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Definition: employment from Routledge Dictionary of Economics

The engagement of a factor of production in a productive activity with the result that it receives a factor income. Employment gives people wages or salaries, and rewards capital with interest or profits. Increased labour force participation makes more persons available for employment; economic growth makes possible actual employment growth. Even in advanced economics with an employed labour force static in size, technological change effects many sectoral shifts in the composition of employment.

Summary Article: Employment from Encyclopedia of World Poverty

EMPLOYMENT CAN BE categorized in many ways: blue-collar versus white-collar, full-time versus part-time, year-round versus seasonal, permanent versus migrant, skilled versus semiskilled or unskilled, unionized versus nonunionized, experienced versus apprentice. Classifications by type of work can be reduced to four basic categories: professional, service, industrial, and agricultural. (Jobs related to transportation and communications might be placed in each of the four categories, while those related to mining, logging, and the exploitation of other natural resources might be categorized as either industrial or agricultural. Government employment would fall largely under service.)

In general, the number of jobs in the professional and service categories increases as an economy develops from an industrial to a postindustrial model. In contrast, if an economy is characterized primarily by employment in the agricultural sector, it has remained, in essence, preindustrial.

At the beginning of the 21st century, the most affluent societies are the postindustrial. Those characterized primarily by industrial employment may be either developing or economically stagnant, with the direction of the economy reflected in a rising or eroding standard of living. Economies characterized primarily by employment in agriculture are generally undeveloped or underdeveloped—and impoverished.

Indeed, in any given economy, the affluence of individual workers can similarly be gauged by the type of work they are engaged in, with professionals being the most highly compensated and agricultural workers being the least compensated. The salaries for the best-paying service jobs typically exceed those for the best-paying industrial jobs, but wages for those employed in the highly unionized heavy industries greatly exceed the wages earned by those in entry-level service jobs that require minimal training or formal skills.

The United States is the world’s largest and arguably the most advanced economy. In 2004, services accounted for 79.4 percent of the $11.75 trillion Gross Domestic Product (GDP); industrial production, 19.7 percent; and agriculture, 0.9 percent. The professional and service sectors employed 76.7 percent of the labor force of 147.4 million workers; manufacturing employed 22.7 percent; and agriculture, 0.7 percent.

Similar percentages are found in other advanced economies. In Japan, services accounted for 74.1 percent of the $3.745 trillion GDP; industrial production, 24.7 percent; and agriculture, 1.3 percent. Of the labor force of 66.97 million, 74.1 percent were employed in the service sector, 24.7 percent in industry, and 1.3 percent in agriculture. In Germany, services accounted for 68 percent of the $2.362 trillion GDP; industrial production, 31 percent; and agriculture, 1 percent. Of the workforce of 42.63 million, 63.8 percent were employed in the service sector, 33.4 percent in industry, and 2.8 percent in agriculture. And in the United Kingdom, services accounted for 72.7 percent of the $1.782 trillion GDP; industrial production, 26.3 percent; and agriculture, one percent. The service sector employed 79.5 percent of the workforce of 29.78 million; industry, 19.1 percent; and agriculture, one percent.

The employment ratios among the sectors of developing economies are much flatter and show a much greater dependence on the agricultural sector. In the People’s Republic of China, industrial production and construction accounted for 52.9 percent of the $7.262 trillion GDP; services, 33 percent; and agriculture, 13.8 percent. Of the 760.8 million people in the workforce, 49 percent were employed in agriculture, 29 percent in services, and 22 percent in industry.

A flattening of the ratios of employment bysector occurs in stagnant industrial economies.

In India, the service sector accounted for 48 percent of the $3.319 trillion GDP; industrial production, 28.4 percent; and agriculture, 23.6 percent. Of the 482.2 million workforce, 60 percent were employed in agriculture, 23 percent in services, and 17 percent in industry. In Brazil, services accounted for 51.3 percent of the $1.492 trillion GDP; industry, 38.6 percent; and agriculture, 10.1 percent. Of the 89-million labor force, 66 percent were employed in the service sector, 20 percent in agriculture, and 14 percent in industry. In Nigeria, agriculture accounted for 36.3 percent of the $125.7 billion GDP; services, 33.3 percent; and industry, 30.5 percent. Of the 55.67-million workforce, 70 percent were employed in agriculture, 20 percent in services, and 10 percent in industry.

A similar flattening of the ratios of employment by sector occurs in stagnant industrial economies, though it might not be immediately apparent in the numbers. In Russia, the service sector accounted for 61.2 percent of the $1.408 trillion GDP; industry, 33.9 percent; and agriculture, just 4.9 percent. Of the workforce of 78.83 million, 65 percent were employed in the service sector, 22.7 percent in industry, and 12.3 percent in agriculture. But the official unemployment of 8.3 percent does not include the two to three times that number who are underemployed. In addition, in 2003, it was estimated that 25 percent of the Russian population were living below the poverty line.

In much of the Third World, such statistics would represent improved economic conditions. In the early 1990s, Algeria’s labor force was estimated at 3.7 million of the population of more than 26 million. Bolivia’s labor force was estimated at 1.7 million out of a total population of over 7 million. The unemployment rate in the Bahamas and in Bangladesh has remained at about 30 percent since the early 1980s, when it represented an improvement over previous levels.

Botswana’s unemployment rate was 25 percent. Jamaica’s unemployment rate has chronically been 25 percent, and it has been much higher in the cities, which like many in the Third World, are surrounded by vast slums.

Rapid urbanization has exacerbated the already dire economic problems facing Third World nations. Approximately one in six of Mexico’s 90 million people live in its five largest cities. In 1990, Mexico City had a population of almost nine million, and by the year 2020, it is expected to be the largest metropolitan area in the world, with about 25 million people. One-sixth of Brazil’s population of 155 million now lives in its five largest cities—almost 11 million in São Paulo and over six million in Rio de Janeiro.

In Côte d’Ivoire, foreign investment and the expansion of industry led to radio and newspaper advertisements touting the benefits of working in the cities. As a result, there was a mass exodus from the countryside. In the cities, fashionable districts complete with skyscrapers, luxurious apartment buildings, and chic nightclubs were suddenly surrounded by crowded districts populated by masses of working poor. Migrant workers from neighboring countries were encouraged to fill the need for laborers in the countryside, but they, too, began to migrate to the cities, creating serious tensions between them and native workers already hard-pressed to secure factory jobs.

Despite the problems created by rapid urbanization, large portions of the workforces in Third World nations are still engaged in subsistence agriculture. In Afghanistan, 68 percent of the population are engaged in subsistence agriculture and raising livestock. In Bangladesh, 74 percent of the population are engaged in subsistence agriculture. In the Himalayan nation of Bhutan, 95 percent of the population are employed in agriculture, even though only 2 percent of the land is arable. Similarly, 82 percent of the population of Burkina Faso are engaged in agriculture, though only 10 percent of the land is arable, and 85 percent of the population of Chad are engaged in agriculture, though only two percent of the land is arable.

More than 85 percent of the export earnings of the central African nation of Burundi continue to derive from coffee. Despite a stable democratic government, Costa Rica experienced up to 25 percent annual inflation rates in the 1980s and 1990s because of a dependence on coffee, bananas, and sugar for export earnings.

The production of these crops has long been controlled by foreign conglomerates, particularly United Brands (formerly the United Fruit Company), which has dominated the production of cash crops throughout Central America for the past century or more. In 1989, the annual inflation rate in Argentina was 3,000 percent and the nation’s foreign debt reached $58 billion, or 70.13 percent of its Gross National Product (GNP).

Many Third World economies are also heavily dependent on raw material exports for their foreign exchange income. In the mid-1990s, 98 percent of Algeria’s export income was being earned from oil and natural gas. In the same period, 77 percent of Bolivia’s reported export earnings were earned from metals (primarily tin) and natural gas. Although per capita annual income in the small island nation of Brunei was $9,600, 99 percent of the sultanate’s export income was earned from petroleum and liquefied natural gas.

In many instances, the main export of Third World nations has been human labor.

Palm oil has long been the major export of Benin, with almost 50 percent of the workforce involved in its production. Despite a sound agricultural base, 60 percent of Cameroon’s export earnings are derived from petroleum. The emphasis on petroleum production has caused severe dislocations of population, with almost 20 percent of the population of over 11 million now living in the two largest cities, Douala and Yaounde.

Most of the new arrivals have difficulty finding work, and cement-block shantytowns stretch for miles around the outskirts of the cities. In the mid-1970s, Mexico sought a rapid expansion of its industrial base and attracted substantial foreign investments on the basis of its high oil revenues. When the price of oil dropped precipitously in the mid-1980s, the nation’s foreign debt ballooned and up to 20 percent of the labor force became unemployed.

Some Third World nations have sought to achieve economic independence and to increase prosperity by nationalizing their natural resources, but these efforts have usually had, at best, mixed results. Gamal Abdel Nasser’s nationalization of the Suez Canal is often heralded as the signal event in such attempts. But because of the withdrawal of British, French, and American financial investments, it eventually led to increased dependence on Soviet foreign aid and economic stagnation in Egypt.

From 1971 to 1973, the Chilean government of Salvador Allende nationalized the entirely foreign-owned copper industry, as well as the coal and steel industries and 60 percent of the banking institutions in the country. An international embargo against Chilean copper led to economic disaster, since almost half of its export earnings were derived from the metal. Allende was subsequently assassinated in a military coup, allegedly encouraged by the U.S. Central Intelligence Agency and financed by such international conglomerates as ITT.

In 1972, Iraq moved to nationalize its oil industry and within three years the government controlled 90 percent of the production. But, again, nationalization discouraged foreign investment and made Iraq dependent on Soviet technical assistance—which did not generate a broad-based expansion of the Iraqi economy. (Nonetheless, a recent study included the interesting fact that if Iraq’s oil-export income since nationalization had been reinvested in the nation’s economic development and industry, instead of being spent on military expansion and Saddam Hussein’s self-indulgent projects, Iraq might now have a GDP comparable to France’s. Instead, the average monthly income has not yet reached three figures.)

Until the late 1960s, three conglomerates—Cerro, International Petroleum, and W.R. Grace—controlled the major industries in Peru, in conjunction with the “40 families,” an elite group of Peruvians. Alarmed at the increasing popularity of the Shining Path guerrillas, the military staged a coup, nationalized the major industries, and instituted agrarian reforms. But the nationalization of industries and the social reforms discouraged foreign investment while raising the expectations of the populace.

Extremely high inflation and foreign debt caused the military to move sharply to the right by the late 1970s. The resulting political repression, in combination with the economic instability, only increased the appeal of the Shining Path. The situation deteriorated steadily from there, until in 1992, President Alberto Fujimori felt compelled to impose martial law.

In many instances, the main export of Third World nations has been human labor. Bangladesh has provided much of the unskilled labor force in Saudi Arabia, the United Arab Emirates, Oman, and Kuwait. Over 25 percent of Botswana’s formal-sector employees have spent six to nine months working in South Africa.

In some instances, the endemic impoverishment in Third World nations has led to desperate sorts of solutions. In the mid-1990s, cacao exports from Colombia were estimated at $1.5 billion annually; the total reported GDP at that time was $4.85 billion. Marijuana has become Jamaica’s third largest export, after bauxite and bananas—with earnings from the three accounting for over a quarter of the island’s total GDP.

Until the HIV/AIDS epidemic, Haiti, one of the poorest countries in the world, was the world’s largest exporter of blood plasma. For a pint of plasma, the donor received $4 and a bottle of soda pop.

  • Economic Growth; Economic Growth and Poverty Reduction Strategy; Employment Policies Institute; Employment Theory; Unemployment; Unemployment Insurance; United States.

  • Iftikhar Ahmed; Jacobus A. Doeleman, Beyond Rio: The Environmental Crisis and Sustainable Livelihoods in the Third World (St. Martin’s Press, 1995).
  • Janet M. Arnado, Mistresses and Maids: Inequality Among Third World Women Wage Earners (De La Salle University Press, 2003).
  • Gary S. Fields; Guy Pfeffermann, eds., Pathways out of Poverty: Private Firms and Economic Mobility in Developing Countries (Kluwer Academic, 2003).
  • Howard Handelman, The Challenge of Third World Development (Prentice Hall, 2003).
  • Rand Hodson, ed., The Globalization of Work (JAI, 1997).
  • Richard Jolly et al., eds., Third World Employment: Problems and Strategy, Selected Readings (Penguin Education, 1973).
  • Gavin W. Jones; Pravin Visaria, eds., Urbanization in Large Developing Countries: China, Indonesia, Brazil, and India (Oxford University Press, 1997).
  • Swasti Mitter; Sheila Rowbotham, eds., Women Encounter Technology: Changing Patterns of Employment in the Third World (Routledge, 1995).
  • A. S. Oberai, Population Growth, Employment, and Poverty in Third-World Mega-Cities: Analytical and Policy Issues (St. Martin’s Press, 1993).
  • Michael Pacione, ed., The Geography of the Third World: Progress and Prospect (Routledge, 1988).
  • Michael Pacione, ed., Urban Geography: A Global Perspective (Routledge, 2001).
  • James Scoville, ed., Status Influences in Third World Labor Markets: Caste, Gender, and Custom (W. de Gruyter, 1991).
  • Ajit Singh; Hamid Tabatabai, eds., Economic Crisis and Third World Agriculture (Cambridge University Press, 1993).
  • Susumu Watanabe, International Division of Labour in the Software Industry: Employment and Income Potentials for the Third World (Geneva, Switzerland, International Labour Office, 1989).
  • Martin Kich
    Wright State University
    Copyright © 2006 by Sage Publications, Inc.

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