Building sustainable enterprises, innovation and enhancing productivity
The overall Global Competitiveness Rankings and Absolute Competitiveness Scores (which are the economic compass to measure the countries’ productivity by both the WEF, 2020 and IMD, 2021) of the BIRCS countries are low except for China. According to the ILO (March 2022), about 9.8 per cent of the adult and 28.4 per cent of the youth labour force in the BRICS countries was underutilized in 2019. The share of youth not in employment, education or training (NEET) increased from 14 per cent in 2019 to 16.1 per cent in 2020 for men, and from 36.2 per cent in 2019 to 36.8 per cent in 2020 for women. The gender gap in the labour force participation rate stood at 28.5 percentage points in 2021 and is estimated to remain at this level in 2022. The youth unemployment rate has increased continuously since 2010 and reached a record high of 20.5 per cent in 2021.
Small and medium-sized enterprises (SMEs), both formal and informal, are an integral characteristic of the economies of emerging and developing countries, accounting for about a third of their economic activity, and employing about 2 billion workers (IMF, 2020). However, most are comprised of unproductive firms providing low-paying jobs (La Porta & Schleifer, 2014). As is the case globally, SMEs in the BRICS economies are unable to assume a more strategic role and adequately respond to their growth and development priorities because their productivity is generally low. The low productivity growth of informal SMEs also leads to low-income generation, exacerbates informality and inequality, and poor growth performance, the consequence of which is generational and deep poverty, inequality, and exclusion. Informal SMEs are also regularly facing new challenges in terms of cost, quality, delivery, flexibility and human resource development for their survival and growth. Most are relatively stagnant, employing mostly unskilled/semi-skilled workers, and struggle to transform their informal operations into established businesses.
However, there are significant opportunities for the BRICS countries, as these major emerging economies of the world have a market comprising 41 per cent of the total population of the world. The countries hold 24% of the world’s GDP and more than 16 per cent of the trade in the world.
To navigate the post-COVID-19 challenges, the BRICS Nations should fully exploit their inter-continental ties which gives them the potential to gain 50% of global future GDP within the next decade. The economic and labour market policies should be revisited and modified so as to bring the required changes in the skilling processes. The countries should fully exploit their comparative advantage (including their resources and technological innovation capabilities), and to adjust their policies and development strategies to address these new challenges in order to achieve rapid and sustainable economic development.
The policies and strategies that the BRICS implement should leverage ILO Instruments including the Centenary Declaration for the Future of Work and Recommendation 204, to build sustainable enterprises, innovation and enhancing productivity. The focus should be on creating an enabling environment conducive for entrepreneurship and sustainable enterprises, targeting Small and Medium-sized Enterprises (SMEs) in the productive sectors, which have a multiplier effect and potential for employment growth. The SMEs are globally recognised as the innovative productive drivers and key component to advancing economic growth and long-term sustainable inclusive growth. They account for the majority of businesses and significant contribution to economic growth (over 60% of GDP) and are important contributors (more than 70%) to job creation in emerging and developing economies. The importance and potential of SMEs to promote domestic-driven growth of new and existing industries and to strengthen the resilience of the economy in a competitive and challenging environment is inarguable (ILO, April 2017).
- Mobilising the financial strengths to invest in the economy and, in particular, jobs-rich sectors and Small and Medium-sized Enterprises (both formal and informal) as well as capita-intensive infrastructure development, which is critical for these nations, and has the potential to benefit the rest of Africa.
- Encouraging the application of decent and productive workplace practices;
- Addressing sector-specific challenges through value chain and cluster upgrading, which is linked to training and skills development along the value chain;
- Promoting technology & ways of doing business that are environmentally friendly;
- Build a Workforce of the Future by encouraging life-long learning. Given the fast pace of technological advances, which are disrupting many industry sectors and Business Models, it is common cause that sustained productivity growth and long-term competitiveness will require a more skilled workforce. It is critical for the country and individual enterprises to anticipate and prepare continuously for the FoW.
- Integrating government support for formal and informal SMMEs, start-ups and cooperatives. Govt should be a funder of first resort, with funding linked to productivity outcomes;
- Ensuring the provision of productivity and competitiveness related value-added information and statistics to inform evidence-based planning as well as monitoring and evaluating the impact of our interventions. The Governments should also incorporate an evaluation process that allows SMMEs to assess the productivity benefits they bring; and
- promote a stronger culture of productivity and accountability thereof at all levels - national, sector and enterprise levels, and build awareness of the importance of and new mind-set about productivity in BRICS countries, which could pave the way for many more ‒ and more highly paid ‒ jobs and ultimately a more inclusive society.
Without improvements in productivity, there is no economic growth—either sustained or inclusive. To raise productivity, five factors are critical:
- Enabling policy environment, conducive for entrepreneurship and sustainable enterprises including addressing the productivity and capability challenges faced by SMEs
- Research and Innovation, including the creation of new technologies.
- Education and Skills Development to Building human capital and spread these new technologies and develop the capacity of the workforce.
- Efficiency to promote the effective and flexible allocation of resources for production in various sectors.
- Improving infrastructure, both physical (transports, energy supply, and telecommunication systems) and intangible (public institutions and macroeconomic environment) to support private activity.
These factors will enforce a world of work that allows for the opportunity to establish a solid labour contracts system that effectively formalizes employment relationships, reduces the scope for casual employment and protects workers in non-standard forms of employment. It will strengthen the research and capacity of public labour inspectorates, so they are able to detect and act on labour violations before they deteriorate into forced labour and to promptly detect and refer actual forced labour cases
Promoting labour rights at work and reducing decent work deficits
Founded in the ILO Constitution and re-emphasised in the 2019 Centenary Declaration, social justice remains central in promoting decent work, which entails elements such as organising social dialogue, arranging for social protection, realising fundamental principles and rights at work and promoting full, productive, and freely chosen employment. It is also imperative for the Future of Work. Thus, this priority focuses on promoting the five fundamental principles and rights at work (FPRW) as highlighted by the 1998 Declaration of Fundamental Principles and Rights at Work, i.e., the right to equality and non-discrimination in employment and occupation, the right to freedom from child labour, the right to freedom from forced labour and the right to freedom of association and collective bargaining as well as occupational health and safety in the workplace.
Furthermore, it seeks to build on the Global Forum for a Human-Centred Recovery, which the organised by the ILO in February 2022 to increase the level and coherence of the international response to the profound and unequal impact of the COVID-19 crisis on people globally. Among others, the Forum examined the actions and investments needed to meet the ambition of the ILO Global Call to Action and the Global Accelerator on Jobs and Social Protection, as well as promote the protection of workers and sustaining enterprises. In the aftermath of the pandemic, the haste to achieve rapid economic results has been central in the strategies of many countries. However, the risk of overlooking the rights of workers and the physical environment where they are expected to operate is real. In December 2020, the Committee of Experts on the Application of Conventions and Recommendations (CEACR) urged ILO member states “to protect the dignity and freedom of people at work remain fully valid during the current pandemic and strengthen the resilience of societies building back better”.
The same can also be said under the present conditions of stagflation and geopolitical turmoil. States should strengthen their cooperative and other efforts to ensure the implementation of international labour standards, notably concerning occupational safety and health, working time and wages, many forms of discrimination and the other fundamental principles and rights at work. The Chinese presidency also reaffirmed the importance of protecting workers’ rights within the context of new forms of employment.
The significance of the Declaration on Fundamental Principles and Rights at Work of 1998, as well as the inter-related nature of the five FPRWs and the central role of the Decent Work Agenda in ensuring inclusive and sustainable development (SDG8), cannot be underestimated. The BRICS member countries can optimise South-South cooperation (SDG 17) to assist one another in promoting labour rights at work and reducing decent work deficits to guarantee a human-centred recovery. In this regard, their efforts in improving the economy and the work environment can be a catalyst for combatting poverty, reducing hunger, improving society’s health, and providing better education and skills. The Strategy for BRICS Economic Partnership 2025, adopted during the Russian presidency, stresses that commitment to mutually beneficial cooperation within BRICS can be helpful to the attainment of economic growth and development. Thus, the labour and employment sector can amplify the importance of labour rights and decent work in realising this Strategy and other endeavours aimed towards economic growth and recovery, particularly after Covid and other crises.
The decent work concept also envisages the absence of forced and child labour and non-discrimination in the workplace. Following the successful hosting of the Fifth Global Conference on the Elimination of Child Labour in 2022. The South African presidency intends to place emphasis on forced labour and child labour, i.e., C182 and C138 (see also the Durban Call to Action1) and the elimination of discrimination in the context of youth and women (C.190). BRICS countries can use their combined strength to support the drive towards achieving the goals of ending child labour (2025) and forced labour (2030). In Durban, the social partners committed to scaling up action to accelerate multi-stakeholder efforts to prevent and eliminate child labour, with priority given to the worst forms of child labour by making decent work a reality for adults and youth above the minimum age for work. The ILO’s Decent Work Agenda prioritises four areas, i.e., promoting jobs and enterprise, guaranteeing rights at work, extending social protection and promoting social dialogue.
Expected output: In a world confronted by multi-layered crises and challenges, the importance of rights and standards in the world of work for establishing social justice and decent work for everyone is more than just a matter of choice but requires a conscious effort to ameliorate the damage to socioeconomic outcomes. The labour and employment sector needs to examine the roles of labour rights-friendly environments and decent work that can contribute towards economic growth and recovery in the current conditions of stagflation, rising energy prices, joblessness and low investments.
Universal access to social protection and ensuring minimum basic income grant
The World Bank and the ILO define universal social protection as the integrated set of policies designed to ensure income security and support to all people across the life cycle – paying particular attention to the poor and the vulnerable. Universal coverage and access to social protection are central to ending poverty and boosting shared prosperity by 2030 in line with the Sustainable Development Goals. Universal social protection coverage should be at the core of each of the member countries and guided by the ILO’s social security standards, including the Social Protection Floors Recommendation, No. 202. In response, many countries have started the process of expanding social protection coverage amongst their population and significant progress has been made in this regard.
The BRICS countries are not different in this regard. During the LEMM held in China (2017), the labour ministers endorsed the BRICS Social Security Cooperation Framework, which outlines principles, objectives, areas and methods of cooperation. And the Memorandum of Understanding on Cooperation in the social and labour sphere was signed in South Africa (2018). This instrument is aimed at facilitating BRICS countries to share knowledge and implement joint programmes on matters of labour and employment, social security and social dialogue. The BRICS Network of Labour Research Institutes will contribute to the 2023 programme by conducting a joint study that will aim to assess country situations in BRICS with the aim of closing gaps identified in their social security coverage, see Appendix 1.
Universal social protection includes adequate cash transfers for all who need it, especially: children; benefits/support for people of working age in case of maternity, disability, work injury or for those without jobs; and pensions for all older persons. This protection can be provided through social insurance, tax-funded social benefits, social assistance services, public works programs and other schemes guaranteeing basic income security. Likewise, various BRICS member countries have embarked on a number of measures in an effort to ensure that the goal for greater inclusivity and access to social protection amongst its citizens. For example, South Africa has a contributory and non-contributory social protection system which covers the working and non-working sectors of the population. The ILO reports that social protection coverage rates are above the region’s average and comparable to other BRICS countries.
Access to health care is granted either through the public health system, funded through general taxes or through contributory medical schemes, which cover employees in the public or private sectors. The latter cover 17% of the population (2018). Health outcomes are low due to inequities between the public and private sectors. Tax-financed social assistance is mainly provided through the Child Support Grant (means-tested, covers over 12 million children), the Disability Grant for working-age persons, and the Older Person’s Grant (means-tested grant for pensioners over 60, covered 3.2 million in 2016). Mandatory social insurance covers unemployment, sickness, maternity benefits, invalidity, and employment injury, although workers in the informal economy are largely excluded. Contributory pensions are provided through private providers.
Sixty-one per cent of the global workforce is still made up of informal workers or workers in precarious forms of employment, with little or no access to social protection, 55 per cent of the world’s population (4 billion people), lack any form of social protection, and an additional 26 per cent is covered only against some forms of economic insecurity. In a country such as South Africa, the reality is that almost 3 million vulnerable people in the informal sector or those who have never worked and contributed to the Unemployment Insurance Fund (UIF) before. The UIF only covers around 26.5 per cent of the working-age population and 37 per cent of the labour force. Among many suggestions, an intervention such as the minimum basic income grant may be useful in closing the hole in the social security systems of many countries and stabilising household incomes. According to Viviene Taylor, who chaired the Taylor Committee of Inquiry into a Comprehensive System of Social Security for South Africa, “A basic income is the most efficient means of achieving a redistribution of income.” Thus, the aftermath of the pandemic and persistent economic hardships demands a new approach to improving the conditions of unemployed people and informal workers.
The COVID-19 pandemic has been deemed by most economic experts as the worst economic event since the Great Depression of 1929. According to the United Nations, the pandemic and the procedures put in place by various countries to protect people could not protect people but led to a downward spiral. Ultimately this pushed an estimated 115 million additional into extreme poverty in 2020, and 35 million more may follow this year. Olivier De Schutter, presenting to the 47th Session of the Human Rights Council, on 30 June 2021, in Geneva, Switzerland, indicated that the reality is that all countries were caught unprepared by COVID-19. The big question, however, becomes what should be done to ensure that everyone is ready or prepared when the next global pandemic hits. Universal access to social protection and ensuring minimum basic income grant have the potential to kickstart this readiness and also can assist in decreasing poverty and hunger among individuals and households worldwide.
Promoting decent work and closing the skills gap in the informal economy
This activity is related to Priority 1, and productivity in particular, but goes further to recognise the informal economy as an integral part of many countries, including the BRICS economies. Thus, efforts to create decent work and the provision of skills should also cater for workers employed in the informal economy. Informal employment includes all persons engaged in informal sector enterprises (non-registered) as well as informal employees in formal firms and in private households whose employment relationship is, in law or in practice, not subject to national labour legislation, income taxation, social protection or entitlement to certain employment benefits. In 2018, the ILO estimated that over 60 per cent of the world’s working population is employed in the informal economy, and that the share of informality is much higher in developing countries compared to Europe, for example.
Therefore, the reality for many people in developing countries is such that the informal economy remains the only prospect of employment. As such, developing countries should commit resources and energies to promoting vocational education and training to improve working conditions and boost incomes in the informal economy. Growing awareness of the importance of the informal economy can be a major step towards developing approaches for combating poverty.
At the 104th Session of the International Labour Conference (ILC) in 2015, governments’, workers’ and employers’ representatives came to a consensus that the transition from an informal to a formal economy is a fundamental means towards decent work for all, see the ILO Recommendation R204 (R204). It recognizes that it is important to preserve and expand the creativity, dynamism, skills and innovative capacities of workers and economic units in the informal economy. It calls on members to provide incentives for effective transitions through education and skills programmes, and to recognize prior learning such as through informal apprenticeship systems, thereby broadening options for formal employment. On the other hand, the World Bank’s 2018 World Development Report stresses the particular relevance of vocational education and training in informal enterprises for developing countries. UNESCO’s 2013/14 ‘Education for All Global Monitoring Report’ also recognises that “education is a keyway of helping individuals escape poverty and of preventing poverty from being passed down through generations.
It enables those in paid formal employment to earn higher wages and offers better livelihoods for those who work in agriculture and the urban informal sector.” Nonetheless, the relevance of the informal economy is that it provides employment to women and youth in both urban and rural settings. As such, skills development systems should improve access to relevant and quality skills and lifelong learning for learners and workers in the informal economy, and initiatives should target a wider net to make up for the lack of fundamental skills as a way of ensuring that the affected groups enter and complete at least the early stages of secondary education and thus acquire the necessary skills to operate in the informal economy. The emphasis on skills for workers in the informal economy does not water down the importance of R204 but merely recognises the sector’s role in job creation and poverty alleviation. Closing the skills gap in the informal economy is essential for reducing decent work deficits in the informal economy and strengthening the ability of individuals and enterprises to enter into the formal economy as a mean to achieve decent work.
A 2016 ILO study, which followed up on the conclusions of the Meeting of Experts on Non-standard Forms of Employment held in February 2015, provides four broad categories of atypical forms of employment, i.e., temporary or casual employment; part-time work; temporary agency work and other multi-party employment relationships; and disguised employment relationships and economically dependent self-employment. While informal jobs and non-standard forms of employment are two different notions, compared to workers in open-ended full-time employment, employees in non-standard forms of employment are 1.5 to 4.5 times more likely to be in informal employment. For developing countries, the differentiation between atypical forms of employment and informal work is complicated by their distinctive labour markets that differ considerably to those of developed countries.
The ongoing debate on the non-conventional forms of work should include their high exposure to the risk of informality and their convergence in that sense to usual forms of informal employment, including because both pose relatively similar challenges for social and labour protection systems. In some countries such as South Africa, and to some extent in Latin American countries, “the links between the formal and the informal are more intense and complex than those described in the ILO’s initial formulation of the informal sector…” (Abramo, 2022: 16). Thus, the separation either between the firms, or between formal and informal workers is artificial since they “coexist in an economic continuum where most segments of the informal economy have direct or indirect production, trade or service links with the formal economy”.
The prevalence of decent work deficits tends to be concentrated at the lower end of this continuum. This situation resembles the connection between developing countries and developed countries in global supply chains. Allain, (2013) argue that informal forms of work intensify closer the bottom parts of the chain. Therefore, rolling out the critical skills in the informal sector can contribute to supply chain upgrading in developing countries. 4 ILO. 2020.
Expected output: The ILO recognises the relationship between informality and decent work deficits, including regarding the five FPRW elements. BRICS countries should assess how they can progress toward decent work in informal settings, particularly the provision of skills, job and income security, social protection and occupational safety and health. The lessons learned from this exercise can provide some understanding of how to deal with “atypical” forms of employment in both developed and developing countries.