Assessing the Direct and Indirect Jobs and Skills Required by Extractives

  • Jobs and skills needs change over time in response to market changes or technological advances, as well as the life cycle of extractives projects.
  • While it may be difficult to distinguish between direct and indirect jobs generated by an extractive project, the International Council on Mining and Metals (ICMM) considers whether the employee normally carries out his/her work physically at the mine site or not.
  • Policymakers have several approaches at their disposal to estimate potential employment generation from the extractive sector, including: bottom up estimates, proxy measures of employment generation from similar projects in other regions, and jobs multipliers. 
  • Factors influencing the job creation potential of a mining investment include: type of ownership; mine size; mining life cycle phase; mining operation type; commodity being extracted, and; the mine’s need for ancillary construction.

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Topic Briefing

Assessing direct job needs can be quite complex for both the mining and oil and gas sectors. Job and skill needs tend to change over time in response to market changes or technological advances, as well as the life cycle of extractives projects.

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In addition, it may be difficult to draw a clear distinction between direct and indirect jobs generated by an extractive project. For example, employment statistics may classify workers at a mine site as construction workers, with the classification depending on the location or nature of the company employing them. The International Council on Mining and Metals (ICMM), which has commissioned several country case studies looking at indirect job creation, has consistently used as a criterion whether the employee normally carries out his/her work physically at the mine site or not. Based on this criterion, a worker at the mine site is a direct employee and a worker who is normally not at the mine site is an indirect employee. While this criterion is not perfect, it avoids some of the statistical problems caused by differing outsourcing practices among mining companies.

To estimate potential employment generation from the extractive sector policy makers can use several approaches, from bottom up estimates that collate project level data gathered from industry sources, to proxy measures of employment generation from similar projects in other countries, to the use of jobs multipliers such as the total number of jobs in an economy created per one direct job. Multipliers vary significantly depending on factors like management style, the capital intensity of a project, the business cycle, and the regional and country context. For example, the International Finance Corporation estimated the job multiplier for the oil and gas industry in the United States at 7.5 while the estimate for Scotland was 13.4. Therefore, the exact number should be interpreted with caution.

Multipliers are difficult and complex to track, especially if the economy does not have an up-to-date input-output table. An “investment multiplier,” assessing the total number of jobs per $1 million invested, also can be informative, and usually exhibit less variation than the standard employment multipliers that estimate indirect and induced jobs.

In the mining industry, for example, factors influencing the job creation potential of a mining investment include:

  • the type of ownership, with publicly-owned mines often employing more workers than market-driven companies;
  • the size of the mine;
  • the mining life cycle phase, as employment levels are much higher during the construction phase than during the production phase, with the types of jobs also changing as a project shifts phases;
  • the type of mining operation, as underground mining typically generates higher employment than open-pit mining;
  • the type of commodity being extracted, as well as the mineral grade; and 
  • the mine’s need for the construction of ancillary infrastructure.

During the production phase of an oil and gas, or mining asset by contrast, governments are able to draw on current and accurate employment figures provided by the mine or oil and gas production site.