Ajay Banga says widening employment gap in developing economies poses economic and security risks…
The World Bank Group has raised alarm over a growing employment gap in developing economies, warning that millions of young people risk being shut out of the labour market in the coming decade.
In a blog post published on its official platform, the Washington-based institution said demographic changes underway across low- and middle-income countries could become one of the most defining yet under-recognised forces shaping the global economy over the next 10 to 15 years.
According to the bank’s projections, approximately 1.2 billion young people in developing countries will reach working age within that period. However, current forecasts suggest that only about 400 million jobs are likely to be created, leaving a shortfall that could see hundreds of millions without access to stable and productive employment.
The President of the World Bank Group, Ajay Banga, said while global attention is often dominated by immediate shocks such as geopolitical conflicts, technological disruptions and market volatility, deeper structural trends including demographic shifts, pressures on food and water systems, and evolving globalisation patterns may carry more enduring consequences.
“This challenge is not only a development issue,” Banga wrote. “It is an economic challenge and increasingly a national security concern.”
The institution cautioned that failing to close the jobs gap could strain public institutions, fuel irregular migration, and heighten the risk of social unrest and insecurity, particularly in regions experiencing rapid population growth.
It noted that the subject has received comparatively limited attention at recent global gatherings, including the World Economic Forum Annual Meeting in Davos, where discussions were largely driven by short-term geopolitical and economic concerns.
The bank urged policymakers to elevate employment generation as a central issue at upcoming international forums such as the G-7 and G-20 meetings, arguing that early and coordinated action could transform demographic expansion into a source of economic dynamism rather than instability.
To respond to the challenge, Banga outlined a jobs-focused strategy built on three main pillars.
The first centres on expanding both physical and human infrastructure. The bank stressed the need for reliable electricity, transport networks, healthcare systems and quality education, noting that private investment and job creation struggle to take root without these foundations. It cited a skills development centre in Bhubaneswar, India, supported through a partnership between government and private-sector actors, which trains nearly 38,000 people annually in programmes aligned with labour market demand, enabling most participants to secure jobs or launch businesses.
The second pillar involves improving regulatory predictability and strengthening policy frameworks to encourage entrepreneurship and long-term investment. The bank emphasised that large-scale job creation depends heavily on private enterprises, particularly micro, small and medium-sized firms that account for the majority of employment in developing economies.
The third focuses on scaling up access to finance through the bank’s private-sector arms, using instruments such as equity investments, guarantees and political risk insurance to reduce barriers to investment.
As an example, the institution referenced a trade finance guarantee backing Brazil’s Banco do Brasil, expected to unlock about $700 million in affordable credit for small businesses, particularly in the agricultural sector.
The World Bank identified five sectors with strong potential to generate employment at scale: infrastructure and energy, agribusiness, primary healthcare, tourism and value-added manufacturing. It said evidence from country-level experiences indicates that strategic investments in these areas can yield significant employment gains.
The bank also rejected the notion that job creation in developing countries comes at the expense of advanced economies. By 2050, more than 85 percent of the global population is projected to live in developing nations, representing the largest expansion of the world’s labour force and a significant source of future consumer demand.
Stronger growth in these economies, it argued, could produce more resilient supply chains, expanded trade partnerships and reduced migration pressures, generating shared benefits across borders.
The institution maintained that risk both actual and perceived has historically been the primary barrier to investment in developing markets, rather than a shortage of viable opportunities. Development finance institutions, it said, can play a catalytic role by supporting infrastructure projects, advancing regulatory reforms and reducing uncertainty for investors.
“If we get this right, demographic change can become an engine of growth and stability,” the bank said. “If we get it wrong, the world will continue reacting to crises that were visible years in advance.”
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