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Growth and Job Creation in Africa. Louise Fox Oxford University March 16, 2008. How to Create “Jobs”?. Genesis: AFR Region Discussion, 2004 Consensus around key question: Why hasn’t structural adjustment created jobs? What can governments do? Some hypotheses

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growth and job creation in africa

Growth and Job Creation in Africa

Louise Fox

Oxford University

March 16, 2008

how to create jobs
How to Create “Jobs”?
  • Genesis: AFR Region Discussion, 2004
    • Consensus around key question: Why hasn’t structural adjustment created jobs?
    • What can governments do?
  • Some hypotheses
    • w/in labor market (institutions, policies, regulations)
    • outside the labor market: structure of growth, microfoundations of growth
summary of presentation
Summary of Presentation
  • Countries with broad-based growth are creating private sector jobs rapidly
      • from a low base
      • mostly in non-tradeables (construction, services)
      • not correlated with labor regulations; but perhaps with IC as a whole
  • Non-farm informal sector is absorbing most new entrants
    • the main vehicle for poverty reduction
    • high variance in outcomes
  • Can this scenario continue?
what is a job data issues
What is a job: data issues
  • Definitions difficult when 75% are self employed and poor, data limited
      • In effect, everybody has a job and is employed – few can afford not to work
  • What do governments want ?
    • As many of the labor force as want it, a full time wage/salary job, with good pay
    • May also want this job to be in big firm to give security, benefits, compliance with rules
  • This analysis: any wage/salary job
growth and structural change in africa 1990 2005
Growth and Structural Change in Africa 1990-2005
  • Is there no job creation?
    • Low growth, oil-dominated: no job creation
    • High growth, high poverty reduction countries did create jobs
      • Low base meant job creation very low relative to supply of workers
    • Structure of growth: dominated by agricultural, service sector, not by manufacturing
    • Public sector restructuring
what are key factors
What are key factors?
  • Balanced growth – agriculture plus diversification
  • Job creation not correlated with labor regulations
    • Why are Ghana and Lesotho creating jobs faster than Uganda? Worse DB scores
  • Firm perceptions: issues outside the labor market matter more
education skills deficit
Education/skills deficit
  • Africa has huge education deficit still
    • Rapid expansion of primary enrollment, but completion low, quality issues
    • Already over 20% of budget – and now need to finance secondary education +
    • Brain drain
  • Firms are citing skill deficit as major obstacle
    • Knowledge or behavior?
    • Who should pay to address this?
informal sector
Informal Sector
  • What is informal sector in Africa?
    • Legal definitions – registration, etc.
    • Our definition: non-agricultural, and selling labor to them selves or their family – micro informal sector
  • Characteristics: mostly services, mostly urban, but some non-farm rural
  • High variance in earnings;
    • average well above agriculture; growth of earnings sometimes tracks wage sector earnings
informal sector is where the new entrants go route out of poverty
Informal sector is where the new entrants go - route out of poverty
  • Explosive growth seems to be influenced by both push and pull factors
    • High labor force growth
    • Low quality of agricultural land – can’t absorb 2-3% increase in labor with current technology
    • Earnings and public services better in urban areas, poverty lower – rural to urban migration is high.
  • Average earning above poverty line- driver for poverty reduction
challenges for creation of wage and salary jobs
Challenges for creation of wage and salary jobs
  • Macro level: optimism about fundamentals
  • Institutional development in non-oil, non conflict countries is the challenge
  • Can African firms produce for export?
    • cost, risk factor in Africa
  • Understand skills large firms are not finding in labor market, develop responses
but what about the rest
But what about the rest?
  • High labor force growth huge challenge
    • Social issue: underemployed youth
  • Micro informal sector will spread, esp. in urban areas – but what about incomes?
  • Develop effective responses – support the sector, don’t try to wipe it out
    • Education: practical skills
    • Property rights, services such as utilities, etc.
  • Collect appropriate data in order to diagnose, monitor, and evaluate
  • Better evaluation, scale up what works