obliged to
turn to informal self-employment or informal wage employment.
Table 2 shows that
in all of the developing world, informal employment rose between the
1980s and the 1990s, providing a temporary economic solution of sorts
for an increasing number of urban workers.
Table 2: Trends in
informal employment – Major world regions (1980-1999)
Region |
% share of
informal employment (3) |
1980-89 |
1990-99 |
Asia |
53.0 |
63.0 |
Latin America
(2) |
52.3 (1) |
56.9 (1) |
North Africa |
38.8 (1) |
43.4 (1) |
Sub-Saharan
Africa |
68.1 (1) |
74.8 (1) (4) |
Notes: (1)
Non-weighted arithmetical means; (2) Informal employment
estimates for 1990 and 1995; (3) As a share of total
non-agricultural employment; (4) Excluding South Africa. |
As Table 3 shows,
self-employment accounts for a larger share of non-agricultural informal
employment than wage employment in all developing regions. In
sub-Saharan Africa, the exclusion of South Africa in these figures would
raise the share of the self-employed from 70 to 81 percent of
non-agricultural informal employment.
Table 3: Share of
self-employment in non-agricultural informal employment, by sex,
1994-2000
Region |
Self-employment as a percentage of non-agricultural informal
employment |
Total |
Women |
Men |
Asia |
59 |
63 |
55 |
Latin America |
60 |
58 |
61 |
North Africa |
62 |
72 |
60 |
Sub-Saharan
Africa |
70 |
71 |
70 |
Urban youth: The
quest for work
Unemployment among
young people between the ages of 15 and 24 years old is a particularly
pressing problem in urban areas, and even more so in slums, which often
comprise a relatively youthful population. Young people constitute a
large proportion of the rural-urban migration while older people often
return to their rural areas to “retire”. Teenagers and young adults are
particularly affected by growing urban poverty, high levels of
unemployment, changing family patterns, the HIV/AIDS pandemic, and
deteriorating environmental and health conditions over the past two
decades. At the same time, young people are our partners today and the
promise of the future. Failure to adequately invest in youth now
imposes great constraints on the potential for future development. Data
indicate that in Africa, 46 to 98 percent of working youth in slums are
engaged in informal economy activities (Figure 1).
Figure 1: Africa –
Percentage of youth in slum areas working in the informal economy
Note: CAR = Central
African Republic.
UN-Habitat’s Global
Urban Observatory (GUO) data further reveal that youth living in
non-slum areas are twice as likely to still be attending school as youth
in slums. Young slum dwellers drop out of school earlier, enter the job
market earlier, and are either working in the informal sector or seeking
a job. They are more likely to have a child, to be married, or to head
a household than their counterparts in non-slum areas. As family
responsibilities increase, the need to earn an income also grows.
However, due to adverse economic conditions in most African cities and
countries, and low levels of education, most young slum dwellers end up
scratching out a living from marginal, low-income, and sometimes illegal
activities in the informal sector. Trapped by a vicious circle of low
earnings, insecure jobs, low education, and early family
responsibilities, in a highly competitive job market because of
widespread un- and underemployment, these young women and men have very
little opportunities to raise themselves and their families out of
poverty. This situation has broader consequences: youth who have
limited job prospects and are frustrated about their future are more at
risk of falling into personally and socially destructive activities. In
turn this deters physical and human capital investment, and undermines
efforts to start a process of local economic development.
The disastrous
effects of urban youth unemployment are becoming particularly apparent
in Latin American and Caribbean cities. Economic stagnation, poverty,
and extreme income differentials within these cities have led to a
growing prevalence of crime and violence, especially among abandoned
street children and unemployed young people. Inadequate skills and
scarce employment opportunities make young people more susceptible to
participate in rebellions and insurgencies, and to resort to illegal
means of earning incomes. High crime rates deter investment, thereby
perpetuating poverty, feeding more crime and civil unrest. This vicious
cycle may ultimately threaten the stability and democratic values that
were attained over the past two decades, as well as the economic and
political stability of the region.
The feminization of
urban poverty
Poor living
conditions in slums, including the lack of water, sanitation, and
electricity, along with the harmful pollution and precarious housing,
affect women more than men. Women also bear the burden of raising
children under the most appalling conditions. In UN-Habitat’s The
State of the World’s Cities 2004, all of the standard
indicators — poverty rates, health care, education, participation in the
labor force, and participation in the political process — reveal the
extent to which urban women are worse off now than they were a decade
ago. The urbanization of poverty is accompanied by another phenomenon
in many parts of the developing world — the feminization of poverty. In
urban areas as in informal settlements, up to 50 percent of households
are headed by women, who typically rank among the poorer segments of the
population. Often unable to inherit land and property, women migrate in
large numbers from the countryside to urban slums. Once there, they
live and work under the constant threat of eviction, crime, violence,
HIV/AIDS, and the daily dangers of unhygienic public toilets. Current
statistics show that between 58 and 60 percent of people infected with
HIV/AIDS in sub-Saharan Africa are women. Research conducted by
the African Population and Health Research Center shows that slum women
are more vulnerable to HIV/AIDS infection than their non-slum
counterparts. This is largely the result of the extreme deprivation
that prevails in slums. High levels of unemployment, unstable sources
of income, and the predominance of low-paying jobs push many women and
children into prostitution to supplement household incomes.
Working women in all
age groups depend on the informal economy more heavily than men,
accounting for 90 percent of women working outside of agriculture in
India and Indonesia, nearly three-quarters of women in Zambia,
four-fifths of those in Lima, Peru, and more than two-thirds in the
Republic of Korea. However, the number of women and their economic
contributions are likely to be underestimated because they engage in
home-based work and street vending, activities which are the most
difficult to document. Often, they choose income-earning options that
are compatible with childcare and domestic responsibilities. Many women
thus perform their economic role from inside or near the house, such as
processing food or selling small items. Even within the informal
economy, women tend to be concentrated in lower-income segments than
men. This results in a significant gender gap in earnings and in the
benefits and protection afforded by work. While there is no simple
relationship between working in the informal economy and being poor, the
linkages, especially in the lowest income-earning activities, is
stronger for women than for men. There is a significant correlation
between gender, informality, and poverty.
Clearly, women slum
dwellers must find better ways of generating incomes if they are to
improve their own and their families’ living conditions. Supporting
women’s work will lead to support for poor households and poor children.
Therefore, a gendered approach to the informal economy is effectively
also a pro-poor approach.
Promoting
Enterprise Development and Job Creation
for Low-Income People
The informal economy
Most of the urban
working poor are part of the informal economy, occupying low-paid,
low-productivity, and low-security jobs. This is often an expression of
weak or inappropriate governance as well as the result of market forces.
Harsh competition for income-earning opportunities has created a “race
to the bottom” with increased pressure on wages, working conditions, and
workers’ rights. Operators in the informal economy lack security and
access to markets, financial services, and other types of business
support. To break this cycle of informality and poverty, local
authorities can (i) adjust their laws and regulations to lower the costs
and increase the benefits for people to formalize their enterprises; and
(ii) provide assistance to small enterprises to upgrade their skills and
increase their access to productive resources and market opportunities.
Regulations that
promote formalization
There is ample
evidence that the costs of formalization and the local tax burden
inhibit many entrepreneurs attempting to start new small enterprises.
For existing entrepreneurs wishing to expand their ventures and hire
more workers, “red tape” bureaucracy and unaffordable labor regulations
often frustrate their efforts. In reaction, many decide to remain in
the “grey zone” between the formal and informal economy, at best
registering only part of their workforce, paying for a business license
but not paying taxes, and other “grey” practices. For example, a study
of 150 micro-enterprises in the United Republic of Tanzania in 1992
concluded that “the main reason for entrepreneurs not respecting the
requirements of national labor laws and international labor standards is
the so-called cost of legality… These enterprises are already only just
breaking even.” In other words, the costs and complexity of compliance
was found to constitute the key motivation for non-compliance — and not
the exploitation of workers for profit.
To promote
compliance with labor regulations, a progressive approach is likely to
achieve the best results. The first step is to identify and prevent the
most abusive conditions such as debt bondage, discrimination,
exploitation based on dependency, and child labor. Furthermore,
national governments, in consultation with their social partners, should
conduct a review to determine i) how rights provided in existing labor
legislation can be practically and effectively applied to the informal
economy; and ii) where it may be necessary and possible to extend the
existing legal scope of rights to cover informal workers. This review
of how labor legislation can be more effectively applied to informal
workers should also consider whether legal requirements might be
simplified — to make it easier for employers and third parties,
including intermediaries, to comply with these regulations, and for
workers to understand their rights. Note that drafting and enforcing
labor regulations are usually done at the national level. Local
governments have little influence over matters such as the minimum wage
and other labor laws, including hiring and firing, social security
contributions, and working conditions.
Complexity and costs
of registration are deterrents
There are various
ways to assess the extent and costs of registration and compliance. For
example, business climate surveys were used in Viet Nam, where key
stakeholders and entrepreneurs were asked their opinion on the
difficulties faced by local businesses. The results of these “polls”
were collated into a consultative forum on ‘Micro-enterprise Day’. This
marked the beginning of a lengthy reform process to make the regulatory
environment more favorable.
Extensive and
detailed “road-map” studies in a number of countries provide a detailed
picture of what it takes for the poor to gain access to local government
offices and pay the bribes, in addition to paying for the business
registration and license fees. In
Tanzania, a UN study
found that many entrepreneurs make regular, genuine efforts to license
their businesses and register their ownership. But the time wasted and
money spent often deters them from taking further steps. Regulations
are multiple and complex, and many of them are outdated or inappropriate
to the size and operations of the small-scale ventures of the poor.
Many
well-intentioned citizens give up their efforts to formalize their
businesses. They are condemned to pay the fines and bribes to
enforcement agents who control the streets and markets. The accumulated
“costs of remaining informal” are usually overlooked or underestimated
in economic reviews and private sector analyses. It is often held that
enterprises choose to remain informal in order to avoid regulatory costs
and taxes. But if offered a genuine service in return for the payment
of fees and taxes, many entrepreneurs will formalize their businesses.
Compliance
—
a tool for developing the small-enterprise sector
Recent ILO research
affirms that small enterprises complying with business registration
requirements create more employment over time than those that do not
comply. Legal provisions can be carefully drafted to reduce the costs
of compliance for small enterprises. Problems arise from overlapping
responsibilities among government departments and from the build-up of
an outdated “web” of policies over time, some of those outdated policies
serve no obvious purpose and may even contradict others. Box 2 shows
how compliance offers practical benefits to small-enterprise owners and
workers by increasing their access to the support and services available
within the formal economy. Thus, an enabling national policy framework
uses compliance with well-crafted laws and regulations as a tool for
developing the small enterprise sector.
Box 2: Lima
(Peru) — Lowering the regulatory barriers and increasing the
benefits of formalization
Enterprise
registration more than tripled from 1,100 to 4,000 between 1998
and 2000 after a municipality within the city of Lima simplified
procedures. About 45 bureaucratic steps were cut to 12, reducing
processing time from 70 days to just one. In addition, the
municipality established a business advisory office that assists
an average of 2,500 clients a month. More recently, several
local governments established labor rights offices to advise
operators in the informal economy about labor rights and
assistance programs. |
Rethinking tax
thresholds for small-scale enterprises
Another step forward
is tax reform. In early 2004, the Tanzanian government decided to
exempt enterprises with an annual turnover of less than US$20,000 from
paying income tax. Although designed to ease financial burdens on the
poor who are working as self-employed entrepreneurs, this tax exemption
also may create a barrier for growth-oriented enterprises. To remain
eligible for income tax exemption, small entrepreneurs might prefer
starting additional small ventures. In such cases, gradual scales of
fees and taxation may be better ways to draw enterprises and employees
into a single, integrated formal economy.
Incentives to
formalize
Other than
simplified registration procedures and lower fees, municipalities can
offer incentives for formalization. One example is to add business
information and support services to the registration unit or desk.
Apart from a fundamental shift in perception by the entrepreneurs, this
welcoming approach also helps people to find their way to available
sources of credit, new market venues, or management consultants. The
Bolivian government went a step further and introduced the “Enterprise
Card”, a registration certificate that made the registered enterprises
eligible to participate in procurement programs.
Municipalities
promoting private entrepreneurship
The key to creating
more job and income opportunities for the urban poor is through more
pro-active, entrepreneurial municipal governments. Reducing the costs
of business registration and increasing the licensing benefits is only
one dimension. An increasing number of local governments are adopting a
much wider mandate, promoting their cities and towns as good places to
invest and develop.
Municipal marketing
To make small
enterprises in slums more visible and accessible, municipalities can set
up directories and “yellow pages” information systems. For example, in
one municipality in Lima, Peru, the mayor initiated a census
enumeration, including a listing of business activities, both formal and
informal, in low-income areas. Subsequently, the mayor was able to
encourage foreign buyers of garments to purchase goods from “slum”
enterprises with the potential to deliver quality products on time.
Supported by technical and management training and an innovative
low-cost leasing arrangement for sewing machines, several hundreds of
essentially home-based enterprises have benefited from this new market
outlet, largely established by the city government.
Some urban areas
develop an overall vision about the potential of the local economy. In
Bolivia and Brazil, for example, municipalities set up promotional
campaigns to make better known to outsiders the advantages and benefits
of their locality. These actions are called “municipal marketing”. In
South Africa, the city of Durban has adopted a comprehensive policy
specifically addressing poverty in the informal economy (Box 3).
Another venue for
obvious promotional efforts is tourism. Municipalities help attract
tourists by helping direct them to local bed-and-breakfast facilities
and local markets. Beautifying parks and green spaces, improving
security, upgrading and maintaining historic sites and other attractions
— all of these policies and programs contribute to drawing more
tourists.
Box 3:
Durban’s informal economy policy — Comprehensive and inclusive
Recognizing
the need for a comprehensive, inclusive policy on the informal
economy, the city of Durban in South Africa embarked on a
consultative process backed by solid research. The vision
adopted was one of Durban as a city with many employment
opportunities, safe and attractive to investors, where people
lived in a healthy and well-managed environment. This vision
necessarily included the informal economy. The outcome of this
consultative process is a policy with the following components:
■ Promotion of diverse economic opportunities along
the spectrum from informality to formality;
■ Area-based management combined with sector-based
support for small enterprises;
■ Integration of the functions of management,
support for enterprise development, and regulation;
■ Simple registration procedures;
■ An integrated approach to environmental health,
public health, and occupational health;
■ Building the capacity of organizations of
informal workers;
■ Promotion of safety and security through local
action;
■ Securing the participation of formal businesses;
■ Integrated and inclusive institutional
structures;
■ Monitoring and evaluation mechanisms;
■ Pilot projects.
Adopted in
2000, this policy is based on the recognition that the challenge
of governing the city must include informal enterprise
development. It also acknowledges that management and support
of the informal economy is a task that can be undertaken through
consultation with stakeholders and the provision of incentives.
The Durban
initiative has sparked similar consultations in other South
African cities, notably Johannesburg. With the support of
StreetNet and the ILO, capacity building in organization and
representation will accompany the process of collective
bargaining that has already started.
Source: http://www.streetnet.org,
www.ilo.org/seed/associations |
Municipalities
facilitating business development support, skills training, and
microfinance
As promoters of
economic development and job creation, municipalities can opt to develop
support programs specifically targeting the poor as entrepreneurs. Box
4 gives a successful example in Benin.
Box 4:
Cotonou (Benin) — Supporting groups of women micro-entrepreneurs
Despite the
important contribution of women micro-entrepreneurs, municipal
authorities seldom take their concerns into account. Usually,
women micro-entrepreneurs must count on their own efforts and
ingenuity in developing their activities, with the assistance of
their families and relatives.
Development
organizations have provided support to micro- and small
enterprise development as a means to reduce poverty. In Cotonou,
Benin, the ILO has pursued an integrated approach that combines
financial and non-financial assistance. Based on existing
savings and credit systems, a mutual guarantee fund was
established to support loan programs for groups of women
entrepreneurs. Capacity-building for association building and
collective initiatives underpinned the approach. A self-managed
common loan fund support center was established with the
assistance of the municipal government. More than 2,000 women
benefited directly from this support. These savings and loans
groups now have well-functioning relationships with local banks
and the municipal authorities. Their success and visibility has
led to the replication of the approach in two other cities in
Benin. |
A second example in
Amhara, Ethiopia, strengthened women micro-entrepreneurs’ associations
through ILO-supported training. After analyzing their needs and
prioritizing their actions, a pilot trade fair was held to exhibit their
products in a central location in town. The commercial success — sales
of the day represented more than normal monthly turnover — sparked a
rapidly growing interest in adhesion and membership contributions. In
consultation with the city government authorities, one of the central
road junctions is now designated for holding trade fairs three times a
month featuring women entrepreneurs.
In both examples,
micro-finance and access to markets are crucial ingredients in
successful enterprise development and income generation. The underlying
organizational strengths of the women entrepreneurs to negotiate and
maintain a physical space — either to obtain business support or exhibit
their goods — were decisive in sustaining and scaling-up these
initiatives.
Micro-finance
programs illustrate the need for supporting enterprise development. For
example, one newly developed financial instrument for small enterprises
engaged in construction and in building infrastructure is micro-leasing.
Lack of access to investment funds is a serious constraint for local
contractors attempting to win bids for infrastructure upgrading. Even
when the contracts are primarily labor-based, the costs of acquiring
small vehicles or equipment are often insurmountable. With the
contracts used as collateral, micro-finance institutions are starting to
offer equipment to lease. This is now happening in Ethiopia and Ghana,
for example, after considerable capacity-building in financial and
administrative management. The government’s role is to recognize and
promote such initiatives and ensure that local, labor-based contractors,
including small businesses without the required capital assets but
supported through leasing schemes, are included in tendering procedures.
Similarly, local
governments can operate or facilitate business service information
centers. In El Alto, Bolivia, a huge slum settlement of about 500,000
inhabitants at the outskirts of La Paz, a business support program
backed by the Inter-American Development Bank (IADB) and the municipal
government established referral centers for small entrepreneurs in
search of appropriate management training, technology support, market
opportunities, financial services, and association support. Rather than
directly providing business development services, the program took a
mediating role in an effort to better link private market demand with
the supply of local goods and services. In other cities, this function
is sometimes provided in collaboration with business associations and
non-governmental organizations (NGOs).
Supporting street
trading
Many of the urban
poor obtain an income from street trading, and many of the urban poor
also buy from street traders — a phenomenon that performs an essential
role both in terms of economic development and distribution of income.
Women and youth are often over-represented in street-trading
activities. The space for and contribution of street vendors is much
disputed and the subject of numerous confrontations, sometimes violent,
between local governments and street traders. There also are reports of
increased crime after government action against street vendors. For
example, in Kenya, local authorities reported significant crime
increases following the destruction of kiosks throughout Mombasa. The
demolition of the illegal businesses left hundreds of residents without
sufficient incomes. Authorities fear that incidences of violence and
armed robberies may continue until alternative means of earning income
are developed. At times, various municipalities tried to address the
problem, but this frequently led to ad hoc solutions based on donor
funding, such as providing new indoor market facilities at inappropriate
locations with unaffordable rents.
In a few cases,
however, municipalities have made genuine attempts to include
representatives of street traders in planning for improved street
trading arrangements. In Durban, South Africa, the city government
recognized that effectively managing the conflict over a scarce number
of spaces for street traders will only occur when public officials can
negotiate with strong organizations of informal workers, and that the
government can play an important role in enabling these organizations to
flourish. Local governments can also do much to educate public
employees about why informal workers and their organizations are
relevant contributors to the health and strength of the urban economy.
Gathering data on the informal economy, including number of workers,
their employment status, enterprise size, sectors in which they work,
and traders’ economic contribution to the city and the region, can be
useful tools for making policy and educating the general public. In
India, the Self-Employed Women’s Association (SEWA) uses statistics as
part of its successful strategies in negotiating for better working
conditions for women street vendors and home workers.
In a second example
(Box 5), street vendors in the Philippines organized themselves and
negotiated effectively with local government officials in Cebu. The
Cebu story illustrates why municipalities should recognize, and work
positively with street traders to promote economic development and
poverty reduction. Street trading will not disappear anytime soon,
even with accelerated economic growth. As long as poverty and
informality persist, people will take up petty trading. New forms of
informal trading can be found today in the shopping malls of Bangkok and
Jakarta. Certain zones around and within these spacious commercial
buildings are officially designated for use by organized street traders.
Box 5: Cebu
(Philippines) — Organization of street vendors
The informal
sector is important to low-income people in Cebu because large
numbers of the workforce earn their incomes this way. One
significant area of activity is informal trading, generally on
the streets. During the early to mid-1980s, the situation of
street vendors in Cebu was very difficult. Local government
officials were hostile to their activities, and their stalls
were frequently demolished.
Gradually,
the street vendors became organized. Over the years, conflicts
and negotiations with the municipal administration made vendors
more representative and politically stronger. Street vending
has become more acceptable to the city government during the
past decade, and informal traders increasingly are able to earn
money in the city without harassment. However, the situation
remains far from easy. Demolitions continue, creating immense
difficulties for groups of the urban poor who have few
alternative sources of income. While the Squatter Prevention
Encroachment Elimination Division of the city government
provides some support to keep areas tidy and acceptable to other
users, street vendors dread the operations of this division. On
the whole, the relationship between the vendors and the
municipality is satisfactory, although in some cases vendors
complain of the lack of due process. As a result of continuing
difficulties, and trader association lobbying supported by a
major NGO in recent years, government authorities agreed in 2000
to establish a technical working committee to recommend new
practices.
Within the
vendors’ organizations themselves, development of organizing
capacity is mixed. Leadership struggles mean that groups come
together, in some cases affiliating with the citywide
federation, only later to break up and/or leave. While
successful organization and subsequent negotiations have offered
greater security to groups such as the Tobacco Vendors
Association and the Lahug Vendors Association, problems remain.
In the case of the CTDA, a trade association for trisikad
(jitney) drivers operating at the port, association leaders are
vulnerable to pressure from local politicians, making agreements
that provoke divisions within their membership and so weaken
their unity and effectiveness. Despite this, the associations
have had some success in resisting repressive enforcement and in
winning certain concessions from the Cebu Port Authority. |
Women street vendors
Urban city planners
are often oblivious to many of the obstacles regularly faced by women
street traders. Gender-responsive transportation, security, childcare
services, access to sanitation, and other infrastructure and service
improvements can ease the burdens of female street vendors in their
struggle for economic survival. Equally important is stopping
harassment, confiscation of goods and money, and arrest by police
forces, because many informal women vendors are subjected to constant
police harassment because they lack legal status and formal recognition.
Designating space,
allocating land, and building basic infrastructure
Street trading
should be given its appropriate and negotiated place in a city’s space,
although planners typically pay little attention to such small-scale
economic ventures. One exception is Bangalore, India, where access to
land is facilitated for the poor in order to enhance their incomes (Box
6).
Numerous cities
encourage small business growth, which constitutes important potential
for urban economic development. A growing number of local governments
and development agencies are beginning to provide support for economic
“clusters” of private firms, with a view to upgrading them by linking
them with local, national, and international partners. The United
Nations Industrial Development Organization (UNIDO) and the ILO are
pioneering this approach, developing practical tools to analyze the
dynamics of industry clusters in local and global value chains. One
particular challenge is to bring municipalities on board in a way that
facilitates and expands the economic growth and cluster-based business
development. One vital challenge is to ensure that economic growth
actually benefits low-income people, especially when they may be engaged
in exploitative subcontracting work, or as underpaid workers in
sweatshops.
Box 6:
Bangalore, India — Access to land and small-business development
to enhance incomes
Bangalore,
India, capital of the southern State of Karnataka, has become
known as India’s Silicon Valley with the development of its
computer software and information technology industries. This
city provides a useful example of how the processes of
settlement planning interact with the growth of small and
medium-sized enterprises. Land is a critical resource in urban
development, and it can be used either to enable the poor to
enhance their livelihood opportunities, or to increase their
vulnerability.
In large
parts of south Bangalore, the master planning approach, with its
“top-down” emphasis on public land acquisition, is dominant. In
contrast, in Mysore Road in the west and Yashwantur in the
north-west there are highly diversified employment centers for
local economic activities with, for example, machine repair and
fabrication, plastics production and recycling, weaving, auto
repair, and electroplating units. These urban areas have
important local political interests associated with the land
market that have been able to resist master planning.
Successful local business development, both informal and
formal, has been facilitated by a land tenure system that is
flexible, diverse, and allows for mixed uses. Sites can be
developed incrementally when a business needs to expand. In
many cases, subcontractors and suppliers live and work close
together. Such land settlement patterns enable low-income
groups to establish themselves on well-located sites. This
gives them access to employment opportunities and creates a
diverse economic structure with a variety of income groups.
Moreover, it allows for a form of politics firmly based on
local land ownership but cutting across partisan lines and even
to some extent class and ethnic lines, based on complex
reciprocal relationships. In this situation, small enterprises
are integrated into local politics and so have some protection
from developments that might force them out. |
Equally important
for urban economic development is support for home-based entrepreneurial
activities. Programs for improving housing, infrastructure, and
services should be explicitly targeted to neighborhoods with a
substantial degree of home-based enterprises. This will create the
double benefit of both improving living conditions and the business
environment. Moreover, cost recovery and financing for urban services
will be more favorable through the direct positive gains from increased
employment and incomes.
Box 7 outlines the
results of detailed research about home-based enterprises in four
developing country cities. Interestingly, one conclusion is that the
planning of new residential areas should reflect the needs of low-income
residents as small-scale and informal business entrepreneurs. Access
roads, electricity grids, water supply, waste collection, and sewerage
facilities should be commensurate with those needed by light industrial
areas.
Box 7:
Working at home — Integrating small enterprises into residential
planning
Home-based
enterprises (HBEs) are unpopular with many policy-makers and
economic development theorists. HBEs are statistically
undercounted because they are often illegal, and their operators
fear either they will be closed down or harassed to pay official
bribes in order to keep their enterprises running. Their
numbers, however, continue to grow. Declining formal sector
employment drives many people to set up an enterprise in the
only space they can use without further cost — their home.
Across the developing world, planning laws are often
incongruent with the practices and attitudes of the millions of
people who earn incomes from their home-based business
activities.
HBEs
represent a diverse range of entrepreneurial actions. The most
common HBE is as a small outlet selling daily household
necessities for people who do not have a refrigerator or much
storage space. Production HBEs are often concerned with
clothing manufacturing. Other enterprises in the samples of 600
households from four cities include everything from television
tuner assembly to the breeding of crickets (which are essential
for feeding ornamental fish and songbirds that are very valuable
in East Asia). The case study evidence suggests that HBEs:
■ greatly increase employment opportunities for
low-income households, particularly women;
■ generate 50-75 percent of all household income
for participating households;
■ occasionally pose threats to health and safety,
though operators are for the most part well aware of these
risks, and take action to minimize the dangers;
■ do not, as is often claimed, bring extra traffic
into residential areas;
■ generate better living conditions — HBE operators
typically have more indoor space than their non-HBE neighbors.
Planners need
to come to grips with the fact that urban areas are vigorous,
changing, challenging, and productive environments. Commercial,
retail, and light industrial uses should be encouraged in
low-income residential areas to enable incomes to rise through
productive home-based livelihoods. Policy-makers should:
■ allow locally managed regulation of HBEs — if
representative local committees vote to allow them in their
neighborhoods, then government officials should not intervene to
close them down;
■ provide electricity with HBEs in mind.
Industrial levels of electrical voltage should be available if
required;
■ ensure that trash collection services are
prepared to expect higher levels of waste generation as a result
of HBEs;
■ allow space for HBEs when allocating land in
newly zoned residential areas. |
Supporting
representative organizations of businesses
The success of local
development strategies is often linked to the degree and strength of
representative organizations of entrepreneurs and workers. These range
from self-help groups for income generation (often registered as NGOs or
community-based organizations), cooperatives, and small-business
associations, to chambers of commerce, sector-based employers’
organizations, and labor unions. These organizations are different from
community or citizens organizations, which are mostly area-based.
Entrepreneurs’ and workers’ organizations tend to be member-based and
organized around a given economic activity across wider geographic
areas.
Although the origins
and motivation of both business and worker organizations differ widely
and are certainly not always aligned, it is essential to strengthen
their voice and participation in economic planning processes and their
role in serving their members.
Street traders’
organizations, as the section on supporting street trading shows, can
become important partners and co-regulators if local governments are
willing to work with them. Similarly, small business associations can
perform delegated functions in tax collection among members, such as in
Ghana (Box 8). A growing number of studies highlight the potential role
that associations, cooperatives, and enterprise networks can play in
supporting and complementing private markets to achieve positive
economic outcomes for the low-income people and for the municipality.
Box 8: Tax
collection through small business associations: Example of a
formalization strategy
The
Industrial and Commercial Workers’ Union (ICU) of Ghana
facilitated a delegated role for small business associations to
collect tax revenues. In return, associations retain a
commission of 5 percent of the annual tax revenue transferred to
the government. Training and advice is provided by the ICU to
strengthen the associations in their negotiations with the
national revenue authority (IRS) about the level of tax
collection among members. To guide this process and ensure
accountability, the following principles were agreed:
i)
each association identifies tax collectors within its membership
to collect taxes from members working in the same trade;
ii)
sector associations register their members with the IRS, with
names and addresses;
iii) associations’ tax collectors are formally acknowledged by
the IRS and given identity cards as IRS representatives;
iv)
estimates for the whole country must be made available for all
the associations prior to collection, so that members are able
to identify their level of taxation from clear parameters;
v)
the IRS compensates associations for transportation and
collection costs and pays a commission of 5 percent at the end
of each fiscal year;
vi)
sector associations themselves compensate their tax collectors.
|
In parallel to
unlocked or hidden individual assets of the poor, local organizations of
the working poor help mobilize and foster social capital. New and
dynamic entrepreneurship cannot be fully realized without building on
the — often informal — networks of people and collectives. Recognizing,
trusting, and empowering these structures is the fundamental basis on
which sustainable economies are built. However, truly representative
organizations with accountable and transparent management structures are
rare. Instead, patronage, clientelism, and sometimes corrupt behavior
characterize many of the traditional interest-based associations. The
challenge is to identify those organizations with true developmental
potential and then strengthen their abilities to engage members, make
their voice heard in policy arenas, and offer valued services to their
members.
Sustainable
development and integration of informal sector workers into the urban
economy is possible when local governments have strong organizations of
informal workers with which to consult and negotiate. Local governments
have a concrete role to play in enabling the development of partnerships
with informal sector workers. Considerable training is required among
local government staff to improve their understanding and recognition of
economic member organizations, particularly those operating in the
informal economy. Training can help facilitate both dialogue and
collaboration between informal sector economic organizations and the
local authorities, to generate a more productive economic environment
and greater integration into the formal economy.
Box 9 summarizes the
situation of women market traders in Ghana.
Box 9:
Kumasi, Ghana
—
Women traders
fight poverty despite local government inaction
Market
trading forms the main occupation for over 70 percent of urban
women in Ghana, and the Kumasi central market (KCM) is the
largest in the country. The KCM performs vital economic
development functions in Kumasi, promoting trade, creating
employment, and generating revenue. In fact, it is the main
source of revenue for the Kumasi Metropolitan Assembly (KMA).
Yet local government marginalizes market traders, especially
women, and the important role of women traders in the urban
economy is largely ignored.
Most women
traders are not among the city’s poorest, because their income
from market trade is instrumental in keeping them and their
households out of poverty. Market income also plays a central
role in strengthening urban women’s financial autonomy. In the
absence of any official trade-related information, market women
rely on social networks to sustain their trade. These social
networks also are essential for the long-term social and
economic security of women trader households. Formal market
associations in the KCM have tended to collapse due to the
inability of their leaders to resolve problems among their large
and heterogeneous membership. Lack of accountability and
communication on the part of the KMA also undermines formal
associations. Moreover, busy women traders have scant time to
engage in formal collective action. Thus, the role of women
traders as leading family income earners in tackling poverty at
the local level remains relatively invisible within formal
sector society and institutions.
There are
clear linkages between household well-being and market trading.
Investment in KCM should be an important poverty reduction
strategy for KMA, but both national and local policy-makers
generally ignore the true economic potential of market trading.
For policies to change, new attitudes towards women’s economic
and social contribution are required, and a breaking of the
political hegemony that fails to support the social and economic
contribution of women market traders. In the meantime, the
women traders of Kumasi are fighting poverty by themselves,
without either the recognition or the support they genuinely
need, deserve, and have earned. |
Strengthening
representation in the informal economy: The role of social partners
Even where they have
the right to organize, informal operators and workers are rarely
organized. They seldom have their own membership-based organizations to
represent their interests. Where they have mobilized and organized
themselves, it has been at the grass-roots or community level, in
self-help groups, or in trade-based associations. Micro-entrepreneurs
and the truly self-employed are more likely to organize than dependent
workers in the informal economy. Even where organizations in the
informal economy do exist, they normally are characterized by fragility,
structural constraints, and limited effectiveness. They are seldom
officially registered or recognized. In addition, they have limited
access to or influence over formal private institutions and public
authorities. Only in a small but growing number of cases are they
affiliated with formally structured national or international
organizations of employers, chambers of commerce, trade unions, or
cooperatives.
Closing the
representational gap is crucial for all concerned. For those working in
the informal economy, the representational gap is an important reason
for their inadequate legal and social protection, along with their lack
of access to productive assets, capital and product markets, training
systems, public services, and amenities. Without effective freedom of
association, they are not able to exercise countervailing powers in
order for their work to be recognized, protected, formalized, and
decently paid.
Established labor
unions and employers’ organizations have a concrete role to play in the
organization of informal economy entrepreneurs and workers. There
are a growing number of initiatives to reach out to those working in the
informal economy. Given the increasing importance of the informal
economy in terms of job creation and economic development within the
context of flexible labor markets and global production systems, both
sides have come to realize that it will be increasingly difficult for
labor unions and employers’ organizations to maintain or improve
conditions in the formal economy without also addressing the informal
economy. The lack of representation by stakeholders in the informal
economy is becoming even more detrimental in terms of their future
economic, social, and political influence.
How labor unions
help informal workers
Labor unions face
significant challenges reaching informal workers, who are generally
“invisible” — scattered, difficult to contact, and often with inadequate
formal schooling. Even when unions identify and contact informal
workers, they find it difficult to make these workers aware of their
rights and of the benefits of unionization. Labor unions often prefer
to help informal workers set up their own organizations and then
establish alliances with them, rather than organize them as union
members. Established unions can provide guidance, training, and other
support to enhance the capacity of informal workers and their
associations in developing organizational structures and management to
help them become effective democratic institutions. Unions also can
train organizations of informal workers to promote social dialogue and
engage in other democratic union-type activities in pursuit of their
members’ interests. Other types of assistance include
institutional support, such as acting as intermediaries with public
authorities or financial institutions, and setting up programs such as
cooperatives that benefit informal workers. An especially important
role for established labor unions is lobbying on behalf of these
informal worker organizations to help them to achieve recognition,
bargaining power, and legal protection from governments and other formal
institutions.
Enlarging the scope
of action of employers’ organizations
In their
representative role, employers’ organizations mainly involve larger
formal economy enterprises. Most employers’ organizations do not
represent employers in the informal economy. But employers’
organizations increasingly recognize that they cannot effectively
promote and protect their interests without enlarging their scope of
action to cover informal entrepreneurs. One important rationale for
employers’ organizations is that informal economy operators are
potential future members, if they can be assisted in growing their
enterprises and entering the formal economy. Many of the barriers that
constrain informal enterprises also adversely affect employers in the
formal economy. As in the case of labor unions, some employers’
organizations have encouraged informal economy operators to form their
own associations. Formal employers’ organizations can assist
associations of informal entrepreneurs in a number of ways: developing a
lobbying agenda specifically geared to the needs of micro and small
enterprises; providing business support (developing business plans,
project design, access to financing) and other relevant services
(personnel management, productivity improvement, basic management
skills, accounting, and entrepreneurship training programs); helping
link micro-enterprises with the formal economy through targeted
procurement; providing a range of information which micro and small
enterprises have difficulty obtaining, including laws and regulations,
and market access and opportunities. In several African countries,
including Kenya, Nigeria, and Uganda, employers’ associations have
helped informal operators to start up and develop their businesses. In
Benin, some 1,600 micro-enterprises in a wide range of trades and
employing 6,500 people have organized into 60 mutual savings and loan
associations. These associations have combined traditional
solidarity-based savings and credit practices with economic
organization. They have succeeded in increasing their capital
formation, and also improved their bargaining position vis-à-vis local
governments.
Tripartite systems
of consultation and negotiation
Finally, it is
important to acknowledge what tripartite partners — governments,
workers’ organizations, and employers’ associations — can accomplish
through social dialogue. It is also useful to remember that in addition
to collective bargaining, other forms of dialogue and collaboration can
be significant. “Voice regulation” through tripartite systems of
consultation and negotiation at the national level or by industry sector
is increasingly recognized as a dynamic and effective means of promoting
efficiency and addressing equity and distributional issues in both the
formal and informal economies. In addition, there is a substantial
diversity of civil society groups, movements, and NGOs providing
visibility and advocacy on informal economy issues. However, these
groups generally do not directly represent people from the informal
economy, as many of them are not membership-based organizations, or they
do not have democratic structures. Some of these groups are very active
and vocal on a national or even international basis, and their
organizing experiences and network structures can be very useful.
Examples of cooperation and alliances between NGOs, labor unions, and
employers’ organizations are increasing.
Conclusions and Recommendations
Conclusions
The urbanization
process will continue to pour millions of generally poor and low-skilled
people into towns and cities — all looking for employment opportunities
to improve their economic circumstances and that of their families.
This influx is creating two acute crises: 1) a job/poverty crisis, as
evidenced by the growth of the informal economy and increasing poverty
levels in cities; 2) an infrastructure and service crisis, as evidenced
by lack of the most basic facilities, especially in the poorer
communities, and the growth of slum areas where most of the low-income
people live.
Despite its
irreversibility, many governments have long been in denial of the
urbanization process, seeing it as a nuisance rather than an
opportunity. This has led to weak planning and policies and a general
reluctance to develop the informal economy, to regularize informal
patterns of settlement, to provide basic infrastructure and services,
and to facilitate the integration of the poor into the urban economy.
The lack of genuine decentralization, policy and institutional
failures, as well as weak governance and lack of accountability to the
local population, at all levels, contribute directly to the worsening of
urban poverty and the exponential growth of a political and social
underclass — as manifested by the growth of slums.
In addition to
suffering low and unpredictable incomes, the urban poor are thus exposed
to the ever-present threat of forced eviction, as well as health hazards
due to bad drainage, waste accumulation, and lack of sanitary
facilities. They bear most of the social and economic costs of high
crime levels and insecurity in their communities. Finally, they are
excluded from many of the attributes of urban life that are critical to
full citizenship, and endure a stigma unknown to the rural poor — the
very fact that they live in a slum settlement.
“Whether cities
actually provide a ladder for escaping poverty or dig a deeper hole for
those at the bottom depends on two main factors: first, whether a city’s
potential to create jobs is liberated or is hamstrung by institutions
and policy conditions; and second, whether city residents have effective
access to land and housing, education, health care, and security, even
if they have erratic incomes, few powerful connections, and unrecognized
status in the city.”(Cities Alliance, 2004 Annual Report).
This article
examined the plight of the urban working poor in three inter-related
dimensions: (i) employment opportunities; (ii) access to basic
infrastructure and services; and (iii) social inclusion. It shows that
policy measures and strategies exist which allow cities to make
considerable progress on all three dimensions, contributing to a more
balanced urban development, in both economic and social terms. Most of
these measures impose no extra financial burden on urban governments.
They require political will, capturing underutilized resources,
developing partnerships, and recognizing the urban working poor as a
resource, not a burden. The five main ingredients of a pro-poor and
pro-employment urban development strategy are listed below.
ü
As
a first step, employment generation should be made a top priority for
urban planners, managers, and decision-makers, in the form of deliberate
policies to promote employment for low-income people.
This implies the
recognition of the urban poor as full citizens with a “right to the
city” and the recognition of the informal economy, where most of them
are active, as an important sector for production, consumption, and job
creation.
ü
Second, employment promotion objectives should be incorporated in all
relevant government policies and programs, and in particular in terms of
infrastructure provision.
The UN Millennium
Project calls for massive investments in infrastructure to meet the
Millennium Development Goals, echoing similar calls by the International
Monetary Fund (IMF) and the World Bank. Such investments are also a
great opportunity for massive employment creation. The point made in
this article and consistently over the years by the ILO is that the
process through which infrastructure is provided should be accorded the
same importance as the end product. In countries where labor is
abundant, capital scarce, and wages relatively low, for many
infrastructure projects it is technically possible, socially desirable,
and economically justified to optimize the use of a resource that is
underutilized and readily available — unskilled or low-skilled labor.
Infrastructure investments can serve as an entry point to start an
employment-intensive growth process “from the inside”. It is within the
reach of national and local governments and international donors to
promote the necessary reforms to that effect.
“It is indeed a
paradox that there should be such underemployment and wastage of talent
where there are needs of incredible magnitude representing hundreds of
millions of work-days and so many people available to do the work.”
(ILO, Cities at Work, 2004).
ü
Third, partnership approaches must be developed between municipal
governments, community-based organizations, and associations of
small-scale enterprises.
Such partnerships
can concern the planning, provision, and maintenance of basic
infrastructure and services such as waste collection and water supply,
the regulation of economic activity including markets, street trading,
and home-based industries, collection of taxes and fees, and ensuring
security. A wide variety of innovative and proven partnerships combine
all or some of the following advantages: (i) job creation for the urban
poor; (ii) improved services and infrastructure; (iii) small enterprise
development; (iv) stronger community-based organizations; (v) skills
development; (vi) creation of a sense of ownership and civic pride;
(vii) improved transparency in the use of municipal resources; (viii)
improved working conditions; and, very often, such partnership
approaches provide (ix) cost-effective solutions to urban service and
infrastructure problems.
ü
Fourth, municipal governments can and should create a more conducive
environment for small enterprises operated by low-income people and
those that provide jobs for low-income people.
Specifically, local
authorities can (i) adjust their laws and regulations to lower the costs
and increase the benefits for people to formalize their enterprises, and
(ii) provide assistance to small enterprises to upgrade skills, and
increase their access to productive resources and market opportunities.
Business security, market opportunities, economies of scale, linkages
between formal and informal enterprises, organization and
representation, as well as access to financial services can be
significantly enhanced by a more positive, enabling attitude by local
authorities.
ü
Fifth, underlying these pro-employment policies is the fundamental
principle of empowering organizations of economic actors and community
groups to participate meaningfully in planning, budgeting, and
implementing urban poverty reduction strategies, and to negotiate their
best interests.
Residents’
organizations (especially of slum dwellers), cooperatives,
small-business associations, chambers of commerce, local labor unions —
these are the institutional partners needed for a representative urban
dialogue.
“For those of us
working on the ground, there is no substitute to creating mass
organizational capacity among the poor to engage these local and global
institutions to bring change that works for the poor.” (Sheela Patel,
Shack/Slum Dwellers International, June 2004).
Recommendations for
coordinated policies and action at the national, municipal, and
community levels
National policies
Ø
Mainstream the employment dimension in macroeconomic policies, Poverty
Reduction Strategy Policies (PRSPs), and decentralization policies;
Ø
Mainstream employment-intensive approaches in infrastructure investment
policies and programs (including appropriate bidding procedures and
small-contractor development);
Ø
Creation of a regulatory and fiscal framework conducive to private
sector development;
Ø
Enable
and finance capacity-building for local economic planning.
Municipal policies
Ø
Recognize the importance of infrastructure for employment promotion and
incorporate the needs of small-scale local economic actors, including
home-based enterprises, in infrastructure planning;
Ø
Target
the employment needs of particularly disadvantaged groups such as youth
and women;
Ø
Establish a pro-poor procurement system that facilitates community
contracting and small enterprise participation in public bidding;
Ø
Systematically consider and adopt labor and local resource-based methods
in infrastructure investment;
Ø
Lower
the costs and increase the benefits of formalization for informal sector
operators;
Ø
Facilitate the access of small-scale enterprises, both formal and
informal, to financial and business development support;
Ø
Develop constructive partnerships with other stakeholders, including
community-based organizations, small-business associations, and local
labor unions, to identify local economic development opportunities and
translate these into action.
Community level
Ø
Mobilize, empower, and build the capacity to engage in community
contracting, including the formal recognition of community-based
organizations (in letter and in spirit);
Ø
Ensure
the participation of women as major stakeholders in all aspects of
project identification, design, and implementation;
Ø
Develop synergies to enhance the employment outcomes of slum-upgrading:
the combination of labor-based approaches, community contracting, small
enterprise development, and infrastructure improvement can provide a
major boost to the local community economy;
Ø
Optimize the mobilization and use of local resources: labor, small
contractors, artisans, building materials, tools, light equipment,
finance, skills, organizational capacities, and local creativity;
Ø
Promote local economic development in and for slums.
Ultimately, what is
needed is the vision and the commitment to bring all stakeholders
together and do the sensible things that are the tasks of any
well-governed city — putting employment on the local agenda, providing
economic opportunity, enabling empowerment, improving basic services and
infrastructure, planning for future needs, expanding local sources of
revenue, promoting and attracting investment — in active cooperation and
dialogue with all citizens, especially the urban poor, both women and
men.
Marja
Kuiper
is a
writer and consultant for the Job Creation and Enterprise Development
Program of the International Labor Organization (ILO) in Geneva,
Switzerland. Kees van der Ree is Director of Poverty Reduction
Through Small Enterprise Development for the International Labor
Organization in Hanoi, Vietnam, and a member of the Advisory Board of
Global Urban Development. Their article is adapted from a background
paper originally prepared for the UN Millennium Project Task Force on
Improving the Lives of Slum Dwellers.
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