By Alexandre Kolev, Head of Unit, Social Cohesion, and Ji-Yeun Rim, Co-ordinator, Youth Inclusion Project, OECD Development Centre
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The Future of Rural Youth in Developing Countries:
Tapping the Potential of Local Value Chains
Rural youth constitute the majority of the youth population today in most developing countries, and their number keeps growing. Most of them are low educated, engaged in low-value added farming, and struggle to find better jobs to escape poverty and hardworking conditions. Only a tiny proportion of rural youth want to keep their jobs, and few work in high-skilled occupations. What is becoming increasingly clear is that rural youth are turning their backs on subsistence agriculture; they have high expectations, do not want to farm like their parents and are lured by the thought of better jobs in urban areas or abroad. As a result, many rural youth end up working in urban areas in low-productive informal activities.
What could break this cycle is growing local and regional demand for processed food from a rising urban middle class in many parts of the developing world. This represents an untapped opportunity to achieve the triple objectives of decent job creation for rural youth, food security and sustainable production. In Africa alone, domestic demand for processed food is growing fast, more than 1.5 times faster than the global average between 2005 and 2015. These trends offer huge opportunities for developing food systems geared toward local and regional markets, much larger than for global markets.
So, what’s standing in the way of achieving this opportunity?
First, integrating rural youth into local value chains remains largely underexploited. Most rural youth engaged in agriculture are currently involved in the production phase, namely farming. Very few have the chance to participate in downstream activities of the value chain in non-farm employment. To a large extent, this mirrors under-investments in agriculture policy and rural development. Whether measured as the share of national budgets allocated to agriculture, road density per square kilometre, access to energy, telephone connectivity, piped water or basic sanitation facilities, under-investment in rural territories in many developing countries is real. This situation denudes small farmers and rural communities of the basic infrastructure and services they need to make their activities more productive and diverse, connected to local and regional markets, and attractive for rural youth.
Second, current approaches to job creation and growth models are not suitable for the majority of youth in developing countries, especially for rural youth. On the one hand, governments and development partners are increasingly promoting youth entrepreneurship programmes in an attempt to create jobs for youth. While this approach may work in lieu of social assistance, only a tiny portion of youth entrepreneurs succeed, and a large number are confined to subsistence activities, working in low valued-added segments of the food value chain.
Third, most developing countries still need to promote domestically more productive and environmentally sustainable agri-food activities. Such activities can meet changing domestic and regional consumption needs, create decent job opportunities for large rural youth populations, and help close the gap between rural jobs and youth aspirations. It is no secret that many developing countries embrace the development of global agriculture as part of an export-led growth strategy, while domestic food systems often fail to keep pace with rising domestic demand, resulting in the need to increasingly import processed foods. Recent evidence, however, shows that the spillover effects of global value chains on the local economy and decent job creation fall short of expectations. The returns in terms of trade gains and upgrading are also disappointing. As global agriculture export markets are highly concentrated and leave little space for new competitors, many developing countries that have embraced the development of global agriculture have been trapped in low value-added global value chains. Only a few developing countries have been able to upgrade in global food value chains.
Given this context, it’s no wonder that a strong business case exists for investing in the local value chain of domestic and regional markets. Why? For one thing, local food processing facilities are more likely to locate in small towns and rural areas to ensure proximity to the production source. This has the potential to create wage jobs for a large number of low- to medium-skilled rural youth. In addition, it can create strong forward and backward linkages with other food and non-food system activities, paving the way for a virtuous cycle of local development.
Unlocking the youth employment potential requires, however, a territorial development approach that provides basic infrastructure and efficient ancillary services, including transport and logistics, in better and more spatially coherent ways. Focusing resources and investments in developing secondary towns would offer new markets to small farmers and processors, while creating job opportunities in non-farm employment. Investments should go into strengthening rural-urban linkages and prioritising transport and marketing infrastructure to improve market access and value addition, reduce post-harvest losses, and expand input market and support services in rural areas. Finally, the more competitive nature of local and regional food markets, the use of more labour intensive technology by domestic small- and medium-enterprises (SMEs), and the existence of lower barriers to entry are likely to yield strong direct and indirect employment effects.
The potential for developing countries to turn the changing consumption patterns of a growing urban middle class into real solutions for rural youth employment is huge. Strategic decisions, investments and policy actions are needed now if we are serious about unleashing that potential.