Assessing Induced Jobs Opportunities

At a Glance

  • Extractive projects often “induce” local employment, as employees in the extractive industry value chain drive up demand for local goods and services.
  • The magnitude of this induced employment fluctuates as the number of value-chain employees expands and contracts over the course of a project’s life cycle.
  • While it cannot be directly influenced, induced employment can be encouraged by fostering a vibrant local economy.
  • When considering the effects of the extractive industry on domestic labor markets, it is helpful to take induced employment into account, in addition to those jobs that an extractive project creates directly (via hiring) and indirectly (via local procurement).

Case Studies

Key Resources

Topic Briefing

In addition to the jobs that it creates directly, by hiring employees, or indirectly, by procuring goods and services locally, an extractive project also induces employment. It does this via so-called consumption linkages, as extractive companies’ direct employees, and the employees of the local suppliers they hire, spend their wages in the local market (for example, in shops, or for transport and other needed services).  

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When the International Council on Mining & Metals (ICMM) examined 2007 employment in the Sepon Mine in the Lao People’s Democratic Republic, it found that the mine had induced the creation of 13,110 jobs—more than four times the 3,155 indirect jobs created via local procurement.[1] An ICMM study of Ghana’s Obuasi Mine estimated that it created 20,000–50,000 induced jobs and 1,000–5,000 indirect jobs.[2] 

The number of induced jobs may be lower (and direct or indirect employment correspondingly higher) if a mine or plant provides its employees with accommodation, food, leisure, or other services. This often occurs when an extractive industry site is in a remote area away from population centers, as is common in the oil and gas sector as well as the mining sector. Since induced employment is a result of consumption expenditure, the location of extractive industry employees’ purchases is also 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.

Induced employment is dominated by low-paying jobs that demand minimal skill or formal education and that are often held by women. Since induced employment depends on the expenditure of direct or indirect employees, retail and service sectors often account for a large share of induced jobs. Especially in developing countries, these sectors yield low incomes but have the potential to improve livelihoods for the poorest strata of the population.

Induced employment can only be estimated indirectly. By contrast, general equilibrium models or input-output models can provide good estimates of indirect employment—but the data required for these models are seldom available for induced employment. The Key Resources in this section provide a sample of less direct techniques that can be used.

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: International Council on Mining and Metals, April 2011).

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