“APPROPRIATE EMPLOYMENT POLICIES FOR POVERTY REDUCTION: GHANA’S EXPERIENCE”

1. “APPROPRIATE EMPLOYMENT POLICIES FOR POVERTY REDUCTION: GHANA’S EXPERIENCE” WILLIAM BAAH – BOATENG DEPARTMENT OF ECONOMICS UNIVERSITY OF GHANA

2. Organization • Introduction • Linking Growth with Employment • Economic Activity of the Poor • Employment Policies for Poverty Reduction and obvious Pitfalls • Concluding Remarks

3. Introduction • Ghana is a 3rd world country with per capita income of approximately $400 with a population of 20 million. • An agrarian economy with average growth rate refusing to beyond 5% mark since 1990 • Agriculture and informal sector are the two distinct source of employment • The economy is characterized by annual average of 230,000 new entrants into the labour market with formal sector able to absorb just 2% • Hence rising unemployment and underemployment and growing informal activities with relatively low wages

5. Distribution of Employment and GDP by Industry (%)Year Agriculture Industry Service 1984 61.1 (47.9) 12.8 (19.6) 26.1 (22.1) 1992 62.2 (37.8) 10.0 (25.0) 27.8 (27.0) 1998 55.0 (36.7) 14.0 (25.1) 31.0 (29.1) 2000 50.7 (36.0) 16.3 (25.2) 33.0 (29.7)Share of GDP in Parenthesis

7. Contribution of Employment Type to Aggregate Poverty (%)(Based on Upper Poverty Line of ¢900,000 per capita p. a.)

8. Employment Policies • Effective employment policies should involve the interaction between labor demand & supply • Strategies to promote labor dd. should include: • Growth enhancement • Improvement in labor productivity and absorption in paid labor market • Promotion of self-employment • Introducing special employment programs for the youth and the vulnerable • Supply side • Population control • Human resource development-education and training • Removal of institutional rigidities and regulations

9. Ironically, Ghana has not had any employment policy apart from various schemes undertaken to improve labour absorption such as the National Service Scheme. • Employment has been treated as passive outcome of sectoral policies and disjoint. • Pre-reform economic policy for employment generation was dominated by • the promotion of ISI with huge public sector investment and state control • Outcome was a dramatic increase in urban formal employment particularly in the protected industries and in the public sector.

10. ERP/SAP were expected to lead to shifts in inter-sectoral employment as relative prices changed in the product market. • Outcomes: • shifts in the distribution of the labour force was not significant with share of agriculture remains high. • The service sector (trade) has become the centre of employment with the reduced absorption capacity of manufacturing due to over-liberalization of external trade and high cost of production • Informal employment and unemployment generally increased due mainly to retrenchment and privatisation (accounting for 89% of the loss of 235,000 formal sector jobs) • The results was high poverty incidence in the early 1990s (most of the retrenched workers were cleaners, labourers, messengers, drivers, sweepers and other grades in the lowest echelons in the public service with little or no employable skills, hence joined the army of unemployed or informal sector where incomes are low • E.g. the % of redeployee HH in the lowest 3 decile of the income per capita scale increased from 15% b4 redeployment to 32% after redeployment • Wages of workers increased but matched by increased workload

11. Some Policy Intervention • The agricultural sector programme, which focussed on national food scurrility, and employment and income generation in the rural areas through increased agricultural research and extension, smallholder credits and the provision of other services. • Alternative Employment Programme (AEP) aimed at placing the outplaced public servants who would be affected by the PSMRP. • Direct Employment Creation as a direct intervention measure to address the minimal impact of growth on poverty and employment. PAMSCAD • Poverty Reduction Programmes throughthe National Poverty Reduction Programme (PRP) and the Social Investment Fund, developed in 1995, aimed at reducing poverty incidence, strengthen the capability of the poor and vulnerable to earn income, and reduce gender and regional disparities in well-being.

12. Employment Generation Under GPRS • Employment creation is treated as the core strategy to achieve poverty reduction • Strategies adopted to meet the objectives include, • improvement in macroeconomic stability for growth; • modernizing agriculture; and • Provide sufficient incentives to stimulate private sector entrepreneurial development • enhance skill and entrepreneurial development for the youth. • Pitfalls • Failed to show how employment would be generated with specific targets for each sector (perhaps due to lack of employment data) • Informal sector was not seriously considered: did not adequately target the poor (no subsidies and ready market for food crop farmers)

13. On the supply side, measures to minimise institution rigidities was absent. New labour has been passed but yet to see implementation • Technical and vocational education and training was not based on demand driven approach. • Implementation of the GPRS has over concentrated on macroeconomic stability. • The anti-employment conditionalities demanded by donors tend to be counter productive • Lack of effective coordination in implementation (e.g. NDPC and MFEP) • lack of capacity and resources has also undermined effective implementation particularly at the at the district level.

14. There is the need to build capacity for implementation and monitoring in the next GPRS • Employment consideration should be strong but not treated as an outcome of sectoral policies • Preparation of GPRS should be based on a sound data base to be able to set employment targets • Implementation and implementation of employment strategies should be coordinated by Employment Ministry. • Training program should be driven by demand considerations rather than supply

15. Concluding Remarks • Critical examination of labour absorption or demand among the various sectors of the economy • Employment policies should be pro-poor (e.g. development of the informal sector is crucial - agro business, handicrafts including woodworks and textiles) • Enhancing informal and agricultural sector activities through the provision of effective entrepreneurial training based on demand driven, improvement in rural infrastructure, and reforming local government regulations that adversely affect the operations of informal enterprises • Take a critical look at the trade liberalization policy since it is killing some vital sectors (e.g. garment and poultry)

16. Re-orienting formal education by emphasising on practical training and also encouraging the trainees to take active interest in informal employment • The Implementation of FCUBE should be seen as working to increase the current school attendant rate of about 65% • Improving employment data collection and analysis, and establishing a sound labour market information system to enhance labour mobility, minimise mismatch and policy design. • Presidential special initiative should not remain a pilot scheme • Proper land policy