Wages and Employment in Africa

Dipak Mazumdar, Ata Mazaheri

• Publisher: Routledge
• Year: 2018
• Topic: Social Sciences
• eBook ISBN:
  9781351749657
• Subtopic: Sociology
• Index: Social Sciences

This title was first published in 2002: Analyzing labour market trends in sub-Saharan Africa since 1970, this volume employs data collected from the International Labor Organization (ILO), United Nations Industrial Development Organisation (UNIDO) and World Bank (the RPED surveys). It examines the economics of the labour market against the presistent decline in real wages over some 20 years in some of these countries. Setting the African story against the background of wage-employment trends in other regions of the world, the author proceeds to examine the impact of this decline on the rural-urban earnings gap. The consequences of the declining wage levels on the lifetime earnings of workers and on trends in labour productivity are then discussed, followed by an analysis of the employment and wage structure in African manufacturing firms.

Part I:

Introduction

1 Labor Markets and their Development in sub-Saharan Africa

Peasant farming dominates the economies of sub-Saharan Africa, as in other developing countries. Thus, self-employment accounts for the major part of the labor market. The self-employed, however, have become an increasingly important part of the labor market outside the farming sector. This is partly because of the growing importance of off-farm activities of peasant households, but more importantly because of the large expansion of the ‘informal sector’ which has accompanied the high rate of urbanization. The urban informal economy is host to a variety of petty businesses, often single entrepreneurs working on their own, with some help, on a regular or part-time basis, from family members. Such businesses are found largely in the sales and service sectors, but also include simple manufacturing. The ‘informal’ sector is generally defined to also include some wage-workers, often employed in small enterprises — who are outside the purview of regular regulations or do not participate any formal employment contract. But the proportion of such workers is typically small. Employment for wages is provided by larger firms and by the public sector, the latter, in recent years, growing into a major actor in the market for wage labor, particularly in the urban areas.

The structure of the labor market can be illustrated by data collected from household surveys in Ghana between 1987 and 1992 (three rounds of the so-called General Living Standard Survey-GLSS), a source which will figure prominently in our subsequent analysis in several chapters.

The table shows that public sector employment accounts for nearly half of total wage employment in these years. The public sector has become a major provider of jobs in the formal sector as African governments expanded the civil service dramatically in recent years. Publicly owned commercial enterprises, sometimes operated jointly with the private sector, are also important sources of formal employment, but as Table 1.1 shows the contribution of such enterprises is typically small compared to administration and services (although in some countries the parastatals would be undoubtedly more important in wage employment).

Table 1.1 Distribution of Labor Force by Types of Employment

Percentages	1987-8	1988-9	1991-2
Wage Employees	17.3	18.l	15.3
Government	8.0	7.7	7.7
State Enterprises	1.9	1.1	1.1
Private	7.4	6.5	6.5
Farmer	58.7	56.6	56.6
Non-agricultural self-employment	19.5	23.5	23.5
Unpaid family	2.2	1.3	1.3
Unemployed	2.2	3.2	3.2
Total	100	100	100
Sample size	6076	6259	8021

Source: Teal (2000), Table 1, p.9.

The observed unemployment rate is seen to be very low in Ghana. Other surveys in sub-Saharan Africa report much higher rates. Of course, in economies dominated by the self-employed the recording of the unemployed is a hazy task at best, and much depends on the way surveys questions are formulated and administered. But even if we confine ourselves to the urban sector, where active search for jobs have more meaning with a larger incidence of wage employment, the unemployment rate was 2.1 percent in Ghana, rising to 5.8 percent in 1991-2. This contrasts with 8.2 percent in urban Kenya reported by a household survey in 1978, and 11.7 percent in 1986 (see Chapter 9 for details of the survey). Inter-country differences could be real to a significant extent. Much depends on the nature of the informal sector, which dominates the urban labor market, the ease of entry into it, and its perception by the job seekers and their families. A recent analysis of the labor market in Ethiopia throws out suggestive points on this issue.

Table 1.2 gives the data on labor allocation based on the household surveys conducted in urban areas. The very high rate of unemployment in urban Ethiopia is balanced by the comparatively lower proportion of labor in gainful self-employment. In urban Ghana in 1991 the self-employed comprised no less than 55 percent of the labor force. The implication is clear that in economies with a relatively underdeveloped informal sector of small businesses (petty trade, manufacturing and repair), the marginal return from work in the informal sector is too low — and below the reservation price of the unemployed. The educational level of the unemployed was found to be well above that of the self-employed in Ethiopia (only 15 percent of the unemployed had less than primary education in 1997 compared to 39 percent of the self-employed). The unemployed also seemed to come from better-off households and most of them reported that their main source of support while unemployed was help from the families. Their job preference was overwhelmingly directed towards the pubic sector (ibid, table 2), emphasizing the value the job-seekers attached to queuing rather than search in the private sector.

Table 1.2 Unemployment and Employment for Men in Urban Ethiopia, 1994-97 (Percentages of the Labor Force)

	1994	1997
Unemployment	33.8	27.7
Public Sector	26.4	29.3
Private sector	21.0	25.0
Self-employment	18.8	18.0

Source:Ethiopian Urban household Survey. Reported in Table 1, Krishnan (2000).

The contrast between Ghana and Ethiopia underlines a major point of the inter-country difference between the structure of labor markets in sub-Saharan Africa. The relative development of earnings opportunity in the informal, and particularly the self-employed sector in urban areas, is a crucial aspect of these differences. The informal sector will be an important part of the discussion on the formation of earnings in the urban economy in our detailed case studies of Kenya and Ghana in Part III.

Labor Market Trends

Developments in labor markets in Africa have been propelled by the high rate of growth of population and the labor force in recent decades. Table 1.3 gives the relevant data for the principal SSA countries figuring in this book.

Table 1.3 Growth Rate of Labor Force (Percentage per annum)

Source: World Development Report.

The high and, in some countries, accelerating growth of the labor force has been accompanied by a net and sometimes substantial increase in the urban population. Table 1.4 gives the relevant figures.

Table 1.4 Level and Rate of Urbanization

Source: World Development Report, 1995, Table 31; 2000, Table 1.

It is important to note the high rate of urbanization continued into the eighties in spite of the fact that the rate of growth of GDP per capita had fallen to a level close to zero or even negative. Of course, the countries of sub-Saharan Africa span a wide range of income levels and degrees of urbanization. But it can be seen from Tables 1.4 and 1.5 (below) that this rather peculiar phenomenon was widespread. The only exception might be Ghana, which showed moderate rates of urban growth. The structural adjustment program had been initiated early in the eighties, and Ghana, as we shall see in detail in Chapter 10 (part III), had successfully raised relative incomes in the rural sector by the end of the decade.

Table 1.5 GNP per capita and Growth Rates of GDP

Source: World Development Report, various years.

The rate of urbanization in SSA, as elsewhere in the developing world, has been driven partly by push and partly by pull factors. It is true that the rate of agricultural growth, although not dismal, has not been all that much higher than population growth in most of SSA, so that the pressure of population on land has clearly been an element in the urban drift.

But this pressure has been supplemented by powerful pull factors attracting migrants from the rural to the urban labor markets. The public sector has taken the lead in the creation of jobs in the modern sector in most African economies, and the urban bias in this type of employment is quite strong. The increase in schooling in the SSA has shifted job-seekers preference for modern sector jobs, disproportionately located in urban areas, and the growing importance of such jobs has been an important element in the rural-to-urban migration. During periods of difficulties in recent years, and sometimes declining GDP, the public ...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• List of Figures
• List of Tables
• Plan of the Book
• Acknowledgements
• Part I: Introduction
• Part II: Wage and Employment Trends in the Formal Sector
• Part III: The Rural-Urban Wage Gap in Africa
• Part IV: Impact of Wage Decline
• Part V: The Structure of Labor Markets in African Manufacturing
• Part VI: Conclusions
• Bibliography
• Index