World Development Report 1984

labor force in most of today's low-income coun- ture-absorbed more than 80 percent of the
tries will go on increasing well into the twenty-first increase in the labor force.
century. Agricultural output and jobs must continue to
In western Europe and Japan, by contrast, the grow rapidly in Kenya: the effective demand for
number of farm workers began to fall when the food is rising at about 4 percent a year, so that
labor force was still largely agrarian, so there were domestic production-or other agricultural exports
never any significant increases in the size of the to pay for food imports-must grow at least at the
agricultural labor force. In Japan, for example, the same pace to avoid draining foreign exchange from
share of agriculture in the labor force in the mid- other sectors (if constant terms of trade are
1880s was about 75 percent-much the same as in assumed). And the rest of the economy has only a
today's low-income countries, and nonagricultural limited capacity to absorb labor. The public sector
- employment grew at between 2 and 3.5 percent a accounted for about two-thirds of the growth in
year in the late 1800s and early 1900s. In these two wage employment during 1972-80-the number of
respects Japan was similar to many low-income schoolteachers rose by more than the increase in
countries today. But the total labor force was grow- manufacturing workers-but its growth is coning
at less than 1 percent a year, much slower than strained by fiscal limits. Industry is relatively small
in developing countries today (see Figure 5.2). So and capital intensive, so its work force is unlikely
only modest rises in nonagricultural employment to expand much.
were necessary to absorb the rise in the rural work These constraints are highlighted by the projecforce.
Between 1883-87 and 1913-17, the share of tions in Table 5.5. In the "worst" case-essentially
the labor force in agriculture fell by twenty per- a continuation of recent trends, with the labor
centage points and the absolute number of farm force growing at 3.5 percent a year and nonagriculworkers
fell by some 1 million. tural employment at 4 percent-Kenya's agricul-
Kenya provides a dramatic contrast with the Jap- tural work force would still be increasing in absoanese
case. Only about 14 percent of the Kenyan lute size even 100 years from now (see also Figure
labor force is in wage employment in the "mod- 5.2). In the "best" case, which assumes the same
ern" economy and about half of them are in the growth in nonagricultural employment but slower
public sector. Between 1972 and 1980 employment growth in the labor force after 2000 (implying a
in the modern sector grew at 4.3 percent a year, decline in fertility starting in the mid-1980s), struchigher
than in Japan in the late nineteenth century tural transformation proceeds at a faster pace.
but somewhat slower than the growth of GDP (4.9 Even so, agriculture must absorb more than 70 perpercent).
But the rate of growth of the total labor cent of the growth in the labor force for the rest of
force was very rapid-3.5 percent. There was some this century. It is only after 2025 that the number of
shift of the labor force into the modern economy, workers in agriculture starts to decline. In the
since growth in modern sector employment was meantime, how to absorb these extra farm workers
faster than in the total labor force. But the shift was productively is a critical issue in Kenya and in
small. Nonwage employment-mainly in agricul- many other countries in sub-Saharan Africa and
South Asia.
TABLE 5.5
Kenya: projections of employment by sector,
Efficiency: allocating limited capital
under two scenarios, 1976-2050 Capital deepening (and associated absorption of
(nmillions of7oorkers) labor into the modern sector) is not the only con-
Einployment
sector' 1976 2000 2025 2050 tributor to economic growth. Last year's World
Development Report highlighted the importance of
Nonagricultural employmentb
Agricultural employment
1.2 3.0 8.0 21.8 making better use of existing resources, as well as
of innovation and entrepreneurship. Promoting
"Worst" casec 3.8 9.9 24.1 56.9
"Best" cased 3.8 9.9 12.4 4.5
a. Unemployment held constant in all years and in both cases
(about 1.2 million workers).
b. Increases at 4 percent a year in both scenarios.
c. Labor force grows at a constant 3.5 percent a year.
efficiency often requires policy reform. For example,
many developing countries have a history of
subsdizng capitl subsiies have discourage
subsidizig capital; subsidies have discouraged
labor-intensive production and led to inefficient
use of scarce capital. Even with reform, efficiency
d. Growth of labor force slows from 3.5 percent a year in
1976-2000, to 2.5 percent a year in 2001-10, to 1.5 percent a year
in 2011-25, and to 1 percent a year in 2026-50.
may not come easily; many technological innova-
tions available to developing countries are labor-
89