Jobs from Extractives
- Jobs cost living standards, raise productivity, foster social cohesion, and are the primary path out of poverty.
- Prospects for local employment generation are significant when considering indirect and induced employment arising from goods and services that extractives companies buy locally.
- Early planning is crucial to maximizing local employment potential since extractive projects often require specialized skills that often take time to acquire.
- Policies leveraging economic diversification through the extractive sector may require stable macroeconomic policies that attract foreign investment, provide more leverage in trade agreements, and improve the financial market.
- Flagship Report Paper Series, Paper 7: Leveraging Extractive Industries for Skills Development to Maximize Sustainable Growth and Employment (African Development Bank, Bill and Melinda Gates Foundation)
- Employment from Mining and Agricultural Investments: How Much Myth, How Much Reality? (Kaitlin Y. Cordes, Olle Ostensson, Perrine Toledano)
- Delivering on the Promise: Leveraging Natural Resources to Accelerate Human Development in Africa (African Development Bank, Bill and Melinda Gates Foundation)
- Unlocking Opportunities for Women and Business: A Toolkit of Actions and Strategies for Oil, Gas, and Mining Companies (International Finance Corporation)
- Local Content Policies: Stimulating Direct Local Employment (Tim Grice)
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Increasing the quantity and quality of jobs within a country is a critical pathway for economic development. Jobs boost living standards, raise productivity, and foster social cohesion, and they are the main path out of poverty. Policy fundamentals such as macroeconomic and fiscal stability, investment climate, and infrastructure affect the demand side of job creation, while education and skills affect the supply side. Policies that promote innovation and human capital development can increase productivity and competitiveness in the economy. Sector-specific, baseline data is necessary to inform these policies.
Extractive industries are often thought of as creating few job opportunities compared to other industries. Often this is correct with regard to direct employment since extractive projects are capital intensive and use relatively little labor. The prospects for local employment generation are rather different when considering indirect employment arising from goods and services that extractives companies buy locally and induced employment arising from goods and services that extractives companies’ employees buy locally. The net effect of an extractive industry project on employment – that is accounting for job losses in competitors projects or industries - can be significant for the local economy as a whole. For example, to estimate the potential local employment effects of a large mining project, it is important to consider the possibility that such project might have negative job impacts on small and artisanal mining in the project area for which operations may be impaired by the larger project.
Job creation in extractive industry projects typically varies over a project’s life cycle, usually peaking during the development phase when infrastructure and engineering work is the most needed. Nonetheless, early planning is important to maximize local employment potential since extractive projects often require specialized skills that may take time to acquire. Figure 1 below provides a visual representation of the employment potential of a typical mining project. Oil and gas projects exhibit similar profiles, although different life cycles.
The ability of an extractive project to create local employment is determined by factors beyond the control of the project. For example, the availability of local staff with the requisite knowledge and experience may require an improvement in the quality of education, changes in labor mobility, and improvement in infrastructure. While policies leveraging economic diversification through the extractive sector may require stable macroeconomic policies that attract foreign investment, provide more leverage in trade agreements, and improve the financial market (or similar but broader policy interventions).