Creating Employment Opportunities in Ethiopia

8/6/2019 Creating Employment Opportunities in Ethiopia

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BUREAU OF LABOUR AND SOCIAL AFFAIRS OF THE AMHARA NATIONAL REGIONAL

STATE OF ETHIOPIA

Creating employment opportunities

Paper presented for the training entitled Employment-Intensive Investment forsustainable Development ITC/ILO, Turin, Italy. 19-23 May 2008

Produced By: K. Mesfin Raji

5/15/2008

This brief report is prepared as gesture of participation in a training program organized by theITC/ILO regional office situated in Turin, Italy. The paper discusses the employment aspects of Ethiopias Plan for Accelerated and Sustained Development to end Poverty (PASDEP) -(2005/06 - 2009/10) strategy. The document only reflects the authors own opinion and notintended to portray as critical review. The paper may or may not get official recognition as its

presentation will depend on the schedule of the organizers.


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2 Paper presented for Employment-Intensive Investment for sustainable Development ITC/ILO, Turin, Italy. 19-23 Ma y 2008

Ethiopia's poverty reduction strategy for the ongoing five years comprises of the following eight

pillars;

1. Building all inclusive implementation capacity;

2. A Massive push to accelerate growth;

3. Creating the balance between economic development and population growth;

4. Unleashing the potentials of Ethiopia's Women;

5. Strengthening the infrastructure backbone of the country;

6. Strengthening human resources development;

7. Managing risk and volatility; and

8. Creating employment opportunities.

Creating Employment opportunities i

In Ethiopia underemployment and unemployment-especially in urban area and among the youth

are serious challenges. Creating employment and income earning opportunities; in the modern

sector, the informal sector, and on farms is thus central to the effort to accelerate growth.

The working age population /labor force/ stood at 54% of the population in 2004/05 and is

growing by about 1.2 million people per year. It is important to note the fact that pressure on the

labor market comes directly from the supply of labor, which in turn, is induced by the growth

rate of the population. The challenges faced by the government in fulfilling the demand for

increased employment are thus two -fold:

Managing the dynamics of population growth, and Expansion of labor-intensive productive activities.

Therefore PASDEP's strategic emphasis is on growth of: The rural, industrial, export,

construction, and other labor intensive sectors. Particular focus is given to the promotion of MSE

development as well.

The MSE growth and integration with TVET system development will be instrumental in

increasing the employment of youth. The returns to education are high, and improving education

levels both through general education and through specialized TVET skills training, is an


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important part of this effort, as is providing the capital for the unemployed to work within the

form of investments in infrastructure, a well-functioning financial system, and specialized

programs to promote opportunities for self-employment.

Currently a great number of job opportunities are being created through urban development

strategy using MSE development linked with TVET, and in integrated housing program in major

towns of the country including Addis Abeba.

Youth and employment ii

Youth defined as those aged (15-29) make up 28% of the population. They represent the futureof Ethiopia, and it is important that they have productive opportunities to grow into adulthood.

And to contribute to society and the economy, Ethiopia's first national youth policy was

formulated in 2004, with the broad objective of encouraging the active participation of youth in

the economic, social and cultural life of the country. The policy addresses a wide range of issues

ranging from HIV/AIDS to environment protection and social service, although the most central

element relative to PASDEP relate to education, training and the employment of youth.

According to the policy, the government is developing a multi-sectoral youth development

strategic plan, and two corresponding five years youth sector development programs (YSDP), the

first of which covers the PASDEP period, 2006-2010. The youth policy promises to facilitate the

growth of safe employment and formal/informal employment opportunities, and to create

condition conductive for rural youth to acquire farming plots and grazing lands on the basis of

existing laws. The policy outlines a vision for creating an enabling environment for youth to

benefit from education and training, and for out-of-school youth to develop their reading and

writing skills through adult education services.

The new education policy in chapter VII focuses on producing a skilled labor force, rather than a

large cohort of relatively unskilled secondary graduates, as was the case in the past. The TVET

program described in chapter VII is a central part of this strategy. During the PASDEP, the

effectiveness of technical training will be upgraded to provide more demand-driven training

through closer linkage with the labor market, and to increase the link with employer and the


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work force. The labor law codifies the practice of apprenticeships and allows for contract to be

entered with those at least 14 years of age. For rural youth, the agricultural TVET program aims

to reduce unemployment. Create trained agricultural practitioners with increased productivity,

encourage self-employment, and create more market-oriented farmers.

Since many youth are engaged in the informal sector, particular attention is being given to the

role of micro and small enterprises development /MSED/. The /MSED/ strategy underpinning

PASDEP pays particular attention to female-operated enterprise, school dropouts, and

unemployed youth. Under this strategy the government will provide entrepreneurships and

business management training, appropriate technology research, market support, information andcounseling, business support service, and help with access to credit and basic infrastructure for

MSEs.

Employment and labor force issues: iii

The main story regarding the labor market is the rapid growth of the workforce, as a result of

high population growth. Combined with fewer farming opportunities for the next generation, and

relatively slow creation of new jobs in the modern sector, this is resulting in growing

unemployment and under-employment pressures.

Economic activity rates in urban areas are relatively low, and have been declining somewhat

(from 66% in 1999 to 58% in 2003), although this is to some extent a reflection of growing

school enrolments that keep youth out of the labor force longer. The incidence of unemployment

was relatively lower for those with non-formal education (9%) and holders of diploma and above

(12%). Underemployment, on the other hand, is very high, especially among youth.

Surveys for the 5 years (1999-2004) show a slight decline in urban unemployment among male,

and a slight increase among females; and also that the duration of unemployment has shortened.

As in most countries, unemployment is highest among youth (who have less marketable skills

and experience, but who also tend to live with their families, and often not subject to the same

immediate pressures to find work that apply to slightly older married men and women). It is also


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generally higher among women than men. Of wage employment, the public sector still accounts

for about 40%.

Wages are low, and for the less educated, Wages in urban employment are just about at the

poverty line. Wages rise dramatically with education levels, for example persons with even basic

non-formal education make about 23% more than illiterates, and those with higher education

making 148% more. While schooling clearly pays, in the future it is likely that completing

primary and secondary education will be less of a guarantee of finding employment than it was

in the past, as the labor market becomes more saturated.

Nonetheless with the expansion of education, the average skill level of the workforce is

increasing, and this should pay off in productivity gains. Although wages are lower than most

counties, potentially making Ethiopia an attractive location for labor-intensive manufacturing

and export production, productivity is also low-too low at the memento to be highly attractive to

FDI.

There are big urban-rural, formal-informal, and gender gaps in employment and wages. Labor

mobility is limited, especially between rural areas and towns, although there is increasing

evidence of 'step-migration' from smaller to large towns. As in most countries, immigrants start

out near the bottom of the urban job market, but there is evidence that their lot improves over

time. The informal sector is large, and pays about a third less than more formal sector

employment 1. Definitions vary, but by one estimate showed that the informal sector accounts for

75% of the workforce. The constraints appear to be related mostly to access to capital, and of

course to skill and education levels. Panel data (1994-2004), however, does show an increasing

movement over time from informal to formal jobs.

The solutions, to be pursued in PASDEP include enabling faster job creation (by opening up

private sector growth, maintaining stability, and strengthening the investment climate); building

1 Note this is based only on paid informal sector employees; the average among all, especially family workers, isalmost certainly lower.


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human capital through education, TVET, and special effort to provide skills training to the

unemployed; and selected public works employment interventions.

The goal of the policy is to make sure that the youth gets enabling environment, benefit from the

exercises of democracy, good governance, social, cultural and economic activities in an

institutional manner.

Experience of Regional states (Amhara) iv

Employment situation in the region is discussed (due to incomplete data) from the data of urban

employment, among the total economically active urban population of the region, 81% areemployed among which 49.6% constitute females. The remaining 19% are Unemployed.

Hence, unemployment in urban areas is rising and becoming among the prominent problems. An

integrated effort has to be carried out among various sectors in the aim of minimizing the

problem. Besides creating a better favorable condition to the private sector, expansion of the

micro trade and manufacturing areas are some among several that the region has to pay attention

to minimize unemployment situation.

With regard to the investment situation, 768 projects amounting to a capital of birr 7.27 billion,

with job opportunity of 134660 are issued in the late 2005. Amongst 27.8% of the total

investment projects go to the agricultural sector. From the prevailing high unemployment

situation on urban areas, and on the other hand from the abundance of investment potentials in

the region, much could be done. Therefore, it has to be strengthened further so as to primarily

absorb the unemployed citizens. The private sector plays a vital role in the introduction and

expansion of modern as well as labor- intensive technologies and entrepreneurship which

ultimately leads the region to be competitive in the world market.

i PASDEP (2005/- 2009/10), p53,Volume : Main Text, September, 2006, Addis Abebaii Ibid, p197iii Ibidiv Development Indicators of Amhara Region(Year 2006), p13-14

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Creating Employment Opportunities in Ethiopia