Assessing Induced Jobs Opportunities

  • Strategies often rely on a mixture of skills improvement, targeted corporate policies, and reforms intended to create an enabling environment that facilitates the establishment of inter-sectoral linkages.
  • Government strategies for direct employment tend to place the emphasis either on quantitative targets, or on ‘softer’ methods that rely on consultation and facilitation. 
  • Policies supporting the recruitment and development of national human capital can be grouped into three broad categories: those designed to increase the absolute and/or relative number of nationals employed in an organization or workforce; those that promote the development of higher technical and managerial skills for national employees; and those designed to restrict the number of foreign workers and the duration of their employment.
  • Cooperative strategies which focus on collaboration between government and industry tend to be more successful when they mobilize active support from other interested parties such as trade unions, civil society organizations, and lower level government. 
View footnotes

[1] National Economic Research Institute (NERI) and economic staff from the National University of Laos, Oxford Policy Management, and Earth Systems Lao, In depth, Utilizing mining and mineral resources to foster the sustainable development of the Lao PDR, (London: ICMM, April 2011)

[2] International Council on Mining and Metals, Ghana: The Challenge of Mineral Wealth: Using Resource Endowments to Foster Sustainable Development, (July 2007)

 

Key Resources

Topic Briefing

Induced employment or consumption linkages from extractive industries result from the spending effect of direct and indirect employment. In other words, an induced effect occurs when direct and indirect employees spend their wages (for example in shops, or on transport and services). For instance, for the year 2007 in the Sepon mine in Laos, a study by the International Council on Mining & Metals (ICMM) reported an induced employment of 13,110 versus 3,155 people indirectly employed.[1] For the Obuasi mine in Ghana, another ICMM study described an induced employment of 20,000-50,000 versus 1,000-5,000 in indirect employment.[2] This induced effect, however, may be lower (and direct or indirect employment correspondingly higher) if the mine or plantation provides its employees with accommodation, food, leisure, or other services. This is often the situation when an extractive industry site is in a remote area away from population centers, which is quite common for both the oil and gas and mining sectors.

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Induced employment is often dominated by low paying jobs demanding little skills or formal education and are often held by women. Since induced employment depends on expenditure by direct or indirect employees, retail and service sectors often account for a large share of induced jobs. In developing countries, but often in developed ones as well, these sectors yield low incomes but have the potential of improving livelihoods for the poorest strata of the population.

Estimating induced employment can only be done indirectly. As for indirect employment, general equilibrium models or input output models can provide good estimates but are seldom available for the area under study. The resources identified provide a sample of different, less direct techniques that can be used.

In the Zambian study Enhancing Mining's Contribution to the Zambian Economy and Society described in the key resources below, detailed data was available only for four large companies accounting for three quarters of total mining employment in the country. In order to calculate the additional induced employment, it was necessary to make an assumption about the proportion of wages that were spent on locally available goods and services by the employees of the mining companies. A World Bank study used household consumption surveys to conclude that an average share of 43 percent of wages of employees of one mining company went to consumption of domestically produced goods and services. This same share was used for the mining company employees of the four mining companies and it was assumed that the entire share was locally produced.  

The calculations yielded an employment multiplier of 2.33. The induced employment effects were considerably more important than the indirect employment effects (employment multipliers of 2.33 and 1.3 respectively). In the case of one province, the results suggested that mining employment (direct, indirect and induced) accounted for almost all employment in the formal sector.

Finally, since induced employment is created as a result of consumption expenditure, the location of extractive industry employees’ purchases is important. In the extreme case of offshore oil and gas production or mining projects based on a fly-in-fly-out model, consumption expenditure may take place very far from the production site, even in another country. Impacts and Development in Local Economies Based on Mining: The Case of the Chilean II Region found in the key resources below discusses the significance of employee’s transportation behavior and demonstrates how varying assumptions about commuting can change results dramatically.