Vulnerable Jobs Drag Growth Only in the Slowest Economies, Study Finds

Vulnerable employment—informal, insecure work without contracts, social protection, or steady wages—has long been treated as a drag on economic growth in developing countries. A new study published in Discover Sustainability challenges that assumption in a striking way: researchers found that the relationship between vulnerable employment and GDP growth is not linear at all, and that the damage is concentrated almost entirely in countries that are already growing slowly. The paper, led by Rohini Rokde of Symbiosis Institute of Business Management in Nagpur, together with Shailesh Rastogi of Badruka School of Management, Smita Bodne, and Jagjeevan Kanoujiya, analyzed a balanced panel of ten developing and emerging economies from 2000 to 2023, using quantile panel data analysis to capture effects that conventional averages miss.

The technical core of the study lies in its departure from standard regression practice. Ordinary least squares and fixed-effects panel models estimate a single average coefficient, implicitly assuming that the effect of vulnerable employment on GDP is the same whether a country sits at the bottom or the top of the growth distribution. The authors instead employed quantile panel estimation, which estimates separate coefficients at different points of the conditional income distribution—in this case, the 25th, 50th, and 75th quantiles. This approach reveals heterogeneity that average-based models wash out. Their results showed no statistically significant linear association between vulnerable employment and GDP, but a significant negative and non-linear effect, described as a monotonically decreasing nonlinear relationship.

That non-linearity matters for how economists think about labor markets in development. A monotonically decreasing relationship implies that the marginal growth penalty of an additional share of vulnerable workers is not constant: it diminishes as income levels rise. In practical terms, the study’s quantile estimates showed that the adverse effect of vulnerable employment is concentrated at the lower quantile of the income distribution—the 25th percentile—while remaining statistically insignificant at higher quantiles. Countries in the sample that were already growing slowly bore the full weight of informal, precarious employment, whereas economies further up the growth distribution showed no measurable growth penalty from vulnerable work.

The sample covered ten developing and emerging economies over nearly a quarter century, a period spanning the commodity boom of the 2000s, the global financial crisis, and the pandemic-era disruptions of 2020 and beyond. Vulnerable employment, as defined by the International Labour Organization, typically encompasses own-account workers and contributing family workers—people who cannot rely on formal hiring arrangements, paid sick leave, or unemployment insurance. In many developing economies, such workers constitute a majority of the labor force, making the question of their aggregate economic effect far from academic.

Perhaps the most surprising finding concerns education. The authors tested whether tertiary education moderates the link between vulnerable employment and growth—that is, whether a more educated workforce softens the economic damage of precarious jobs. The interaction between vulnerable employment and tertiary education was uniformly insignificant across the models. Education, in other words, did not significantly affect the connectivity between vulnerable employment and economic growth. This result cuts against a widely held assumption in development economics: that human capital can compensate for weak labor-market institutions, allowing educated informal workers to remain productive despite the absence of formal protections.

The insignificance of the education interaction carries real policy weight. If schooling alone cannot neutralize the growth penalty of vulnerable employment, then strategies that rely on expanding university enrollment while leaving labor-market informality untouched may be incomplete. The authors argue that the employment–growth connection is crucial in lower-growing economies irrespective of education. For the slowest-growing countries in the panel, the priority suggested by the evidence is not merely more graduates but structural change in the nature of work itself—formalization, social protection coverage, and the creation of stable employment relationships that allow productivity gains to accumulate.

The findings also challenge linear employment–growth assumptions that have shaped development policy for decades. Classic growth models often treat labor as a homogeneous input, and informal employment is frequently framed as a transitional phenomenon that shrinks as economies modernize. The quantile evidence suggests something more conditional: the growth implications of vulnerable employment are non-linear and statistically significant only in countries with lower economic growth. In economies that have already achieved a certain growth trajectory, vulnerable employment appears to coexist with growth without measurable penalty—possibly because dynamic sectors absorb labor informally while still generating output, or because the counterfactual of unemployment makes precarious work economically preferable.

Methodologically, the study contributes to a growing literature that uses distributional econometrics to uncover conditional relationships in macroeconomic panels. Quantile panel analysis is technically demanding because it must handle the serial correlation, cross-sectional dependence, and endogeneity that plague country-level data, while estimating coefficients at multiple distributional points. The authors’ decision to test linearity, distributional homogeneity, and human-capital moderation in a single framework gives the paper its analytical scope: it asks not just whether vulnerable employment constrains GDP growth, but whether that effect is linear, uniform across the growth distribution, or conditioned by education. The answers—no, no, and no—form the study’s three-part contribution.

The work connects directly to the United Nations Sustainable Development Goals, particularly SDG 8 on decent work and economic growth, and to debates about skill mismatch in developing labor markets. Vulnerable employment is a headline indicator for the ILO and a core metric for tracking progress toward decent work worldwide. If the growth penalty of vulnerable employment falls disproportionately on the slowest-growing economies, then international targets for decent work carry a built-in distributional dimension: progress measured in global averages could mask stagnation in precisely the countries where informal work is most economically corrosive.

For researchers, the study opens questions that the data cannot yet settle. Why does vulnerable employment lose its growth penalty at higher quantiles? Is it because formal and informal sectors become better integrated as economies develop, because capital accumulation outpaces labor-market weakness, or because the composition of vulnerable work itself changes—from subsistence agriculture toward more productive self-employment? The authors’ evidence that education does not moderate the employment–growth link suggests that human capital and labor-market quality are separable dimensions of development, each requiring distinct policy instruments. For the ten economies studied, and for the broader set of developing countries they represent, the message is sobering and clear: in the slowest-growing economies, the quality of employment—not the quantity of education—is where the growth battle is being fought.

Subject of Research: Economics

Article Title: Impact of vulnerable employment on economic growth in ten developing economies using education as a moderator

Article References: Rokde, R., Rastogi, S., Bodne, S., & Kanoujiya, J. (2026). Impact of vulnerable employment on economic growth in ten developing economies using education as a moderator. Discover Sustainability. https://doi.org/10.1007/s43621-026-04877-0

Image Credits: AI Generated

DOI: 10.1007/s43621-026-04877-0

Keywords: vulnerable employment, economic growth, GDP, developing economies, education, quantile panel analysis, decent work, SDG 8, labor markets, development economics, Impact, vulnerable