The promotion of economic growth and economic (and political) stability. Economic growth offers the best guarantee of expanded employment opportunities, higher wages, and labor productivity growth. Appropriate macroeconomic policies (e.g., fiscal discipline, control of inflation, and financial reforms), combined with both tariff and nontariff trade liberalization, offer the most promising strategy for promoting employment growth and generating enough resources to pay for the infrastructure investments needed to achieve income equity.
For this strategy to work efficiently, the economy in general and the labor market in particular need to adjust quickly to changing market conditions. Many developing countries have labor policies in place (such as minimum wage laws, job security provisions, job-related housing provision, pension systems, and centralized--often government-controlled--labor unions) that, when enforced (often they are not), aggravate labor market distortions and impede adjustments. Deregulation of the labor market offers prospects for increasing its flexibility, especially by recognizing that policy interventions should work with rather than against market forces and should pay attention to the incentives driving the behavior of individuals and households. At the same time, improved access to credit markets for potential entrepreneurs, as well as to job information and to skills acquisition for potential employees, can help megacities’ labor markets run more efficiently.
Whereas redistribution policies tampering with spatial (geographical) variations in labor supply and demand are unlikely to be effective, efficiency-oriented urban policies (e.g., low-cost improvements in transportation, broadly based educational investments, privatization of government services, access to credit for small-scale enterprises, and creation of a favorable entrepreneurial environment) can promote labor productivity growth and improve the competitive efficiency of megacities, directly impacting macroeconomic performance.
Finally, with respect to the role of science and technology, more rapid diffusion of known and already widely applied technologies (e.g., computer information systems, cellular telephones) may transform the structure and composition of employment in developing-country megacities, especially given the global competitive environment. These and similar measures will be critical to avoid widespread urban unemployment and underemployment in the megacities of the developing world.