Decent Work and Economic Growth: Boosting Prosperity Through Action

Decent work means more than holding a job. It means work that is productive, pays a fair income, offers security in the workplace, and extends social protection to workers and their families. Economic growth refers to a sustained increase in a country’s gross domestic product (GDP) over time. When these two objectives align, the result is an economy that lifts living standards broadly — not just for those at the top. When they diverge, growth becomes hollow: GDP rises while inequality deepens and workers are left behind.

According to the International Labour Organization (ILO), roughly 2 billion workers — more than 60% of the global workforce — earn their living entirely outside the formal economy. Hundreds of millions more hold formal jobs that fail to provide living wages, safe conditions, or access to financial services. The United Nations made closing this gap a central pillar of its 2030 Agenda through Sustainable Development Goal 8: Decent Work and Economic Growth.

Related reading: Economic Mobility: Pathways to Financial Progress and Stability | The Future of Work: How Automation and AI Will Transform Employment by 2030 | Gender Equality in Economic Development: Unpacking the Pervasive Issue

What Is SDG 8 Decent Work and Economic Growth

SDG 8 is the United Nations goal to promote sustained, inclusive, and sustainable economic growth, full and productive employment, and decent work for all. It is one of the 17 Sustainable Development Goals adopted in 2015 as part of the 2030 Agenda for Sustainable Development. SDG 8 operates on the recognition that economic progress must create quality jobs — not just statistical growth — and that work must come with rights, security, and dignity.

The goal is directly connected to SDG 1: No Poverty, SDG 2: Zero Hunger, SDG 3: Good Health and Well-Being, and SDG 4: Quality Education. Poverty cannot be eliminated while workers earn poverty wages. Hunger persists when income is too precarious to sustain food security. Health deteriorates in unsafe workplaces. And education and economic development are mutually reinforcing: educated workers drive productivity, and productive economies fund public education systems.

SDG 8 also intersects with SDG 5: Gender Equality. Globally, women earn roughly 20% less than men for equivalent work, a gap driven by occupational segregation, unpaid care responsibilities, and direct discrimination. Closing the gender pay gap is not only a matter of justice — it is an economic imperative. The McKinsey Global Institute estimates that advancing women’s equality could add $12 trillion to global GDP annually.

What Are the Key Targets of SDG 8

SDG 8 contains 12 specific targets and 17 indicators covering economic growth rates, employment standards, labor rights, financial access, and the eradication of exploitative labor practices. Understanding these targets is essential for governments, businesses, and civil society organizations designing policy and measuring progress.

The headline macroeconomic target is to sustain GDP growth of at least 7% per year in the least developed countries and achieve higher levels of economic productivity through diversification, technological upgrading, and innovation across all countries. Alongside this, SDG 8 calls for:

• Full and productive employment and decent work for all women and men, including persons with disabilities, with equal pay for equal work — addressing the gender inequality at work that persists across every sector and region
• Substantially reducing the proportion of youth not in employment, education, or training (the NEET rate)
• Eradicating forced labor, modern slavery, and human trafficking and eliminating the worst forms of child labor by 2025 — a target already missed, with 160 million children still in child labor as of the ILO’s most recent global report
• Protecting labor rights and promoting safe and secure working environments for all workers, including migrant workers in precarious employment
• Expanding access to banking, insurance, and financial services through domestic financial institutions — a goal aligned with financial inclusion initiatives and microfinance institutions operating in underserved markets
• Increasing the exports of developing countries and enhancing Aid for Trade capacity-building, particularly for least developed countries and small island developing states
• Implementing policies that decouple economic growth from environmental degradation and increase global resource efficiency, connecting SDG 8 directly to SDG 7: Affordable and Clean Energy and SDG 9: Industry, Innovation and Infrastructure

Progress on these targets is tracked through headline indicators including the annual growth rate of real GDP per capita, the unemployment rate, the share of informal employment, the frequency of fatal and non-fatal occupational injuries, and the proportion of adults with access to a bank account or mobile money service.

How Many People Lack Access to Decent Work

Approximately 2 billion workers — representing over 60% of the global workforce — are employed in the informal economy, without legal protections, stable income, or social security. This is the defining labor market challenge of the 21st century, and its scale is staggering.

The ILO’s most recent data reveals a multi-dimensional deficit in decent work:

• 2 billion informal workers worldwide, concentrated in Sub-Saharan Africa (85.8% informality rate), South Asia (88.2%), and parts of Latin America and the Caribbean
• 64 million young people unemployed, representing a global youth unemployment rate of 13.5% — approximately three times the adult rate
• 27.6 million people in forced labor, generating an estimated $3.4 trillion in illegal profits annually for traffickers and exploitative employers — a figure that exceeds the GDP of most nations
• 160 million children in child labor, including 79 million in hazardous work that directly harms their health, safety, and educational development — an increase for the first time in 20 years, driven partly by COVID-19 economic shocks
• Hundreds of millions of workers in formal employment who nonetheless earn below living wage thresholds, particularly women, migrants, and racial minorities facing compounding barriers linked to income inequality and gender inequality

The geography of decent work deficits tracks closely with the geography of poverty. Countries with the highest informality rates are also those where child poverty, poverty cycles, and SDG 10: Reduced Inequalities targets face the greatest headwinds. Breaking this connection requires moving workers from informal to formal employment — a process that demands investment, institutional capacity, and sustained political will.

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What Is the Relationship Between Economic Growth and Employment

Economic growth and employment are closely linked but not automatically correlated. GDP expansion increases demand for labor, but the quality and distribution of jobs created depends heavily on the structure of growth, technological change, and labor market institutions.

The classical relationship between growth and employment is captured in Okun’s Law: for every 1% increase in unemployment, GDP falls approximately 2%. This inverse relationship implies that policies that reduce unemployment also stimulate output. But the modern global economy has complicated this picture considerably.

Technology-driven growth — particularly automation, artificial intelligence, and platform-mediated gig work — can increase output without generating proportional employment. This jobless growth dynamic has been documented across manufacturing industries in both advanced and emerging economies. The OECD estimates that up to 14% of jobs in member countries face a high risk of automation, with a further 32% likely to see significant task transformation. Workers displaced by automation without access to retraining programs fall into unemployment or the informal sector, widening economic mobility gaps.

SDG 8 therefore targets not just macroeconomic growth but specifically productive employment — jobs that pay living wages, operate within legal frameworks, contribute to tax revenues, and offer social protection. The SDG 8 target for least developed countries is a 4.1% annual GDP growth rate specifically tied to job creation in productive sectors, not aggregate output growth alone. This distinction — between growth that employs and growth that excludes — is fundamental to understanding why decent work and economic growth must be pursued together rather than separately.

How Does Informal Employment Affect Development

Informal employment deprives workers of legal protections, social insurance, and stable income while depriving governments of tax revenue needed to fund public services — creating a structural drag on development that is self-reinforcing without deliberate intervention.

Informality is not simply a transitional phase that economies naturally outgrow as they develop. Evidence shows that without active policy, informality can become entrenched even as GDP grows. Workers in the informal economy typically:

• Earn 30–50% less than comparable formal sector workers, according to ILO analysis
• Have no access to occupational health protections, workplace injury compensation, or sick leave
• Cannot access formal credit, mortgages, or business loans, limiting their ability to invest in tools, education, or capital that would raise their productivity
• Are excluded from pension systems, leaving them vulnerable to destitution in old age
• Have no recourse against wage theft, unsafe conditions, or arbitrary dismissal

The macroeconomic costs of informality are equally severe. Governments in countries with high informality rates collect less tax as a share of GDP, constraining their ability to invest in education, infrastructure, and health care. This creates a vicious cycle: low public investment reduces productivity and formal sector job creation, pushing more workers into informality. Fair trade frameworks and formalization support programs — including simplified registration procedures, portable benefits systems, and targeted tax incentives for small businesses — are among the tools that have demonstrated measurable impact in transitioning informal workers into the formal economy.

Economic policies that support formalization typically combine supply-side measures (reducing the cost of formality for small enterprises) with demand-side measures (strengthening labor inspection and enforcement). Brazil’s Simples Nacional program, which simplified tax compliance for micro-enterprises, led to a documented increase in formal registrations of small businesses. Similar programs in Mexico, Indonesia, and Rwanda have shown measurable reductions in informality rates when sustained over multi-year policy horizons.

What Role Do Living Wages Play in Reducing Poverty

A living wage is the minimum income required to cover essential costs — food, housing, healthcare, education, and basic transport — without relying on public assistance. Unlike a statutory minimum wage, a living wage is calculated from actual cost-of-living data and is recalculated regularly to reflect inflation and rising living costs.

The distinction matters enormously. In many countries, the legal minimum wage falls far below what workers actually need to meet basic needs. The ILO estimates that if all workers in low- and middle-income countries received living wages, hundreds of millions of people could exit poverty without any change in employment levels. The poverty-reduction impact of wage increases at the bottom of the distribution is substantial: poor households spend nearly all of their income on consumption, so wage increases translate almost directly into reduced poverty cycle depth rather than savings or capital accumulation.

Living wages also generate positive macroeconomic effects beyond poverty reduction:

• Higher consumer spending: Workers who earn living wages spend more in local economies, supporting demand for goods and services and creating positive employment multipliers
• Lower turnover costs: Employers who pay living wages experience significantly lower staff turnover, reducing recruitment, training, and onboarding costs — a documented return on investment across retail, hospitality, and care sectors
• Higher productivity: Efficiency wage theory predicts, and empirical evidence confirms, that higher wages are associated with greater worker effort, lower absenteeism, and better job performance
• Reduced reliance on social safety nets: When employers pay living wages, governments spend less on in-work benefits, housing subsidies, and food assistance — shifting fiscal resources toward investment

Equal pay policies strengthen the living wage framework by ensuring that the same work earns the same compensation regardless of gender, race, or origin. Women’s economic empowerment is structurally dependent on closing the gap between what living wages require and what women are actually paid — a gap that persists in every region and industry. The ILO’s Global Wage Report documents a global gender pay gap of approximately 20%, with the gap widest in sectors where women are most concentrated: domestic work, garment manufacturing, and agricultural labor.

How Does Youth Unemployment Threaten Economic Stability

Youth unemployment rates globally average 13.5% — roughly three times the adult unemployment rate — and the consequences extend far beyond immediate income loss to include long-term wage penalties, increased informality, and systemic risks to social and fiscal stability.

When young people cannot find formal employment at labor market entry, they face a documented phenomenon economists call scarring effects: persistent wage and career penalties that follow workers for years or even decades after an initial period of unemployment or informal work. A young person who spends two years outside formal employment at age 20 will typically earn less, progress more slowly, and retire with a smaller pension than a peer who found stable work immediately — even if both ultimately secure the same type of job.

The macroeconomic implications are compounding:

• Reduced lifetime tax contributions: Workers with scarring effects earn less, contribute less to pension systems, and draw more from public services — a net fiscal drain over a working life
• Pressure on social safety nets: High youth unemployment increases demand for unemployment benefits, housing assistance, and mental health services simultaneously, at a time when youth are also least able to access formal credit or accumulate savings
• Social instability: Research across multiple countries and historical periods links elevated youth unemployment to increased rates of crime, civil unrest, and political radicalization — particularly when unemployment is concentrated in specific geographic areas or demographic groups
• Demographic risk: Countries with large youth populations — particularly in Sub-Saharan Africa, which is projected to add 830 million working-age people by 2050 — face the most acute risk if labor markets cannot absorb youth cohorts into productive formal employment

SDG 8 specifically targets a reduction in the share of youth not in employment, education, or training (the NEET rate). Evidence-based interventions that have reduced NEET rates include apprenticeship programs linked to employer hiring commitments, targeted wage subsidies for first-job placements, and community college pathways aligned with labor market demand. SDG 17: Partnerships for the Goals is directly relevant here: youth employment programs that involve government, private sector, and civil society partners consistently outperform single-actor interventions.

What Makes Labor Markets Inclusive and Productive

An inclusive and productive labor market is one that connects all workers — regardless of gender, age, disability, ethnicity, or migration status — to jobs that fully use their skills, pay living wages, and operate within legal frameworks that protect rights and safety.

Labor market inclusivity and productivity are not in tension — they are mutually reinforcing. When discrimination excludes qualified workers from employment, firms forgo talent and the economy forgoes output. When unsafe conditions cause injury and illness, productivity losses and healthcare costs exceed any savings from reduced safety investment. When workers lack access to retraining, technological change destroys jobs without creating new ones in the same communities.

Key institutional features of inclusive and productive labor markets include:

• Strong labor inspection systems that enforce minimum wage, occupational health and safety, and anti-discrimination laws consistently and without corruption
• Portable benefits systems that do not tie social insurance to a single employer, enabling workers to move between jobs, sectors, and regions without losing healthcare, pension contributions, or parental leave entitlements
• Active labor market policies including publicly funded job placement services, retraining programs, and wage subsidies that help workers transition between employers and sectors
• Collective bargaining rights that give workers a voice in setting wages and conditions, counterbalancing the power imbalance between individual workers and large employers
• Disability inclusion frameworks that mandate reasonable workplace accommodations and measure employment outcomes for workers with disabilities — a group that faces unemployment rates two to three times higher than the general working-age population in most countries

Economic growth is most sustainable when labor markets operate inclusively. Countries with more equal income distributions — measured by lower Gini coefficients — consistently outperform highly unequal economies on long-run growth metrics, according to IMF research. This is because inequality concentrates consumer spending among high-income households that save more, reducing aggregate demand and limiting the multiplier effects of investment.

Which Countries Lead in Decent Work Standards

The countries that consistently rank highest on decent work indicators combine universal social protection systems, strong labor law enforcement, high minimum wages indexed to inflation, active labor market policies, and low levels of informality — conditions found predominantly in Northern Europe, Canada, Australia, and New Zealand.

The ILO’s Decent Work Country Profiles and the OECD’s Better Life Index provide the most comprehensive comparative data. Countries consistently at the top include:

• Iceland and Denmark — near-universal collective bargaining coverage (85–90% of workers covered), very low NEET rates, and among the smallest gender pay gaps in the world
• Germany — dual apprenticeship system that channels youth into skilled employment with formal contracts, strong works council system giving workers voice in enterprise decisions, low informality
• Canada and Australia — indexed minimum wages, universal healthcare removing the link between employment and health security, strong occupational health and safety enforcement
• Japan — low unemployment, high labor force participation, though persistent gender inequality at work and a large temporary work sector remain significant challenges

Emerging economies making documented progress include Costa Rica, which maintains a formality rate well above the Latin American average through sustained public investment in education and a universal social protection system; Vietnam, which has dramatically reduced informality through export-oriented manufacturing development tied to labor standards requirements in trade agreements; and Rwanda, which has achieved among the highest rates of women’s labor force participation in Africa through a combination of legal reform and targeted investment in women-owned enterprises, directly advancing women’s economic empowerment.

The common thread across high-performing countries is institutional quality: labor market outcomes are determined not primarily by economic size or natural resource endowment but by the strength and fairness of the rules governing work. This insight is central to decent work frameworks — without enforceable standards, growth creates jobs without guaranteeing that those jobs are decent.

How Can Businesses Promote Decent Work

Businesses can promote decent work by paying living wages, publishing supply chain transparency reports, eliminating forced and child labor from supplier networks, offering formal employment contracts with social security contributions, and investing in workforce development programs that expand workers’ skills and career opportunities.

The business case for decent work standards is well-documented. Companies that pay living wages, offer stable contracts, and invest in occupational safety experience lower turnover, higher productivity, stronger employee engagement, and reduced reputational and regulatory risk. The ILO’s Better Work program — which provides factory compliance assessments and training across eight countries — found that participating factories experienced improved compliance with labor standards alongside increased profitability, demonstrating that decent work and business performance are complements rather than trade-offs.

Specific actions businesses can take include:

• Adopt living wage commitments: Benchmark compensation to independently calculated living wages rather than statutory minimums, and publish wage data transparently — starting with closing the gender pay gap within the firm
• Formalize supply chains: Require supplier compliance with ILO core labor standards as a condition of procurement, conduct third-party audits, and publish supplier lists — a practice associated with significant reductions in forced labor and child labor incidents
• Invest in skills development: Fund apprenticeships, retraining programs, and tuition assistance that help workers adapt to technological change, increasing both their productivity and their employability — a direct contribution to economic mobility
• Support financial inclusion: Partner with microfinance institutions and digital payment platforms to ensure workers have access to savings accounts, insurance, and credit — particularly important for low-wage and informal sector workers
• Engage in collective bargaining: Recognize and negotiate with worker representatives in good faith, contributing to sector-wide wage standards that prevent a race to the bottom on labor costs
• Join the UN Global Compact: Commit publicly to the ten principles covering human rights, labor standards, environment, and anti-corruption, and report annually on progress

The structural levers available to business extend beyond individual firm decisions. Industry associations that set sector-wide labor standards, trade agreements that incorporate enforceable labor provisions, and investor coalitions that use shareholder engagement to raise supply chain labor standards have all demonstrated measurable impact at scale. Fair trade certification, which guarantees minimum price floors and social premiums to producer organizations, provides a market mechanism for translating consumer demand for ethical sourcing into concrete wage and working condition improvements for farmers and workers in developing countries.

The relationship between business conduct and SDG 8 is not peripheral — it is foundational. Businesses collectively employ the majority of the world’s workers. Their decisions about wages, contracts, working conditions, and supplier relationships either advance or undermine the goal of decent work for all. Achieving SDG 8 requires not just government policy but a fundamental shift in how the private sector understands its obligations to the workforce that creates its value — and to the broader goal of global partnership that makes sustainable development possible.