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What do we know about labor markets in Africa:

Some of the gaps

The big 5

2 1990-2000 2000-2012

Lack of growth of manufacturing (or even de-

industrialization)

Source: Bhorat et al (2015)

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• Why aren’t raw materials processed in Africa?• Cashews from Cote d’Ivoire shipped to Bangladesh or India,

then exported to Europe, traveling back past Africa.• Why would a t-shirt manufacturer in Accra import cotton bolts

from China than get it from Burkina Faso?

2 anecdotes from the last few months

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Gap 1: Cost of Labor• Does Poor Mean Cheap? A Comparative Look at Africa’s Industrial Labor

Costs by (Gelb, Meyer, and Ramachandran 2013).. And others, Benchmarking Africa’s Costs and Competitivenes by G. Iaroosi

• Gelb et al conclude that industrial labor costs are far higher in Africa • Sizeable residual “Africa effect” after controlling for other factors

• “… it is not clear that Africa’s low-income level automatically translates into a comparative advantage in low-wage basic manufactures.”• “…without access to competitive labor, African manufacturing firms face an

uphill struggle to be globally competitive.”

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Figure 4 Model 1 of Gelb et al 2013

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Why is labor more costly?

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Why is labor more costly?

• Explanations that don’t seem to work• Regulation • Unionization (SA exception)• High replacement costs: Lack of supply/potential employees

(demographics and LFP)

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Why is labor more costly?

• Other candidates• Political equilibrium• High replacement costs: High search costs• Higher price level and the price of food particularly• Preferences?• A preference for non-wage work (Ethiopia Blattman and

Dercon 2012; Ghana Falco et al 2013)

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Services, services, services

It dominates non-ag household enterprises

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…And it dominates wage work

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Gap 2: The Amalgamation that is “services”• Can these service jobs grow into “decent work”? • How to identify what work has potential to grow into a well

paid job or from a household enterprise into a microenterprise into a small firm (firm growth with a focus on employment)

[Are we too distracted by the discussion of formalization and informality?]

• Still lack interventions that work for the household enterprises• The unimpressive results of skills/business training

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Little “open” unemployment

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But for the young, inactivity is to some extent masked unemployment

Ghana 2005/06 Working and/or

in school ILO unemployed Inactive

15-20 79 2 19 21-25 71 8 21 26-30 84 5 11 31+ 89 3 9 2012/2013 15-20 88 1 11 21-25 82 5 13 26-30 89 3 8 31+ 92 1 7

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Gap 3: The Unemployment rhetoric• Unemployment or underemployment: does it matter? The

political and public discourse centers around unemployment, especially youth unemployment.• Yet, is ‘unemployment’ (in its various forms) worse? Or have

expectations changed as education levels have increased.

ILO ICLS 19th New definition of employment

ILO ICLS 19th New definition of employment

Reference concept for Labour Force statistics

Source: Elisa Benes, ILO Department of Statistics PPT 2013

Employment versus work (Any activity to produce goods or provide services for use by others or for own use)

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excludes own-use production of goods (subsistence farmers)

Unemployment or underemployment: does it matter?

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Gap 4: Does the new ICLS matter?• Mechanically, labor force participation will fall, and fall drastically

in some countries.• There are unresolved issues which how to define ‘own-

production of goods” work in household surveys.• Intended use• Attaching “mostly for home consumption” to the HH farm or to

individual members? Multiple plots, multiple members

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Gap 5: How do people “find” their jobs• Little is known on how workers land in the jobs they have:• What is the role of networks?• What is the role of information?