Links between Employment and Poverty in Cambodia

This paper explores labour market structure and employment links to poverty in Cambodia.
Employment elasticity of growth, labour productivity and real wage growth are
the main indicators of the labour market situation, while probit models
estimate the connection between household employment and poverty likelihood.
The paper combines macro and micro data to perform a descriptive analysis. For
probit estimation, it uses the Cambodia Socio-Economic Survey (CSES) 2007-11.
The results show that agriculture, albeit with a slow growth rate, absorbed a
big part of the labour force, while the sector’s growth was driven mainly by productivity
increases, as was that of services. Industry grew rapidly, but its capacity to
employ labour was relatively small. The growth rate of industry depended on
employment levels within the sector rather than on increases in productivity.
Note that female workers had less chance of being employed than male workers: a
1 percent rise in GDP would increase the demand for female labour by 0.65
percent and the demand for male labour by 0.71 percent. The labour markets in
industry and services were very competitive: growth in real wages rose along
with increases in labour productivity, implying that expected real wages would
increase with higher labour productivity and vice versa. In this case, firms
seem to have benefited from hiring more labour to expand their outputs as long
as wages remained manageable. This was not the case for agriculture, where
changes in real wages and productivity reflect the possibility of labour being discarded.
Employment creation in services is found to help the poor to have a better
chance of overcoming poverty, but this is not the case in agriculture and
industry. From the empirical results, households employed in agriculture have a
higher chance of being poor than those employed in industry. Factors that help
workers to avoid poverty are land and education. The study suggests that macro
policy should seek to make farmland more accessible to farmers, and that
investment in education should be increased so that every citizen at least
finishes primary and lower secondary education, to increase workers’
capabilities and productivity.