Employment, labor markets, and poverty in Ghana

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.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

La théorie du sous-emploi urbain dans les pays en voie de développement

The article investigates the working of a model of an urban labor market in LDG's which has two sectors—one sector (the U-sector) being characterized by ease of entry, variable hours of work and flexible earnings, the other (the O-sector), by rigid wages maintained at a relatively high level. Migrants from the rural areas respond to the expected earnings in both sectors, and can search for O-sector jobs while participating in the U-sector. Labor supply determined by such a migration function, together with the relative rates of growth of income in the two urban sub-sectors (on plausible assumptions) lead to the possibility that average earnings in the U-sector decline over time relative not only to O-sector wage, but also to the alternative income in the rural sector. In the last section a distinction made between two types of job seekers found in the U-sector—those with and those without an interest in the O-sector—gives the result that average earnings in the U-sector may sometimes be independent of conditions in the O-sector. It is also seen that, under certain conditions, even with ease of entry and variable hours of work, the U-sector may not serve as a channel for migrants seeking to enter the O-sector. The analysis provides a classification of labor market types which may be of help in organizing empirical information from different parts of the world

La théorie du sous-emploi urbain dans les pays en voie de développement

The article investigates the working of a model of an urban labor market in LDG's which has two sectors—one sector (the U-sector) being characterized by ease of entry, variable hours of work and flexible earnings, the other (the O-sector), by rigid wages maintained at a relatively high level. Migrants from the rural areas respond to the expected earnings in both sectors, and can search for O-sector jobs while participating in the U-sector. Labor supply determined by such a migration function, together with the relative rates of growth of income in the two urban sub-sectors (on plausible assumptions) lead to the possibility that average earnings in the U-sector decline over time relative not only to O-sector wage, but also to the alternative income in the rural sector. In the last section a distinction made between two types of job seekers found in the U-sector—those with and those without an interest in the O-sector—gives the result that average earnings in the U-sector may sometimes be independent of conditions in the O-sector. It is also seen that, under certain conditions, even with ease of entry and variable hours of work, the U-sector may not serve as a channel for migrants seeking to enter the O-sector. The analysis provides a classification of labor market types which may be of help in organizing empirical information from different parts of the world.

The structure and determinants of inequality and poverty reduction in Ghana, 1988-92

Using three rounds of the Ghana Living Standard Survey, conducted between 1988 and 1992, the authors present findings that shed light on the structure of inequality among different socioeconomic groups in different geographic areas, in the context of poverty reduction. First, poverty reduction can be attributed mainly to improvements in both average levels of income and the pattern of its distribution in the informal and nonfarm sectors in other cities and rural areas outside the capital city, Accra. Second, an analysis of different measures of inequality reveals that the most important changes in the degree of inequality took place at the lower end of the distribution. But the direction of change was different in Accra compared with the localities outside Accra. In Accra, while inequality increased overall, the inequality in the lower part of the distribution increased much more. In other cities, there was a more or less uniform improvement all along the distribution. But in the rural areas, there was a significant improvement at the lower end, but a deterioration at the upper end. Third, structural adjustment - which aimed to cut back public sector employment and stimulate activities in the private sector - raised living standards in rural areas and other cities, but not in Accra. The public sector is much larger in Accra than in other cities and rural areas. Contraction of the public sector in other cities and rural areas was compensated for by income growth in the informal and nonfarm sectors. But contraction of Accra's large public sector dominated the local economy, so living standards declined in both formal and informal sectors. Accra's economy will probably grow as its private and informal sectors grow. Fourth, major shifts in the population occurred in all localities from the formal to the informal sector, but the magnitude of the shift was largest in Accra - in fact, several times more than in the other localities. The deterioration of the income at the lower part of the distribution in both the formal and the informal sectors is mainly responsible for the decline in the welfare of the low income households in Accra. These findings suggest that an integrated regional strategy, taking into account the local socioeconomic structure, is necessary for achieving economic growth and poverty reduction in all regions. Anotherimportant finding: The poor do not benefit as much from education as the nonpoor do because there is very low return (in income) to primary education, the highest level most poor Ghanaians can hope for. Education helps increase, rather than decrease, inequality, so primary education for the poor should be designed to provide them with income-earning skills. Developing economic strategies for sustainable poverty reduction will require further research on activities in the informal sector. Another issue that requires investigation is the role of different administrative regions in the determination of household welfare that seems to have changed over the period under study. Findings from such an analysis will facilitate the design of appropriate regional strategies for poverty reduction in Ghana.Poverty Impact Evaluation,Public Health Promotion,Health Systems Development&Reform,Health Economics&Finance,Services&Transfers to Poor,Poverty Assessment,Achieving Shared Growth,Inequality,Rural Poverty Reduction,Services&Transfers to Poor

Malaysian labor markets under structural adjustment

Malaysia's sustained growth in the 1970s was boosted by windfall gains during two oil price hikes plus a commodity boom. Oil and commodity prices fell in the 1980s and Malaysia, an oil exporter, bungled into a rather severe depression in 1985-86. But it recovered quickly, to the surprise of some - and growth resumed in 1987. The events that led to the recession and quick turnaround are a Southeast Asia prototype. The author analyzes the key relationships in this cyclical behavior. He then focuses on long-term labor market issues of interest during the economy's 20-year transformation. It was found that the real exchange rate appreciated because of the inflow of foreign capital to support the government's budget deficit. And the increase in average wages in the period leading up to the recession was not corrected with the rise in the domestic exchange rate in a fully employed economy. Wages increased more than labor productivity did at a time when employment growth had slowed and the rate of unemployment had risen. The author also concluded that rising labor costs were only part of the problem of rising costs before the recession. The whole package of fiscal, monetary, and exchange rate policies - together with the labor market behavior - led to the recession.Banks&Banking Reform,Environmental Economics&Policies,Economic Theory&Research,Economic Stabilization,Markets and Market Access

Financial Constraints and Investment: Assessing the Impact of a World Bank Loan Program on Small and Medium-Sized Enterprises in Sri Lanka

The authors examine the investment behaviour of a sample of small, credit-constrained firms in Sri Lanka. Using a unique panel-data set, they analyze and compare the activities of two groups of small firms distinguished by their different access to financing; one group consists of firms with heavily subsidized loans from the World Bank, and the other consists of firms without such subsidies. The use of program-evaluation techniques reveals that the relaxation of financing constraints did not affect economic efficiency for the group of firms that received subsidized capital.

Labor markets in an era of adjustment : an overview

The authors have written an overview of 19 papers in a symposium devoted to an examination of the interaction between labor markets and adjustment. The purpose of their commentary is to draw general conclusions and policy lessons and to identify areas for further research. The papers include 7 issue papers and 12 country studies (Argentina, Brazil, Bolivia, Chile, Costa Rica, Cote d'Ivoire, Egypt, Ghana, Kenya, Korea, Malaysia, and Thailand). The country studies bring together a wealth of information that will be useful to researchers. The evidence on real wages casts considerable doubt on theoretical concerns about aggregate real wage rigidity and labor market inflexibility as a hinderance to adjustment. Declines in real wages have been dramatic and often far greater than the fall in GDP. For some countries, the declines in real wages may have been large enough to have aggregated demand effects that inhibit recovery. The studies also discuss the consequences of labor market adjustment on income distribution, gender, and human capital. The conclusions here are less clear-cut. The issue papers highlight complexities that point to country-specific answers. While real wage declines will worsen poverty, improvement in the rural-urban terms of trade during adjustment will have the opposite effect. Similarly, while employment shrinkages are likely to affect women adversely, a high female-labor intensity of tradables can serve as a countervailing force.Environmental Economics&Policies,Banks&Banking Reform,Health Economics&Finance,Labor Markets,Economic Theory&Research

A Decomposition of Growth of the Real Wage Rate for South Africa: 1970 - 2000

This paper examines the potential trade-off between growth in employment and growth in wages. In order to assess the trade-off between employment growth and real wage growth, we make use of a simple decomposition model, following Mazumdar (2000), in which real wage growth is determined by growth in real value added, employment growth, a trend in the wage share of value added and a relative price effect

India’s Peculiar Pattern of Growth: The Impact of Labor Regulations on its Origin and Persistence

http://deepblue.lib.umich.edu/bitstream/2027.42/77409/1/ipc-99-mazumdar-india-growth-patter-labor-regulations-origins-persistence.pd