Lee-Roy Chetty
Lee-Roy Chetty

Africa’s 2040 employment problem

Over the last decade, six of the world’s 10 fastest-growing economies were in sub-Saharan Africa. Yet, there are troubling indicators that this exponential growth has not resulted in robust growth of “good” jobs.

In other words, those offering higher wages and better working conditions – especially for the young.

Exacerbated by a delayed demographic transition, the share of youth (aged 15 to 24) in Africa – both north and south of the Sahara — has been rising over time and is now higher than in any other part of the world.

This demographic bulge offers the possibility of a growth dividend. As in the case of East Asia – a rapidly growing work force can be combined with capital and technology.

But it can also represent a major threat.

Africa is not creating the number of jobs needed to absorb the 10 to 12 million young people entering its labour markets each year, and as recent events in North Africa have shown, lack of employment opportunities in the face of a rapidly growing, young labour force can undermine social cohesion and political stability.

Seen from this perspective, employment policies cannot focus only on the supply side of the labour market.

Indeed, while labour market reforms and active labour market policies can make a contribution to solving the employment problem, the greatest traction is likely to come from policies and public actions designed to accelerate the growth of sectors with high value added per worker.

Ultimately, from a strategy for structural change.

On the face of it sub-Saharan Africa does not appear to have a severe employment problem. In 2009 the overall unemployment rate was 6.4% compared with a global average of 4.7%. The regional unemployment rate has been relatively stable since 2000 and ranks third, behind the Middle East, North Africa, Europe and Central Asia.

Between 2004 and 2008, North and sub-Saharan Africa had some of the most employment-intensive growth in the world. According to data from the Africa Development Bank, average employment elasticities of growth were 0.7 and 0.5, respectively. Globally the employment elasticity of growth is estimated to be about 0.3, and it ranges from a low of 0.2 in East Asia to a high of 0.9 in the Arab Middle East.

Based on the International Labour Organisation definition, youth unemployment rates in many sub-Sahara African countries are relatively low compared to world averages. Worldwide there is a fairly regular relationship between the overall rate of unemployment and the unemployment rate of the young.

With almost 200 million people aged between 15 and 24, Africa has the youngest population in the world. In a majority of African countries the young account for more than 20% of the population.

In 2011 the 10 countries in the world with the youngest populations were all in Africa. While the proportion of young people (15 to 24) is projected to decline globally, it will stay at the same level in Africa for the foreseeable future.

At the projected rates of population growth the number of young people in Africa will double by 2045. By 2030 Africa is projected to have as many youth as East Asia and by 2050 it could also exceed the youth population in South Asia.

The rapid growth of the labour force implied by Africa’s demographic transition will pose serious challenges. According to a McKinsey survey conducted in 2010, by 2040, Africa will have the largest workforce in the world, surpassing both China and India.

This offers an unrivalled opportunity for economic and social development, if these new workers can find places in the productive sectors of the economy. However, it could also present a significant risk, if Africa fails to create sufficient economic and employment opportunities.

However, the role of education will prove paramount.

There is a severe mismatch between the skills possessed by young workers and those demanded by employers. According to the World Bank, despite the increase in enrolments in most sub-Saharan African countries – especially at the primary level – the out-of-school population has very low educational attainment.

Thirty-six percent of the 15- to 24-year-olds in sub-Saharan Africa have never attended school. Only 28% have completed primary school, and only 8% have completed secondary school.

This means that about two-thirds of all young workers in the labour market — about 95 million young people — lack the basic skills needed to be competitive in the labour force.

The key to reducing unemployment and informality – both among the young and in general – is rapid growth of good jobs. These are employment places capable of paying good wages and building skills. If the history of those countries that have successfully sustained growth, job creation and poverty reduction is any guide, creating such good jobs will require significant structural change. Economies that have made the transition from low-income to high-income status typically have experienced significant changes in their economic structure.

Education reforms are essential to improving the skills and problem-solving capacity of Africa’s workers. Perhaps the most urgent reform is to increase the emphasis on post-primary education. In the longer term the education system needs to be restructured to build the skills needed to compete globally.

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  • 13 Responses to “Africa’s 2040 employment problem”

    1. Stephen Browne #

      This against the textbook debacle, and many other similarly alarming problems, makes me very worried. The very phase of education (post-primary) that you narrow down on is the one with the most deep-seated difficulties. I would offer a solution, but I don’t have a cooking clue how to solve a generation-old education crisis.

      October 12, 2012 at 5:52 pm
    2. Try it, it works!!! #

      The solution to education problems under the most difficult conditions is very simple,

      “Consciousness-Based Education”

      “The Consciousness-Based education programme (CBE) provides a practical, proven approach to prevent anti-social behaviour and other educational problems by developing the creative intelligence and inner happiness of every student.”
      More: http://cbesa.org/

      Transform your school in three months:
      http://cbesa.org/ImplementationProcess.html

      “Please see our FAQ page for answers to questions often asked by school developers (including parents, educators, and philanthropists) about the Consciousness-Based Education programme.”
      http://cbesa.org/faq.html

      >>>

      October 13, 2012 at 10:03 am
    3. Sterling Ferguson #

      @Chetty, some Africa economies appeared to be growing because the prices of natural resources have been going up. However, Africa is not adding value to their resources by taking their resources and making finish goods with them. For example, Africa produces cotton but, where are the textile mills to process this cotton into finish goods? Nigeria and Angola both have oil and natural gas but, where are the secondary chemical industry built around these resources? Until recently in Nigeria, this country had four oil refineries and two of them weren’t working and they were importing their gasoline. So, the growth you are talking about is all fake and unbalanced.

      @Try it,it works, Africa is losing thousandth of educated people a year that are going to North America and never return to Africa.

      October 13, 2012 at 5:01 pm
    4. While probably accurate, these employment figures that you present seem both ambiguous and misleading.

      In principle, with about one sixteenth of the continent’s population, RSA is apparently the most advanced economy on the continent with Nigeria on an overtake race currently. Our unemployment level is over 25% with youth arguably well over 60%.

      So these numbers that you are presenting must be interrogated in the light of what represents the nature of Afrika’s economy. This you have neglected to do. Excluding RSA and Nigeria it is more than probable that the rest of the sub-saharan Afrika is still essentially low wage, labour intensive primary production territory with the general populace locked into low output agriculture and low-wage level, natural resource extraction activity… meaning that the GDP of the bulk of the sub-Saharan continent is possibly equivalent to that of Spain where unemployment is at the same level as South Africa’s.

      There are some indications that Ethiopia is focussing on low wage manufacturing, with some marginal success, and of course Nigeria is a world leader in the [so-called] ‘Nollywood’ production of low cost [hence low wage] tertiary, religion oriented film making.

      Other than these exceptions… there is little likelihood that Africa will escape the future you predict… Reality suggests that those who come late to the party soak up the crumbed remains of the feast.

      It is probable that the future is Feudal/extractive.

      October 14, 2012 at 8:03 am
    5. Try it, it works!!! #

      @Ferguson

      Until you solve the education problem for the masses, educated people will leave Africa for greener pastures, and neither will African countries be able to add value to their natural resources. The solution is changing the education system and I posted a tried and tested solution above. Ignore it at your peril.

      PS. Your example of Africa producing cotton is out of date. Cotton prices around the world have collapsed anyway. The cotton industry in Asia, USA etc. are all in dire straights. In addition, oil in Nigeria and Angola should stay in the ground, climate change from fossil fuels is going to affect Africa more than any other continent in the world.

      October 15, 2012 at 9:05 am
    6. Shinedima #

      “The share of youth (aged 15 to 24) in Africa – both north and south of the Sahara — has been rising over time and is now higher than in any other part of the world.” That means we have a time bomb ticking in our backyard, a time bomb that is due to explode anytime before 2040. Sub Saharan Africa need to come up with strategies of creating jobs for this vulnerable but could turn deadly age group. Many companies and even government departments prefer employing qualified and experienced personnel in their companies/institutions thus disadvantaging non experienced fresh graduates who falls within the 15 to 24 age categories. The big question will therefore be, how do we create jobs for the unqualified non experienced youth of Africa?

      October 15, 2012 at 12:24 pm
    7. Yaj #

      Jobless growth. Mechanisation and automation sheds more jobs than it creates.

      What are the possible solutions : Reduce the working week and job-sharing combined with universal basic income. Tax speculation by imposing a levy on all financial transactions and scrap tax on income and value -added. Invest in decentralised renewable energy grids, organic small-scale farming and the services sectors like health-care and social work and education to create meaningful jobs!

      October 15, 2012 at 1:05 pm
    8. Sterling Ferguson #

      @Try it, it Works, you missed the point Africa does nothing with her resources.

      October 16, 2012 at 6:42 am
    9. Enough Said #

      @Ferguson – you actually missed the point of the whole article. Africa cannot do anything with its resources or economy without the decent education of its people. Read Lee-Roy Chetty’s article before you open your mouth and repeat what you have repeated out of context so many times before. Then use appropriate and examples to illustrate your point if you want people to take you seriously.

      October 16, 2012 at 1:34 pm
    10. Sterling Ferguson #

      @Enough Said, Africa has never tried to do anything with her resources, when I used cotton as an example, this raw material can be used to make clothes for the people to create jobs and wealth. However, the cotton is being shipped to Asia and finish goods are made with these resources. The T-shirts the ANC members are wearing were made in China and not SA or Africa. The towels you dry your body were made in China and not SA or Africa with their cotton.

      In the case of Nigeria and Angola, these two countries have never tried to build industries around their oil. Until recently, Nigeria had four oil refineries and two were working to refine her oils to add value to her oil. The reason this wasn’t done because the leaders in Nigeria have been stealing all of the money from the government. In Angola, the government is building soccer stadiums with this country oil money.

      The good news is that in Nigeria the government has started to build industries around their resources. New oil refineries have been built and this country has just built a chemical plant around her oil industry. Nigeria is now building fertilizer plants to make fertilizer for her farmers. So, not everyone is listing to your left wing dogma in Africa.

      October 17, 2012 at 1:18 am
    11. The Creator #

      Enough Said, I think (and usually I disagree with Ferguson on most things) that Ferguson has indeed read the article.

      The trouble with Chetty’s points is that they are based on the pretense that there is reliable unemployment data in Africa south of the Sahara. It’s pretty obvious that with more than 35% of the population wholly uneducated, the infrastructure is in a bad way and the chances that those people are in gainful employment are remote.

      In fact, the argument that South Africa is the most unequal country in the world falls on the same point; we’re just an African country which happens to have more reliable stats than most, and therefore we’re the poster child for bad economic news. In reality, countries like Gabon and Central Africa, to say nothing of disaster areas like the DRC, are probably far worse off than anyone knows — least of all their governments.

      October 17, 2012 at 10:10 am
    12. Sterling Ferguson #

      @Creator, after WW2 Germany and Japan invested all of their resources in building industries to produce wealth and this is why they are rich countries today. Post colonial Africa hasn’t been building nothing but soccer stadiums and big homes for their corrupted officials. when capital projects are built in Africa, they are allowed to fall apart because of lack of maintenance. A good example of what I am talking about, the rail system in Nigeria was working when the English left Nigeria. However, within a few years the whole rail system had fell apart. These scenes were played out all over Africa until the new leaders came to power in many countries in Africa.

      The good news about Africa, the new leaders are focusing on building capital projects to create goods and wealth for the people in many African countries. I was just reading about how many capital projects that have been started in Ethiopia and finished. This country has built a large industry around her cotton production and the export of clothes were at a record high. So, there is good news in many parts of Africa that should be talked about.

      Speaking of Enough Said, you shouldn’t pay him no attention because he has been picking my brains for a long time.

      October 18, 2012 at 12:29 am
    13. Enough Said #

      @Ferguson

      “Speaking of Enough Said, you shouldn’t pay him no attention because he has been picking my brains for a long time.”

      What brains?

      October 18, 2012 at 4:31 pm

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