How the Private Sector Can End Poverty

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Over the past 25 years, tremendous progress has been made in lifting people out of poverty all over the world. In fact, the Millennium Development goal of halving poverty around the world by 2015 was achieved 5 years ahead of schedule, and this achievement is in large part attributable to the private sector.

Strong economic growth and job creation by the private sector have played a very important role in reducing poverty thus far, and, according to World Bank president Jim Yong Kim, the private sector will continue to drive global alleviation of poverty in the future.

However, he stated that the road ahead would be more difficult, now that many “low-hanging fruit” have already been picked. Furthermore, it is estimated that some 600 million new jobs will have to be created by 2020 to keep up with population growth. A recent report by the International Finance Corporation showed that 90% of jobs are provided by the private sector.

The report, which provides further insights as to how the private sector can end poverty, also showed that if the goal is poverty eradication, then the focus should be on job creation not by small- and medium-sized enterprises (SMEs), but by larger firms.

This is because larger companies are more productive, pay higher wages, and create a higher volume of better jobs. As a result, more effort should be directed towards helping SMEs grow.

Another important factor related to creating higher employment is training. In the study, more than one-third of examined companies were unable to hire people with the necessary skills. This means that job creation alone is not sufficient – people entering into the workforce require appropriate support and training.

This important issue could be addressed, in part, by international aid. Development organizations that provide skills-based training and financial support could link growing companies and untrained workers. This aid is essential to build and develop economies that can sustain growth over time.

– Caroline Poterio Martinez

Source: People’s Daily, World Bank
Photo: Flickr

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