Employment, labor markets, and poverty in Ghana
Abstract
The slowdown and possible reversal in the rural-to-urban flow of labor in Ghana is symptomatic of a basic shortcoming in the country's economic recovery: the inadequate growth of the productive sector in the non-agricultural economy. The rate of growth of GDP has been adequate but much of the growth has been fueled and led by the services sector, which (at more than 46 percent) has surpassed agricultural as the main contributor to GDP. In some way growth in the services sector has been positive, but arguably it is a once-for-all adjustment to recovery that cannot be sustained at this growth rate without commensurate growth in both agricultural and non-agricultural production. Evidently, stabilization and liberalization measures have not been sufficient to put the industrial sector on a path of sustained growth. There is too little skilled labor in Ghana, and demand for industrial goods has been weak, in part because the cost of credit is high and savings are too low for inefficient, state-run enterprises to buy the equipment they need. Returns to higher (especially university) education are high in Ghana, largely because of high wages for government services. Because of inadequate technical and vocational education, returns to secondary education are low. Employment trends have mirrored the deficiencyin output growth. Every year since 1987, industrial employment has fallen. Every year since 1987, industrial employment has fallen. The growing labor force, which agriculture could not absorb productively, has spilled over into service activities and the informal sector is symptomatic of an economy with low growth potential. In the medium term, the surest way to absorb labor would be to increase investment in the agriculture sector by changing the composition in public spending. As long as the public sector wage bill remains a sizable part of government expenditure, an increase in wage levels not compensated by reduction in employment will create strains in the budgetary balance and will defeat the most important instrument of increasing the growth rate of employment--higher levels of public investment in agriculture. It is possible that a vicious circle is complete. Higher wages in the public sector might be necessary to increase efficiency, without which productive public investment is not possible. But if the government is not willing or able to reduce public employment, and is further unable to alter the composition of expenditure to provide more finance for agriculture-related public investment, a high wage public policy will merely fuel inflationary pressures and reduce the real investment ratio. The only way out of this vicious circle is a larger infusion of foreign and private investment than has been seen so far, supplemented by corrective monetary policy.Download Info
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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1845.Length:
Date of creation: 30 Nov 1997
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Handle: RePEc:wbk:wbrwps:1845
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Keywords: Labor Policies; Environmental Economics&Policies; Banks&Banking Reform; Public Sector Economics&Finance; Public Health Promotion; Environmental Economics&Policies; Economic Stabilization; Public Sector Economics&Finance; Banks&Banking Reform; Health Monitoring&Evaluation;References
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- Alderman, Harold & Canagarajah, Sudharshan & Younger, Stephen, 1995. "A Comparison of Ghanaian Civil Servants' Earnings before and after Retrenchment," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 4(2), pages 259-88, October.
- Knight, J B, 1972. "Rural-Urban Income Comparisons and Migration in Ghana," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 34(2), pages 199-228, May.
- Mazumdar, Dipak, 1976. "The urban informal sector," World Development, Elsevier, vol. 4(8), pages 655-679, August.
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"The size and sources of economic rents in a developing country manufacturing labour market,"
CSAE Working Paper Series
1995-06, Centre for the Study of African Economies, University of Oxford.
- Teal, Francis, 1996. "The Size and sources of economic rents in a developing country manufacturing labour market," Economic Journal, Royal Economic Society, vol. 106(437), pages 963-76, July.
- Glewwe, Paul, 1996. "The relevance of standard estimates of rates of return to schooling for education policy: A critical assessment," Journal of Development Economics, Elsevier, vol. 51(2), pages 267-290, December.
Citations
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
- Canagarajah, Sudharshan & Mazumdar, Dipak & Xiao Ye, 1998. "The structure and determinants of inequality and poverty reduction in Ghana, 1988-92," Policy Research Working Paper Series 1998, The World Bank.
- Pierre-Richard Agénor, 2004.
"Macroeconomic Adjustment and the Poor: Analytical Issues and Cross-Country Evidence,"
Journal of Economic Surveys,
Wiley Blackwell, vol. 18, pages 351-408, 07.
- Agenor, Pierre-Richard, 2002. "Macroeconomic adjustment and the poor : analytical issues and cross-country evidence," Policy Research Working Paper Series 2788, The World Bank.
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