Employment, Unemployment, and Underemployment in Africa

Abstract

This paper documents and analyses the predominance of informal employment in Africa and shows that lack of demand for labour rather than worker characteristics is the main reason for pervasive underemployment. Integration into the global economy and exports of labour-intensive products are vital to boosting the demand for labour in Africa. Africa has some potential to become competitive in light manufacturing, but the most promising avenue for export-led growth of employment in many African countries is agriculture, including traditional cash crops such as cotton, coffee, cocoa, and groundnuts. Contrary to common perceptions, traditional cash crops, which are the source of livelihood for millions of Africans, have many of the features of manufacturing exports: high labour-intensity; potential for quality improvements through technological transfer; and quality-sensitive markets in developed countries. Improvements in the business climate are the key to boosting investment and technology transfer in labour-intensive tradable industries, and thus raising labour demand and employment.

Can Africa compete with China in manufacturing? The role of relative unit labour costs

“…Gelb, Meyer, and Ramachandran () use firm‐level data from World Bank Enterprise Surveys to compare formal‐sector wages in African manufacturing to those of other developing countries and conclude that Africa's labour costs are quite elevated and likely constitute a significant impediment to export diversification. Similar findings are reported in Golub and Hayat () and Benjamin and Mbaye (). These studies do not provide time‐series analyses of African competitiveness or measures of RULC.…”

“…Factor endowment‐based explanations of SSA–China trade, however, are inconsistent with the fact that a significant number of sub‐Saharan African countries have few natural resources and most countries have a large reservoir of underemployed workers with very low earnings (Golub & Hayat, ). From this perspective, imports of labour‐intensive goods from China inhibit the growth of manufacturing in SSA (Giovannetti & Sanfilippo, ; Jenkins & Edwards, ).…”

An African Growth Miracle?

“…The term "poor business climate" applies equally well here too (e.g., Golub and Hayat 2014). In addition, agriculture has special problems that governments need to fix, such as extension, land rights, standard setting, and input provision.…”

Entrepreneurship and human capital development in children

“…Instead, opportunity costs of having children in school may vary depending on the occupation of the parents. Given a high degree of underemployment in the agricultural sector (Golub and Hayat 2014), it is likely that the opportunity cost of having children in school is lower when parents work in agriculture. This could lead to worse child school outcomes when parents establish an NFE.…”