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MCC’s New Scorecard Indicator: Employment Opportunity

October 13, 2022

By Terry Fletcher , Senior Development Policy Officer, Department of Policy and Evaluation, MCC

During its September 2022 meeting, MCC’s Board of Directors endorsed a new indicator for MCC’s Fiscal Year 2023 scorecard: Employment Opportunity. This new indicator measures disability rights, forced labor, workplace discrimination, and the ability of civil society organizations (CSO) to start-up. MCC is making this change in recognition of the importance of including all segments of the adult population in the workforce and of broadening opportunities for historically marginalized groups. The Employment Opportunity Indicator replaces the Business Start-Up Indicator, which MCC will discontinue due to the cancellation of the World Bank’s Doing Business Report.

As part of its commitment to using the best and most rigorous data, MCC regularly reviews the indicators on the MCC scorecard to ensure use of the highest quality data and methodologies available. As new datasets become available and our understanding of the links between governance and poverty reduction evolve, regular reviews of the indicators are essential. MCC focuses on indicators with broad country coverage, regular updates, and publicly available data that are produced by third-party institutions.

Business Start-Up Indicator

The new indicator is replacing the former Business Start-Up indicator, which was based on the Doing Business Report from the World Bank. MCC used the cancellation of that report last year as an opportunity to make the scorecard more inclusive by expanding coverage of concepts in our statute either not previously covered by the scorecard, such as disability rights, or where there was an opportunity to further strengthen coverage. The new indicator includes a subcomponent on CSO start-up that provides both an empirical and conceptual tie-in to the old indicator and continues to incentivize governments to reduce burdens to organizations starting up. MCC continuously reviews new datasets as they are published and will review new indicators on the business environment as they become available.

Disability Rights and Fair Employment Practices

MCC created the new Employment Opportunity indicator to measure candidate country protections of the rights of people with disabilities and to better measure worker protections. MCC’s eligibility criteria have always included an explicit focus on the rights of people with disabilities, but in previous reviews, there were not any datasets that measured these rights and had the country coverage and update frequency required to be included on the scorecard. Worker protections have been covered by the Civil Liberties indicator, but they are only part of that comprehensive indicator.

The new Employment Opportunity Indicator includes four equally weighted components: 1) legal protections for people with disabilities; 2) the prevalence of forced labor; 3) legal prohibitions on employment discrimination (based on race, religion, age, etc.); and 4) the ability of CSOs to start up and shut down. Including this indicator on the MCC scorecard will prioritize the inclusion of people with disabilities and other groups historically excluded from employment opportunities.

  1. Protections for people with disabilities are crucial to MCC’s eligibility criteria and essential for economic growth. A focus not merely on the prevention of disability, but the rights and social inclusion of people with disabilities is essential to ensuring the economic prosperity of people with disabilities, who make up a disproportionate share of the global poor. The new Employment Opportunity Indicator uses data from UCLA’s WORLD Policy Analysis Center that measures whether people with disabilities are guaranteed equal rights, reasonable accommodations at work, and access to education. By including this data set as part of the new Employment Opportunity indicator MCC is providing country governments an incentive to codify the rights of people with disabilities into law.
  2. Over 20 million people worldwide are subject to slavery, forced labor, and exploitation. The elimination of forced labor and slavery worldwide is intertwined with poverty reduction as forced labor increases poverty by impeding the ability of individuals to earn a fair wage, and extreme poverty increases the vulnerability of individuals to debt bondage and other forms of forced labor. Incentivizing the elimination of all forms of forced labor is a key tool for MCC to drive poverty alleviation and inclusion. MCC’s new indicator uses data from the Varieties of Democracy Institute on the prevalence of forced labor for men and women in a country to incentivize governments to eliminate all forms of forced labor.
  3. A key component of MCC’s new Employment Opportunity Indicator is a measure of legal protections against employment discrimination across various demographic groups (race, age, religion, etc.). Discrimination in employment leads to poverty through denied employment and business opportunities as well as social exclusion. Conversely, equality of employment opportunities can spur economic growth and drive social inclusion of historically marginalized groups. The new indicator is based on data from UCLA’s WORLD Policy Analysis Center on whether a country has legal protections for each of twelve different demographic groups. By including this indicator, MCC is encouraging countries to enact laws that make employment practices fairer and more inclusive for all groups in society.
  4. The final component of this new indicator is focused on the level of control that a government can exercise over CSOs. Specifically, it is focused on the ability of CSOs to freely start up and shut down. This component is included because CSOs are instrumental in ensuring that governments comply with legally recognized protections. CSOs help to ensure that the rights of workers, people with disabilities and marginalized groups which are written into law are protected in reality. Additionally, CSOs often face the same barriers to starting up as businesses, and this measure is empirically correlated with the former Business Start-Up indicator, making this a good link to the previous data source. MCC is using data on CSO start-up and shutdown from the Varieties of Democracy Institute.

Inclusion is a Priority for MCC

The new Employment Opportunity Indicator supports MCC’s recently published Inclusion and Gender Strategy. The addition of a measure of disability rights to the scorecard fits with MCC’s commitment to inclusion of disadvantaged groups in its programs. The new indicator’s focus on ensuring that individuals from historically excluded groups have equal opportunity for employment is a crucial component of MCC’s new commitment to expand excluded groups’ ability to have access to, participate in, or derive benefits from its investments. This scorecard update signals the importance MCC places on ensuring the inclusion of all communities in broad-based economic growth.

Country Selection and the MCC Effect

Evidence-based selection of partner countries is a cornerstone of MCC’s development model. Only those low- or lower-middle-income countries that meet MCC’s strict selection criteria can be selected as eligible to receive MCC grants. MCC’s Board assesses a country’s commitment to good governance using 20 different policy indicators, which are compiled on the MCC scorecard. The scorecard draws data from independent, third-party institutions to transparently and objectively measure a country’s commitment to democratic governance, social investment, and economic freedom. These are areas MCC sees as critical to creating an enabling environment for sustained, inclusive economic growth.

The incentivizing aspect of MCC’s selection criteria is often referred to as the “the MCC Effect.” That is, countries have and continue to use the MCC scorecard as a roadmap for building institutional capacity, often before MCC invests a single dollar. In doing so, countries make critical reforms to boost policy performance in hopes of qualifying for a compact program. MCC investments couple significant grant funding for large infrastructure with key policy and institutional reforms that aim to reduce poverty through economic growth. Countries that receive MCC investments are also historically more attractive to private investors because those countries have independently pursued government and business policies vital to sustained economic growth.