Today’s economies increasingly rely on the service sector, especially that takes place in developing countries where industrial growth does not always keep pace with the need for job creation. Kazakhstan, as a rapidly developing country, faces a similar challenge: despite industrial progress, labor-intensive service sectors play an increasingly important role in generating jobs and supporting economic growth. In the “Servicing Development: Productive Upgrading of Labor-Absorbing Services in Developing Economies” report by the National Bureau of Economic Research (NBER) the authors Dani Rodrik and Rohan Sandhu explore approaches for improving productivity in labor-intensive service sectors. Their recommendations include four key strategies: supporting large companies, encouraging small businesses, implementing technology to enhance labor productivity, and creating comprehensive vocational training programs.
For Kazakhstan, adapting these strategies to local conditions is crucial for improving productivity and creating sustainable jobs in the service sector. This article will discuss how these recommendations can be applied in the context of Kazakhstan and what steps the country can take to ensure growth in productivity and employment in labor-intensive sectors.
Encouraging Large Companies and Partnerships in the Service Sector
Large companies often have a significant impact on the productivity of labor-intensive sectors, especially when they can scale up and develop local supply chains. The report indicates that encouraging large companies to create jobs and develop local infrastructure can help developing countries effectively utilize labor resources. In Kazakhstan, the government could support such companies by offering tax incentives, training subsidies, and fostering partnership projects with small and medium enterprises (SMEs). For instance, tax benefits and subsidies could be provided to companies in labor-intensive sectors such as logistics, transportation, and telecommunications.
Additionally, it is essential for Kazakhstan to adopt an approach that includes partnerships between large companies and small businesses. Such cooperation can be particularly beneficial in the tourism and hospitality sectors, where large companies can collaborate with smaller service providers to create comprehensive packages and improve the overall quality of service. Establishing clusters based on these partnerships could boost service quality and generate new jobs.
Supporting Small Businesses and Their Role in Developing Labor-Intensive Sectors
Small businesses hold enormous potential for employment, especially in rural areas and remote regions of Kazakhstan, where labor-intensive sectors can create opportunities for job placement and improve living standards. The report suggests directing government resources to support small and medium enterprises through grants, business training, and access to modern technology. In Kazakhstan, such measures could include government programs aimed at improving SME access to financing, as well as creating incubators and business support centers.
Additionally, Kazakhstan could implement programs focused on promoting entrepreneurship in the service sector. For example, subsidizing training costs or providing free consulting services for small businesses in rural areas. This could also include support for purchasing and adopting technologies, such as digital platforms for inventory management and marketing tools, which can help small businesses expand their activities and attract more customers.
Implementing Technology to Enhance Labor Productivity
Technological solutions can significantly increase labor productivity in labor-intensive sectors, particularly in areas where workers’ skills are limited. The NBER report highlights that digitalization and mobile applications can improve access to knowledge and simplify labor-intensive tasks. In Kazakhstan, where digitalization is actively promoted, technological solutions can be applied in sectors such as retail, healthcare, and social services.
Promising directions for Kazakhstan include developing mobile applications for worker training and task management, which can help employees improve their skills. For example, apps could provide access to instructional materials on first aid or even construction tasks. Such technologies could be especially useful in regions with limited access to educational and training resources.
Furthermore, Kazakhstan could invest in creating online platforms that match local businesses’ workforce needs with available workers. This would allow both small and large companies to attract workers on a project basis and develop flexible employment schemes, which could help reduce unemployment.
Vocational Training Programs and Worker Skill Development
Tailored vocational training programs for labor-intensive sectors play a crucial role in improving productivity. The report recommends supporting vocational training and apprenticeships that help people acquire in-demand skills. In Kazakhstan, where there is still a significant gap between educational programs and the actual needs of the labor market, training programs focused on preparing workers for the service sector are necessary.
Such programs could include apprenticeships and dual education, enabling individuals to gain practical skills directly on the job. Additionally, courses on entrepreneurship and business management could be introduced to help workers create their own small businesses and stimulate local economic activity. Career counseling and job skills training would also be valuable for young people and those entering the labor market for the first time, increasing their chances of successful employment.
Kazakhstan’s economy, with a high share of labor-intensive service sectors, can benefit significantly from implementing a comprehensive productivity enhancement strategy. The experience outlined in the NBER report demonstrates that supporting large companies, encouraging small businesses, implementing technology, and developing vocational training are essential components of sustainable economic growth. Successful application of these strategies in Kazakhstan will require active government participation, fostering an environment conducive to the development of labor-intensive service sectors.
Implementing these measures will help Kazakhstan not only improve productivity but also create sustainable jobs, supporting social and economic stability amid global changes. In the long term, such approaches will allow the country to develop its economy in a more sustainable and innovative way, addressing the challenges of the 21st century.
Prepared by: independent expert Timur Useyev specifically for www.economyKZ.org
