“Healthy and educated workers, effective equipment and infrastructure, and entrepreneurial vision are integral components to the economic development of a community” (Giugale, 2017). Effective economic development has been found to increase employment as growth creates new job opportunities (OECD). This growth not only effects the quantity of employment opportunities, but also the quality and types of jobs available both in the informal and formal sector. Many believe that the most effective way to address poverty is to “increase the income of the poor by providing productive employment” (Karnani, 2011).
Initiatives and programs, especially in foreign aid seek to address the issue by pouring in external resources instead of adopting a bottom up process that is “tailored to the local context” and assets and interests of the community. This is often where initiatives for economic development can cause more harm than good. According to Aneel Karnani (2011), “It is necessary to view the poor as producers and emphasize buying from them. Many of the current approaches to poverty alleviation miss this simple point” (Karnani, 2011).
Karmani has outlined three major components to reduce poverty by employment. First, demand for employment must be created by creating job opportunities that fit the skills and abilities of the community. Second, education and training opportunities should be made available to increase the employability of the community. Third, the labour market must be made more efficient by making information easier to access. This can be done via job-matching and placement programs (Karnani, 2011).