Creating jobs in higher productivity sectors in Africa

Africa’s  working-age  population  is  projected  to increase from 705 million in 2018 to almost 1.0 billion by 2030. As millions of young people join the labor market, the pressure to provide decent jobs will  intensify.  At  the  current  rate  of  labor  force growth,  Africa  needs  to  create  about  12 million new  jobs  every  year  to  prevent  unemployment from  rising.  Strong  and  sustained  economic growth is necessary for generating employment, but  that  alone  is  not  enough.

The  source  and nature of growth also matter. Africa has achieved one of the fastest and most sustained growth spurts in the past two decades, yet  growth  has  not  been  pro-employment.  A 1 percent increase in GDP growth over 2000–14 was  associated  with  only  0.41 percent  growth in  employment,  meaning  that  employment  was expanding at a rate of less than 1.8 percent a year, or far below the nearly 3 percent annual growth in the labor force. If this trend continues, 100 million people  will  join  the  ranks  of  the  unemployed  in the young continent.

Africa  by  2030.  Without  meaningful  structural change, most of the jobs generated are likely to be in the informal sector, where productivity and wages are low and work is insecure, making the eradication of extreme poverty by 2030 a difficult task (African Development Bank Report 2019).

One of the most salient features of labor markets in Africa is the high prevalence of informal employment, the default option for a large majority of the growing labor force. On average, developing  countries  have  higher  shares  of  informal employment  than  developed  countries.  While data  on  informal  employment  are  sketchy,  it  is clear that Africa has the highest rate of estimated informality in the world, at 72 percent of nonagriculture employment  and as high as 90 percent in some countries.

Furthermore, there is no evidence that informality is declining in Africa. While evidence from other developing countries shows a fairly competitive labor market structure, Africa has a more segmented labor market. Segmented labor markets tend to improve with economic policies that facilitate labor mobility, a competitive environment for private sector operations, and better skill development programs.

 

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