Labor market policies must consider the complexity of poor people’s lives

Source: UNDP, Oxford Poverty and Human Development Initiative

Poor people’s lives are complex. To be successful, labor market policies targeting the poor must therefore be designed and implemented differently than for other target groups. Holistic approaches are needed that simultaneously address multiple barriers to employment. Moreover, service delivery must recognize “scarcity mindsets” of people in poverty and therefore make enrollment and attendance as easy as possible.

By Kevin Hempel | November 2022

UNDP recently invited me to be part of their KnowTalks that took place during the Frankfurt International Book Fair 2022. The topic was “Multidimensional poverty: Implications for labor market policies”.

While poverty is often understood and measured based on income, the concept of multidimensional poverty looks at the various deprivations experienced by poor people in their daily lives – such as poor health, lack of education, inadequate living standards, disempowerment, etc.

For those interested in the topic, here is a recap of my interview with moderator Stephanie Boustany (UNDP). The session took place on October 21, 2022.

Stephanie: The latest Global Multidimensional Poverty Index 2022 was just released earlier this week. The data suggests that multidimensional poverty is most prevalent in Sub-Saharan Africa and South Asia. Do you think the concept of multidimensional poverty is also useful in other regions, including richer countries?

Kevin: Absolutely. You are right, if we just look at the official data the way the Global Multidimensional Poverty Index is measured, then one might think that this isn’t an issue in Europe, the Middle East, or East Asia for example. Countries like Serbia, Jordan, or Thailand have less 1% of their population in multidimensional poverty according to that data.

But this data reflects the specific indicators used for the global index. Middle- and higher income countries may not face some of the most severe deprivations, such as high child mortality or lack of access to drinking water, but there are still many people who face multiple deprivations across different areas of life. That is also why country-level studies of multidimensional poverty take additional poverty dimensions into account, such as safety and social inclusion.

Stephanie: So how do you think the concept of multidimensional poverty can be useful for policymaking?

Kevin: I think the biggest value added from looking at poverty not only in a monetary way, but across multiple areas of life, is that it helps us understand the complexity of poor people’s lives. And that broader understanding is key for policymaking. You cannot design good policies and programs unless you understand the people you are trying to serve.

But the truth is that we are often not very good at that. The people who design the policies and programs are very different from the people they are trying to serve. Even with the best intentions in mind, we often lack the understanding, empathy, and humility to really grasp the complexity of poor people’s lives. And because we don’t fully understand the reality of their lives, many policies and programs don’t work – be this in the areas of health, education, and also labor market policies.

Stephanie: How does this common lack of understanding people’s situation manifests itself in labor market policies?

Kevin: Let’s take the example of so called “Active Labor Market Policies”. These are policies and programs intended to get people into work and raise their income. They include job search support, skills trainings, self-employment assistance, subsidies to employers, or temporary public works schemes.

If we have a narrow perspective of poverty, we may say: These people are out of work. They don’t have money to feed their families. So let me offer them one of these programs, let’s say a 6-month technical training, because we know that they have low levels of education.

But if people don’t have access to information, they may not even find out about this program. Even if they do, how can they get to those trainings if they live far, and their mobility is limited? If they face time constraints due to household and caring responsibilities, does the schedule of the program work for them? If a woman lacks agency, i.e., the power to make her own decisions, is the husband supportive to let her attend? And if people live in a very stressful, overcrowded household, is it realistic that they can regularly attend? Even if they somehow manage to get through a program, their living conditions are still the same. Can they realistically keep a job even if they find one?

There is also another factor that is typically overlooked: There has been an increasing amount of research in the last 10+ years recognizing that when people have less than they need and face significant stress (e.g., financial worriers), it creates a “scarcity mindset”. This mindset makes people focus on that challenge (e.g., lack of food, safety concerns), consuming brainpower, or “mental bandwidth”, which diminishes their ability to pay attention, process information, plan ahead and take decisions. Therefore, people facing multidimensional poverty don’t just lack things, they are also much more likely to have limited mental resources available to engage with a labor market program or a job. Imagine yourself trying to study or work when you are sick, hungry, in the middle of a move, or with children distracting you. We all know that it’s almost impossible. But that’s nothing compared to full-blown poverty.

Thus, a narrow view of poverty doesn’t allow us to design labor market programs that work. This often results in low enrollment, high drop-out rates, limited labor market integration, and low job retention.

Stephanie: So, what do we need to do?

Kevin: If we want effective policies and programs, the first thing to do is to put enough effort into the initial analysis of the target group. I like to use the medical field as an example. A doctor is good if (s)he takes the time to come up with a good diagnosis, prior to suggesting any treatment.

Data like the one from the GMPI can help. But good data on the most vulnerable may often not exist, especially in many low- and middle-income countries and at subnational level. So we may often need to collect it first. We also need to immerse ourselves in the target group’s environment to at least get a glimpse at what they experience at a daily level, e.g., by shadowing them, a common tool in consumer research and human-centered design.

Those organizations who take the time and have developed a deep understanding of their target groups also come up with effective approaches to improve their situation.

Stephanie: You mention “effective approaches”. What does an effective approach for labor market policies look like?

Kevin: There is no “one size fits all”. It depends on the specific circumstances of the people you are trying to serve in the local context. But there is a common thread to effective approaches when targeting the most vulnerable. Policies and programs need to be comprehensive and integrated.

There is a nice quote in the new Multidimensional Poverty Report by a health worker in Honduras: “Focusing only on health will not work; family income and housing conditions also limit a child’s development and increase the risk for undernourishment.” The same is true for labor market policies. Narrow labor market programs usually don’t work, because they do not take into account the multiple deprivations people face. You need to be holistic.

Let me give you an example: Take the labor market integration of the Roma minority for instance. They are present in many European countries and face some of the poorest living conditions. They typically face:

High levels of illiteracy
Limited formal work experience
Physical and mental health problems
Low aspirations to work
Lack of assets, e.g., computer, internet
Live in substandard and overcrowded housing, with poor basic infrastructure
Lack of networks outside Roma community
Traditional gender roles
Social welfare regulations discourage formal work (loss of social benefits)

So, what are some of key elements when trying to support their labor market integration?

Targeted outreach: Going to where they are, through stakeholders they trust (e.g., Civil Society Organizations)
Continuous individual assessment and action planning: Understand their life circumstances, strengths, and barriers to employment (incl. health, family situation, etc.)
Personalized and intensive counselling and coaching: At individual, group and family level (often for 6-12 months), to build confidence, connections, supportive environment at home, etc.
Provide/Connect with other social services: administrative procedures (e.g., ID, bank account), healthcare, mental health counselling, debt-counselling, etc.
Job search assistance
Activation measures: a combination of several activation measures may be required (e.g., initial skills training followed by on-the-job training, wage-subsidy or start-up support)
Employer services: develop a network of partner companies that can support activation measures (e.g., internships, on-the-job training) and subsequent employment transitions for Roma
Post-placement support: The transition into support measures and jobs is very fragile, hence onboarding support for at least 3 months is often essential to identify challenges early on and prevent drop-out
Ideally, at the system level, one also needs to work on the rules and regulations of social assistance, so that they don’t immediately lose all their benefits when starting to work.

You can see that while there are elements of traditional labor market support (job search assistance, activation measures), the approach is much more holistic. A similar holistic approach is often also used for other vulnerable and marginalized groups, such as long-term unemployed or refugees.

Stephanie: You mentioned earlier that one of the commonly overlooked factors is that, given the complexity of their lives, people living in poverty may struggle to pay attention and plan ahead. How does that factor into a successful program approach?

Kevin: You are absolutely right. This is a key element when thinking through service delivery.

My short answer would be: Make it easy. While the overall approach needs to be holistic, from the perspective of the user (the poor person), everything should be as easy as possible, so processes need to be designed accordingly. Outreach: Go to where they are. Registration: Help them fill it out, if needed. Attendance: Organize activities close to where the target group lives or help them get to where the activities take place. Etc. We need to take out as many “hassles” as possible.

User experience matters to all of us. But given the complexity of poor people’s lives, a poor user experience and even the smallest hassles are much more likely to affect them compared to the average person. So, we must be extra aware of that.

Stephanie: There is a huge skills gap, and some sort of poverty that is related to skills deprivation. People are not qualified to enter the job market. What can governments and development agencies do to support these people and help bridge this skills gap?

Kevin: Yes, the lack of skills is likely to be barrier for poor people to successfully get and keep decent employment. But we need to unpack what we mean by “lack of skills” to be able to help:

First, if there is a lack of basic schooling, then we are often facing an issue with basic literacy & numeracy. Low literacy levels directly affect how a program must be designed (e.g., use of more pictures in sessions)
Second, when people have low basic schooling, they may also not have been able to receive at least formal vocational training. So technical skills may also be lacking.
Third, there are likely also several socioemotional skills that are not well developed, but that are key for labor market success, such as self-esteem, self-management, and some interpersonal skills (communication).

Once we understand these deficits, we can integrate adequate measures into programs by governments and development agencies. This can include second-chance education (to enhance literacy), individual and group counselling (to foster socioemotional skills), and targeted technical training in line with labor market needs.

But then again, as mentioned earlier, skills deficits are just one of the barriers poor people face. Just improving skills doesn’t work if the other issues are not addressed. That’s why, contrary to less disadvantaged target groups, we need more comprehensive programming.

Let me give you another example: The “Graduation Approach”. It is a model at the nexus of social assistance and labor market policies targeted to the poorest. It has been tested in many countries across the world and scientifically proven to be very effective. This model typically includes:

Basic food or cash support to stabilize households and help them meet their most basic needs.
An asset to stimulate income generation, such as livestock or goods to start a small store.
Training on how to manage the asset.
A savings account to help people put away money for future investment or to use in an emergency.
Regular coaching visits to build confidence, reinforce skills, and help participants handle challenges.
Health education or access to healthcare to stay healthy and able to work.

You can see that this approach includes building skills, but it also addresses other dimensions of poverty incl. the lack of assets, health problems, etc.

About the author:

Kevin Hempel is the Founder and Managing Director of Prospera Consulting, a boutique consulting firm working towards stronger policies and programs to facilitate the labor market integration of disadvantaged groups. You can follow him on LinkedIn and Twitter.