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IMF tells policymakers to raise productivity for growth

Author: PTI/Tuesday, April 10, 2018/Categories: Global

IMF tells policymakers to raise productivity for growth

By Lalit K Jha

Washington - The IMF today urged policy makers to raise productivity towards supporting their goal of equitable growth, as the declining share of manufacturing jobs in overall employment has been a concern for policymakers and the broader public alike in both advanced economies and some developing economies.

"The goal of supporting equitable growth would be better served by policy efforts to raise productivity across all sectors and make the gains from higher productivity more inclusive," the International Monetary Fund said in its release of the World Economic Outlook ahead of the annual spring meeting of the IMF and World Bank next week.

Facilitating the reallocation of labour to productively-dynamic sectors, including by removing barriers to entry and trade in the service sector and supporting the reskilling of workers affected by structural change, is crucial to raise productivity and combat inequality, the IMF said.

It said there is new evidence on the role of manufacturing in the dynamics of output per worker and in the level and distribution of labour earnings.

The report concludes that a shift in employment from manufacturing to services need not hinder economy-wide productivity growth and the prospects for developing economies to gain ground toward advanced-economy income levels.

It also concludes that while the displacement of workers from manufacturing to services in advanced economies has coincided with a rise in labour income inequality, this increase was mainly driven by larger disparities in earnings across all sectors.

The declining share of manufacturing jobs in overall employment has been a concern for policymakers and the broader public alike in both advanced economies and some developing economies, it said.

"This concern stems from the widely held belief that manufacturing plays a unique role as a catalyst for productivity growth and income convergence and a source of well-paid jobs for less-skilled workers," the IMF said.

According to IMF, in many countries, manufacturing appears to have faded as a source of jobs. Its share in employment in advanced economies has been declining for nearly five decades.

In developing economies, manufacturing employment has been more stable, but among more recent developers it seems to be peaking at relatively low shares of total employment and at levels of national income below those in market economies that emerged earlier.

The share of jobs in the service sector has risen almost everywhere, replacing jobs in either manufacturing (mostly in advanced economies) or agriculture (in developing economies).

From a long-term economic perspective, the shift of capital and labour into different forms of economic activity is accepted as "structural transformation" — the natural consequence of changes in demand, technology, and tradability.

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