How Trade Can Create More and Better Jobs: A Global Perspective

A new report, Leveraging Trade for More and Better Jobs by the World Bank, analyzes how trade impacts employment, wages, productivity, and job quality across various countries. It reveals that trade expansion generally boosts job creation, labor earnings, and productivity, especially in developing nations. However, these benefits are not uniformly felt in low-income countries, where structural challenges limit trade’s potential. The report suggests that trade policy alone is insufficient and calls for complementary strategies to maximize job creation and improve living standards.

The Link Between Trade and Job Creation: A Global Analysis

Trade has long been heralded as a critical driver of economic development, capable of lifting millions out of poverty and driving employment in diverse sectors. But in recent years, debates around globalization have brought into question whether the broad benefits of trade reach all segments of society. A new report by the World Bank, titled Leveraging Trade for More and Better Jobs, provides an evidence-based analysis of trade’s impact on employment, labor earnings, productivity, and job quality across different countries and income levels. Drawing on data from 1995 to 2019, this comprehensive study reveals both the potential and limitations of trade in fostering economic growth and job creation.

Trade as a Path to Better Employment

The report confirms that countries with higher exposure to trade, particularly through exports and participation in global value chains, tend to experience substantial employment growth. This trend is especially pronounced in developing nations where exports can directly contribute to job creation and wage increases. The analysis shows that trade-driven sectors such as manufacturing and business services have seen the highest growth in employment levels.

For example, in countries like China and India, the number of jobs linked to export activities increased significantly until the global financial crisis of 2007. Although the pace slowed afterward, the overall trend has been positive. Notably, firms that are engaged in international trade employ a higher proportion of women, suggesting that trade can be a catalyst for gender equity in employment. Women’s participation in the workforce is shown to increase markedly in firms that are connected to global markets compared to their non-trading counterparts.

However, while trade has created more opportunities for women and overall employment, these benefits are not uniformly distributed. Countries at lower levels of development often struggle to replicate these successes due to structural barriers and an over-reliance on commodity exports. These economies tend to generate fewer jobs from trade and show less improvement in wage equality.

Boosting Productivity and Job Quality Through Trade

Beyond job numbers, the report delves into how trade can enhance job quality and productivity. Labor productivity, a key indicator of economic health, rises significantly as export volumes grow, particularly in low-tech manufacturing and agriculture sectors. This trend is encouraging for developing economies, where unskilled and semi-skilled workers stand to gain the most.

Nevertheless, the report also highlights that the productivity boost from trade has weakened since the 2007 financial crisis, especially in low-income countries. The reasons behind this decline are complex and multifaceted. Factors such as technological advancements and increased capital intensity in production have made it harder for less-developed countries to keep pace. While global value chains offer opportunities for productivity gains, they also raise the bar for participation, requiring higher skill levels and investment in technology.

The quality of jobs linked to trade has also improved over time. The share of salaried and formal jobs has increased, transitioning workers from low-paying, informal roles to more secure and stable employment. Job quality, as defined by higher wages and better working conditions, is further enhanced as countries move up the value chain, producing not just goods but also engaging in higher-value activities like engineering, finance, and professional services.

Trade Alone is Not Enough: The Need for Supportive Policies

Despite the many positives, the report stresses that trade policy alone is not sufficient to deliver sustainable job growth. For low-income countries, the positive effects of trade are often muted due to a large supply of unskilled labor and a reliance on capital-intensive industries. Without complementary policies, such as investments in education, skills training, and infrastructure, trade may not achieve its full potential in improving living standards.

The report calls for a balanced approach, suggesting that policymakers focus on strengthening human capital, creating a more conducive business environment, and enhancing local market integration. For instance, developing countries can benefit significantly from investing in skill development to enable their workforce to participate in more sophisticated global value chains. Additionally, spatial policies that connect rural areas to urban centers can ensure that the benefits of trade reach even the most remote parts of a country.

At the same time, the report underscores the importance of a stable global trading system. Rising geopolitical tensions and protectionist policies have strained the rules-based international order, making it harder for developing countries to access global markets. The World Bank’s analysis suggests that preserving and enhancing this system is crucial to maintaining the momentum of job creation and economic growth driven by trade.

Trade as a Tool for Inclusive Growth

The findings in Leveraging Trade for More and Better Jobs paint a nuanced picture of trade’s role in job creation. While trade can undoubtedly generate more and better jobs, particularly in developing economies, its success depends heavily on supportive policies and a stable global trade environment. For policymakers, the challenge lies in ensuring that trade policies are complemented by broader strategies aimed at skill development, economic diversification, and inclusive growth.

Ultimately, as countries continue to navigate the complexities of globalization, leveraging trade to create good jobs will require more than just open markets. It will demand a concerted effort to build a robust policy framework that maximizes the benefits of trade while minimizing the risks for vulnerable populations. By doing so, trade can remain a powerful force for economic development and poverty reduction in the decades to come.