African Lions Author Workshop 2015: Ghana

Understanding Ghana’s Success Growth

Story and Job Creation ConcernsErnest Aryeetey , Vice Chancellor, University of Ghana and

William Baah-Boateng, Department of Economics, University of Ghana

African Lions Authors Draft Workshop, June 5, 2015, Arusha, Tanzania

Outline

• Introduction – Growth story

• Employment: quantity and quality

• Poverty and inequality

• Growth-employment-poverty linkage

• Constraints to growth

• Skills gap

• Review of employment related policies

• Conclusion

Introduction – Growth Story

• Strong growth in Ghana above SSA since 2007

– Rebase of national accounts in 2006

• Pushed the country to Middle income status

– Oil production since Dec. 2010

-5.0

0.0

5.0

10.0

15.0

20.0

0.00

500.00

1000.00

1500.00

2000.00

19

91

19

94

19

97

20

00

20

03

20

06

20

09

20

12

GD

P G

row

th R

ate

s (%

)

Pe

r ca

pit

a G

DP

(U

S$)

Ghana GDP Per capita (US$)Ghana GDP growth rate (%)

Introduction – Growth Story

• Export due to oil was a demand major driver over the last three years but continue to be neutralized by increasing imports

• Public consumption reached new height in 2012 due to election related spending

• Gross capital formation peaked in 2012 due to oil exploration but slowed down in 2013 on account of decrease in exploration activity

High level of employment than SSA

average dominated by low quality jobs

72.9 73.966.9

67.767.4

75.464.3 64.1 64.1

64.965.2

65.5

5.777.2 7.43

9.1410.24

12.03

0

5

10

15

0

20

40

60

80

1992 1999 2000 2006 2010 2013

Emp

loym

en

t Le

vels

(in

m

illio

ns)

Emp

loym

en

t-to

-p

op

ula

tio

n r

atio

(%

)

Ghana SSA Employment levels (Ghana)

Quantity and Quality of employment

Quantity and Quality of employment

Quantity and Quality of employment

• Higher working poverty rate in vulnerable/low quality jobs than productive and/or paid jobs

Poverty and inequality

• A consistent decline in poverty since 1989

• But increasing inequality

Growth-employment-poverty linkage

• Higher levels of employment than SSA though

• Employment lags behind growth and the gap seems widening

– with declining employment elasticity of output

Growth-employment-poverty linkage

• Slowing employment response to growth confirmed by declining elasticity

0.65

0.56 0.55

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

1991-2000 2000-2010 2011-2013

Employment Elasticity of growth

GDP

employmentey

ln_

ln_

Growth-employment-poverty linkage

• Higher growth in low labour absorption sectors (mining, oil, construction, finance) relative to high employment oriented sectors (agriculture, manufacturing)

• While employment in agriculture & manufacturing declining/stagnating but high growth in mining/oil is not generating enough jobs

Constraints to growth and employment

generation• 12.31 million constitutes

Ghana’s LF; and

• Has grown 3.4% since 1992 relative to 5.3% economic growth

• Higher LFPR for

– males than females

– Adults than youth

Constraints to growth and employment

generation• Size of LF not much of a challenge but

the quality

• 3 of every 4 have up to basic education hence (high informality)

• Slow growth of high skilled LF

• Quality constraint evident in low (0.15) contribution of education per worker to growth

• Could have adverse productivity effect

44.1 40.148.7

34.5 32.1 26.6

48.249.1 34.7

53.148.0 55.8

5.7 7.911.0

8.213.0 12.1

2.0 2.95.7 4.2 7.0 5.4

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1992 1999 2000 2006 2010 2013

Level of education of the labour force

None Basic or less Sec/Voc/Tech/Comm Post sec & Tertiary

Skills Gap as Constraint to Growth

• Low level of education culminates into shortage of high, vocational & semi-skilled

• High and semi-skilled jobs to be filled by low skill implied lower productivity (e.g. 40% of Professionals; 72% of technicians & 78% of legislators etc. underqualified in 2013 (See Sparreboom& Gomis, 2015)

• Specific skills gap also exist due to mismatch (Baah-Boateng and Baffour-Awua (2015)

Skills Gap as Constraint to Growth

40.4 36.1 35.4 34.8

59.6 63.9 64.6 65.2

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Year1 Year2 Year3 Year4

Distribution of University enrolment by Science and Humanities programmes 2012/13

Science Humanities

33.1 30.6 28.7

66.9 69.4 71.3

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Year1 Year2 Year3

Distribution of Polytechnic enrolment by Science and Humanities programmes 2012/13

Science Humanities

Review of Employment Oriented Policies

and Programmes • Job creation prior to 1983 was dictated by state-led economic strategy in a controlled economic

environment with public sector major employer

• A shift to private sector-led strategy in a liberalised after 1983 caused public sector jobs to decline in favour of private sector particularly informal employment

• Key Specific interventions towards employment generation & poverty reduction

– PAMSCAD

– STEP Program

– NYEP/GYEEDA

– Livelihood Empowerment Against Poverty (LEAP)

– National Employment Policy 2015

Further work to be done

• Trend in depth of poverty

• Employment elasticity by sector

• Labour productivity overall and by sector

• Returns to education and minimum wage issues

• Strengthen demographic section to capture demographic dividend or otherwise

Conclusion

• Job creation is often treated as a residual outcome of macroeconomic strategies but not the main focus.

• Employment growth lags behind growth (with declining employment elasticity) and mostly occur in the informal service sector

• Growth mainly driven by high capital intensive sectors with jobs in agriculture & manufacturing stagnating at best

• Low quality of education drives informal sector employment associated with low earnings – pushing inequality

• Job creation needs to be more integrated into all national programs

www.wider.unu.eduHelsinki, Finland