84083 Afri ca D ev elop me nt Forum v1 Overview Youth Employment in Sub-Saharan Africa Youth Employment in Sub-Saharan Africa Overview Deon Filmer and Louise Fox with Karen Brooks, Aparajita Goyal, Taye Mengistae, Patrick Premand, Dena Ringold, Siddharth Sharma, and Sergiy Zorya A copublication of the Agence Française de Développement and the World Bank This booklet contains the Overview from the forthcoming book, Youth Employment in Sub-Saharan Africa (doi: 10.1596/978-1-4648-0107-5). To order copies of the full-length book, published by the World Bank, visit http://publications.worldbank.org. You can also download the report at www.worldbank.org/africa/youthemploymentreport. © 2014 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved 1 2 3 4 17 16 15 14 This work is a product of the staff of The World Bank with external contributions. 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SWAZILAND LESOTHO SOUTH AFRICA Contents Acknowledgments  vii Abbreviations  ix Overview  Youth Employment in Sub-Saharan Africa   1 Africa’s Large Youth Population   2 Growth, Jobs, and Africa’s Labor Force—Now and in the Future   3 Youth’s Transition to Productive Employment   6 Policy Priorities for Addressing Youth Employment   8 Human Capital: The Fundamental Role of Basic Education   10 Raising the Productivity of Smallholder Farmers   11 Increasing the Productivity of Nonfarm Household Enterprises   15 Improving Competitiveness to Boost Modern Sector Wage Jobs   18 Building an Effective Youth Employment Policy    21 v Acknowledgments This report was prepared by a core team led Kadzamira. The report was edited by Kelly by Deon Filmer and Louise Fox and compris- Cassaday (overall) and Amy Gautam (who had ing Karen Brooks, Aparajita Goyal, Taye Men- primary editing responsibility for chapter 4). gistae, Patrick Premand, Dena Ringold, Sid- The team is grateful to the many World Bank dharth Sharma, and Sergiy Zorya. Additional who provided comments at various stages staff ­ contributions were made by Shubha Chakra- of the development of this report. Richard varty, Florence Kondylis, Obert Pimhidzai, Damania, Mary Hallward-Driemeier, Mar­garet Raju Singh, and Erik von Uexkull. The team Grosh, and Ravi Kanbur provided careful peer was directed by Shanta Devarajan and Ritva review comments. Any errors or omissions are Reinikka. Research assistance was provided by the responsibility of the team. Jorge Munoz, Lena Nguyen, and Thokozani vii Abbreviations CFA  African financial community GDP gross domestic product HE household enterprise ILO International Labour Organization NGO nongovernmental organization SEZ special economic zone TVET technical vocational education and training VSLA village savings and loan associations ix Overview Youth Employment in Sub-Saharan Africa S ub-Saharan Africa has just experienced The incidence of poverty has fallen as Sub- one of the best decades of growth since Saharan economies have expanded, yet overall the 1960s. Between 2000 and 2012, gross growth in Sub-Saharan Africa has not been domestic product (GDP) grew more than as pro-poor as growth in other regions. Each 4.5 percent a year on average, compared to 1 percent increase in average per capita con- around 2 percent in the prior 20 years (World sumption has been associated with a reduction Bank various years). In 2012, the region’s GDP in poverty of 0.69 percent; elsewhere in the growth was estimated at 4.7 percent—5.8 per- world, that reduction has averaged just over cent if South Africa is excluded (World Bank 2 percent (World Bank 2013). In part, Afri- 2013). About one-quarter of countries in the ca’s poverty reduction has been less marked region grew at 7 percent or better, and several because in many countries the source of African countries are among the fastest grow- growth is primarily oil, gas, and mineral extrac- ing in the world. Medium-term growth pros- tion, not labor-intensive sectors such as agri- pects remain strong and should be supported culture or manufacturing. Young people, who by a rebounding global economy. have weaker links to the world of work than At the same time, many Africans are dissat- the general population, are therefore doubly isfied with this economic progress. According disadvantaged. to the latest Afrobarometer data, 65 percent of Although the current generation of Africans the surveyed population consider economic entering the labor force is the most educated conditions in their country to be the same or ever, many are finding that their prospects for worse than the year prior, 53 percent rate their employment and earnings differ very little national economic condition as “very bad” or from those of their parents. In a few countries, “fairly bad,” and 48 percent say the same about they are worse. their personal economic condition (Afro­ Youth in urban areas have been vocal about barometer 2011–12. www.afrobarometer.org). their dissatisfaction. Urban demonstrations 1 2 Youth Employment in Sub-Saharan Africa consisting primarily of politically active and markets and can, in the longer term, stimu- disaffected youth have become more common late economic growth and development in African capitals. The causes of urban violence • The role of mineral exports—which have undoubtedly include factors much broader shaped the structure of recent economic than employment status (such as inequality and growth but failed to sufficiently increase exclusion), yet dissatisfaction with opportuni- the number of wage jobs most desired by ties, especially in relation to expectations, can youth—and the prospects for reversing this be a contributing factor. Understandably con- trend in the future cerned, especially in light of the Arab Spring, policy makers in Sub-Saharan Africa are mak- • The largely untapped reservoir of opportu- nities in farming, at a time of high global ing youth employment a high priority. Focusing prices for agricultural commodities and ris- on urban youth, they are seeking policies and ing local and regional demand for food programs that can ameliorate the dissatisfac- tion of young people and ease their transition • The massive expansion in access to educa- tion, which is adding many years of school- into adulthood by encouraging the creation of ing, but much less learning, during child- sustainable, productive employment. hood and youth But urban youth are only the most visible and audible part of the employment problem. • The aspirations of youth and policy mak- The majority of young people still live in Afri- ers, which focus on the wage employment ca’s rural areas and small towns. Poorer and less sector at the expense of more immediate educated than their urban counterparts, they opportunities in family farming and house- too struggle to find pathways to adulthood, hold enterprises. especially to stable, remunerative employment Recognizing that it is the private sector that that allows them to support a family. For young creates jobs, the report examines obstacles women, the pathway can be especially treacher- faced by households and firms in meeting ous. As they navigate the school-to-work tran- the youth employment challenge. It focuses sition, their control over their own destiny and primarily on productivity—in agriculture, in their employment choices may be limited by nonfarm household enterprises (HEs), and in social norms. the modern wage sector—because productivity The challenge of youth employment in is the key to higher earnings as well as to more Africa may appear daunting, yet Africa’s vibrant stable, less vulnerable, livelihoods. To respond youth represent an enormous opportunity, to the policy makers’ dilemma, the report iden- particularly now, when populations in much tifies specific areas where government interven- of the world are aging rapidly. Youth not only tion can reduce those obstacles to productivity need jobs, but also create them. Africa’s grow- for households and firms, leading to brighter ing labor force can be an asset in the global employment prospects for youth, their parents, marketplace. Realizing this brighter vision for and their own children. Africa’s future, however, will require a clearer understanding of how to benefit from this asset. Meeting the youth employment challenge in all Africa’s Large Youth Population its dimensions—demographic, economic, and social—and understanding the forces that cre- Sub-Saharan Africa today faces an unprec- ated the challenge, can open potential pathways edented opportunity. Half of the population is toward a better life for young people and better under 25 years of age. Each year between 2015 prospects for the countries where they live. and 2035, there will be half a million more This report begins by laying out the dynam- 15-year-olds than the year before. Meanwhile, ics of the youth employment challenge in Sub- the population in the rest of the world is, or will Saharan Africa today: soon be, aging (figure O.1). • The demographic transition, which created Africa’s youth bulge offers a range of oppor­ the youth bulge that is entering African labor tunities. First, the world’s goods and services Youth Employment in Sub-Saharan Africa 3 Figure O.1  The structure of Sub-Saharan Africa’s population is different than that in other regions a. Sub-Saharan Africa b. South Asia c. East Asia and Pacific 80+ 80+ 80+ 70–74 70–74 70–74 60–64 60–64 60–64 Age group (years) Age group (years) Age group (years) 50–54 50–54 50–54 40–44 40–44 40–44 30–34 30–34 30–34 20–24 20–24 20–24 10–14 10–14 10–14 0–4 0–4 0–4 100 80 60 40 20 0 20 40 60 80 100 100 80 60 40 20 0 20 40 60 80 100 160 120 80 40 0 40 80 120 160 Population (millions) Population (millions) Population (millions) Male 2035 Male 2015 Female 2015 Female 2035 Source: Based on United Nations 2011. cannot be produced without working- primary commodities for their exports. The age labor. Sub-Saharan Africa, along with failure of this growth to reduce poverty is stark South Asia, can be the main supplier of the in several countries, including oil-rich Angola, world’s workforce, either by producing goods Gabon, and Nigeria, and noticeable in oth- and services in the region or by sending work- ers, such as Mozambique and Zambia. Labor- ers to regions with a shortage of workers. Sec- intensive manufactured exports—the force ond, manufacturing wages in other regions are behind employment and economic transfor- rising. Africa’s labor force should compete for mation in East Asia—are far from taking off in these jobs. Third, increasing concentrations of Africa. In fact, manufacturing’s share in GDP is workers in urban areas can be a source of inno- lower in Sub-Saharan Africa today than it was vation and rapid economic growth (World Bank in 1980; over the same period in Asia, it rose 2008). Young people will be at the forefront of in both lower- and middle-income countries these developments. Finally, if fertility contin- (figure O.2). ues to decline, rapid growth in Africa’s work- To understand the challenge of youth force will mean that the number of working- employment in this context, we start with where age adults relative to “dependents” will rise from Africans work today (see box O.1 for an expla- just around 1 in 1985 to close to 1.7 in 2050, nation of how this report defines employment). providing the space for savings, investment, Contrary to popular perceptions, measured and sustained economic growth. Yet the demo- unemployment in low-income Africa is only graphic transition is not automatic. A critical 3 percent.1 Even in lower-middle-income coun- concern is that the decline in fertility rates has tries, unemployment is quite low (figure O.3). stalled—or not even started—in many African These low unemployment rates may seem countries. But it is also a critical concern that counterintuitive, given widespread concern those of working age are able to be productive. about “unemployed youth,” but most Africans simply cannot afford to be idle. Very few fami- lies can fully support a recent graduate while Growth, Jobs, and Africa’s Labor he or she seeks a job. That the unemployment Force—Now and in the Future rate is highest among university graduates— who mostly come from the top end of the Despite 15 years of relatively rapid economic income distribution—is no coincidence. Only growth averaging more than 4.5 percent a year, in upper-income countries, with broader safety almost all African countries still depend on nets, does substantial unemployment persist, 4 Youth Employment in Sub-Saharan Africa Figure O.2  Over the past two decades, agriculture’s share in GDP contracted in Africa, but manufacturing did not replace it a. Low-income countries b. Lower-middle-income countries 100 100 90 90 80 80 70 70 60 60 Percent Percent 50 50 40 40 30 30 20 20 10 10 0 0 1990 2010 1990 2010 1990 2010 1990 2010 1990 2010 1990 2010 Sub-Saharan Africa South Asia East Asia and Pacific Sub-Saharan Africa South Asia East Asia and Pacific Agriculture Industry (excluding manufacturing) Manufacturing Services Source: World Bank various years. Box O.1 What is a “job”? In assessing the challenges of youth employment, it is impor- self-confidence; they can contribute to an individual’s overall tant to take stock of what it means to have a job and to have life satisfaction. Not all jobs contribute to these dimensions employment. To some, having a job is synonymous with of well-being. The type of job, working conditions, contract, having a wage or salaried position with an employer. Most benefits, and safety and security at work all matter. Beyond work in Africa is not structured that way, however. This study personal life satisfaction, jobs also contribute to social cohe- follows the approach adopted in the World Development sion through various channels: jobs can shape identities and Report 2013: Jobs, which defines jobs as “activities that gen- how individuals relate to one another, jobs can connect peo- erate actual or imputed income, monetary or in kind, for- ple to one another through networks, and the distribution mal or informal.” That report also notes that not all forms of jobs within society and the perceptions about who has or work can be considered jobs—for example, activities that access to opportunities, and why, can shape people’s expec- are performed against the will of the worker or that violate tations and aspirations for the future, their sense of having a basic human rights. stake in society, and their perceptions of fairness. All of these Across countries, including those in Sub-Saharan Africa, intrinsic aspects of jobs are particularly important for youth. people report that jobs have a broader importance than the income they provide. Jobs can convey identity, status, and Source: World Bank 2012. including among youth. Because the youth regular wage, sometimes with associated ben- employment challenge is configured somewhat efits. In low-income countries, these jobs are differently in Africa’s resource-rich countries divided roughly equally between the public and some middle-income countries, they will and private sectors, although the private share need to approach the challenge in somewhat grows with per capita income. The industrial different ways (see box O.2). sector (mining, manufacturing, and construc- Where do most Sub-Saharan Africans find tion) accounts for less than 20 percent of wage employment? About 16 percent of those in the jobs (about 3 percent of total employment). labor force have “wage jobs”—jobs that pay a The remaining jobs are either on family farms Youth Employment in Sub-Saharan Africa 5 (62 percent) or in household enterprises (22 Figure O.3  Where are Africans working? percent), which may be collectively described Estimated structure of employment in Sub-Saharan Africa by country type, 2010 as the informal sector (see box O.5 for a defi- 100 nition of household enterprises). These kinds 90 of jobs—working a small plot of land, selling 80 vegetables on the street, sewing clothes in one’s home—often generate low earnings, partly 70 because the “enterprises” tend to be tiny, typi- 60 % of total cally involving only the family. 50 Will this pattern of employment persist? 40 After all, countries that are not resource rich 30 are creating private wage jobs at a rapid clip— often faster than GDP is growing. The kinds of 20 jobs that are created will depend partly on the 10 structure of growth that Africa attains. Growth 0 and employment projections for this report Low-income Lower-middle- Resource-rich Upper-middle- Total countries income countries income countries assume that growth will remain strong (5–6 countries countries percent a year) and will be fueled by Africa’s 183 40 150 21 395a natural resources—minerals and agriculture. Labor force (millions) The mineral sector is not expected to create Agriculture Household enterprises Wage services Wage industry Unemployed very many jobs. Increases in wage employment (as a share of total employment) will come Source: Fox et al. 2013. from continued diversification of output and Note: On the horizontal axis, numbers show size of the labor force, ages 15–64, in each group. Resource-rich countries included are Angola, Chad, the Democratic Republic of Congo, Guinea, exports and from increased domestic demand Nigeria, the Republic of Congo, Sudan and Republic of South Sudan, and Zambia. a. Numbers do not add to total because of rounding. for services as incomes grow. Since service employment is projected to grow faster than employment in industrial sectors, as it has in tivity of the almost 80 percent of the workforce the past, most nonfarm employment will be who will be in the informal sector—thereby created there. Based on these assumptions, the addressing the underemployment associated number of industrial sector wage and salary with work in this sector. The size of the youth jobs is projected to increase 55 percent over the bulge in Africa and the current structure of the next 10 years. The problem is that this growth economy mean that the majority of this gen- starts from such a small base that it does not eration’s workers will remain in the informal even come close to absorbing the millions of sector for the duration of their working lives. young people entering the labor force each To be sure, in the long run these workers (or year. Because of the low base, the share of their children) will move to the formal sector, industrial wage jobs in total employment will like their counterparts in East Asia and Latin rise only from 3 to 4.5 percent in Sub-Saharan America. Africa, still below the share in other developing This focus on raising productivity in the regions. The share of wage jobs in the service informal sector may seem unusual, given the sector is projected to rise from 13 to 22 percent. publicity around high unemployment among In other words, over the next 10 years, at best university graduates and the recent emphasis only one in four of Sub-Saharan Africa’s youth on creating jobs in the formal manufactur- will find a wage job, and only a small fraction ing sector (Dinh et al. 2012). But university of those jobs will be “formal” jobs in modern graduates still represent only a tiny fraction enterprises. Most young people will end up (about 3–4 percent) of the labor force, come working where their parents do—in family from the richest households, and have the best farms and household enterprises (figure O.4). job prospects. Creating jobs in the formal sec- The employment challenge is therefore not tor is important and should be encouraged, just to create jobs in the formal sector, impor- but the reality is that even if African countries tant as that may be, but to increase the produc- were able to attract an extraordinary infusion 6 Youth Employment in Sub-Saharan Africa Box O.2 The youth employment challenge in resource-rich and some middle-income countries in Africa Resource-rich countries present particular challenges when it and Malaysia) or to non-resource-based primary commodities comes to employment. Natural resource rents, if poorly man- (Chile)—through sound macroeconomic policies, open trade aged, lead to overvalued exchange rates and uncompetitive and investment policies, strategies to build human capital, and real wages. Such conditions severely hamper job creation in a good business environment (Gelb and Grasmann 2010). export-oriented sectors. At the same time, the few but highly Youth employment problems in some middle-income paid employment opportunities in the natural resource sec- countries, such as Mauritius and South Africa, resemble the tor encourage young people to “wait for a job”—behavior crisis in youth unemployment occurring outside Sub-Saha- that can distort educational choices and aggravate skill mis- ran Africa. Especially in South Africa, unemployment is high matches in the labor market. Resource rents can also engen- (25–40 percent, depending on the definition used), youth der substantial governance problems that stifle growth in unemployment is even higher, and the informal sector is employment. very small. The challenge is to reduce unemployment, which If countries manage their natural resource endowments involves understanding its determinants. While the symp- well, however, they can amass the financial resources to toms and some of the causes may differ (for instance, labor support smart investments in human development, infra- regulations may play a significantly larger role in these more structure, and the promotion of new sources of economic developed countries), some of the solutions proposed in this growth. Resource-rich countries noted for successfully grow- report for other countries are quite similar to those needed ing their economies, such as Chile, Indonesia, and Malaysia, in South Africa—for example, steps to increase agricultural have diversified economically—to manufacturing (Indonesia productivity or improve workers’ foundational skills. Figure O.4  Informal will be normal in 2020 pessimistic about Africa’s future? That we are Jobs by sector denying African workers the hope of emerging from informal employment? On the contrary, 300 raising the productivity of smallholder farms 250 and household enterprises is precisely what will enable the formal sector to develop and thrive. Jobs (millions) 200 It was the key to structural transformation in 150 Asia and Latin America, and it is the key to 100 Africa’s future as well. 50 0 Agriculture Household Wage Wage Youth’s Transition to Productive enterprise services industry Employment Jobs in 2010 New jobs in 2020 Source: Fox et al. 2013. Transition is the defining feature of youth (see Note: The projected number of new jobs added by 2020 will be World Bank 2006). The young leave school 125 million. for work, eventually settling on a career. They grapple with the many decisions that influ- of private investment in very labor-intensive ence when they start a family and how health- enterprises, the formal sector would draw only ily they live (including decisions to engage in a small number of workers from the informal risky behaviors such as tobacco and alcohol sector in the near future (see box O.3). use). Most young people also begin to engage Even if it is realistic to emphasize the role of in the rights and duties of citizens, such as the informal sector, does this mean that we are voting in elections. The question, therefore, is Youth Employment in Sub-Saharan Africa 7 Box O.3 What will happen to employment if light manufacturing increases dramatically in Africa? Some observers contend that the structure of employment ca’s low- and lower-middle-income countries. The average could change more rapidly if Africa experienced a radical, annual growth of industrial wage employment would double “game-changing” departure from its current growth path over the decade to 12 percent a year, and total wage employ- (see Lin and Monga 2012; Dinh et al. 2012). What employ- ment would grow 6 percent a year. ment prospects would open to youth by 2020 if African Ultimately, however, the structure of employment would countries picked up manufacturing industries and jobs from change very little compared to today. Low-income countries East Asia beginning in 2015, just as Asian countries such as could expect about 5 million more wage jobs a year, and Bangladesh, Cambodia, and Vietnam picked up industries lower-middle-income countries could expect about 2 million and jobs from Japan and the Republic of Korea in the 1980s new wage jobs—a shift of 10 percent of total new jobs in and 1990s? these countries, representing a small change in the pros- To test the possibilities, we simulated this recent Asian pects for new entrants. These modest gains partly reflect the experience in low-income and lower-middle-income coun- short period used for the projection (which covers 5 years, tries of Africa.a For the simulation, the wage employment whereas the structural change in Vietnam unfolded over 20 elasticity rises to 1.2 to match the historical wage employ- years). They also reflect Africa’s larger labor force and the ment elasticity estimated for Bangladesh, Cambodia, and lower base from which industrial development must start. Vietnam—meaning that employment in the industrial sec- Africa will need at least two decades to change the structure tor would grow 20 percent faster than value added, which of employment sufficiently to offer dramatically different implies very labor-intensive growth. The industrial growth prospects to its youth, which underscores the importance of projection for low- and lower-middle-income countries is starting the change process now. also revised upward to 10 percent a year over 2015–20. This figure is slightly above the median and average indus- try growth rate experienced by Bangladesh, Cambodia, and Source: Fox et al. 2013. Vietnam during the most recent decade (9.3 percent a year). a. Africa’s resource-rich countries are excluded from this simulation, If this “game-changing” scenario could be realized, indus- because even resource-rich countries in East Asia did not achieve the trial wage employment would grow much faster across Afri- transformation of employment simulated here. how to help youth to make these transitions similar arrangements, but others do not. Evi- in a way that puts them on a pathway to pro- dence from urban Tanzania (Bridges et al. ductive employment. The particular challenges 2013) shows that some young people do odd that young people—especially young women jobs and are supported by their families for as or poorer youth—encounter during these long as five years before they settle into wage transitions increase the difficulty of finding a jobs or (mostly) self-employment. Moreover, pathway to productive employment (although first-generation school leavers aspiring to be securing productive employment is important wage workers lack a family history in formal for all members of society, as box O.4 explains). employment. They may not have networks to The transition from school to work as well help them to find jobs. as between sectors of employment (between Young women may be particularly disad- farming and a wage job, for example) is par- vantaged by other dimensions of the transi- ticularly difficult for young Africans. Many tion, such as family formation, compared with lack the means, skills, knowledge, or connec- young men (figure O.6). Social norms tend to tions to translate their education into produc- enforce job segregation by gender. For instance, tive employment. Nor is there a structured young women in the household enterprise sec- path to follow. Many young people combine tor work mostly in narrowly defined fields such school with work for many years (figure O.5). as dressmaking, even though a range of other Some move straight into apprenticeships and occupations could be more lucrative. 8 Youth Employment in Sub-Saharan Africa Box O.4 Youth employment versus overall employment A key part of improving employment opportunities for Afri- to help young people to enter agriculture or start household ca’s youth is to understand and address Africa’s overall eco- enterprises do not generally reduce such opportunities for nomic challenges. For that reason, much of the discussion in adults. But efforts to facilitate access of youth to the modern this report focuses on identifying policies that can increase wage sector could potentially displace adults working in the the productivity of all employment—in agriculture, nonfarm sector. On the one hand, assistance for young people might household enterprises, and the modern wage sector. The have long-term benefits if it sets them on a productive path. report also identifies promising policies that focus specifically On the other hand, older workers may have families and on helping youth to transition more successfully to higher- other economic dependents who rely on their income. There productivity work in each of those three sectors. is no clear argument that social welfare will be improved by The focus on youth raises the question of whether it might favoring younger workers over older ones. This report advo- be socially beneficial to support employment policies that cates seeking to increase the opportunities for all workers, favor youth over other members of society. Special efforts while helping youth to overcome their particular constraints. Figure O.5  The transition from school to work in Sub-Saharan Africa is slow a. Rural b. Urban 100 100 80 80 60 60 Percent Percent 40 40 20 20 0 0 15 18 21 24 27 30 33 15 18 21 24 27 30 33 Age (years) Age (years) Working, not at school Both working and at school At school, not working Not at school, not working, and looking for work Source: Based on standardized and harmonized household and labor force surveys (most recent data available). Policy Priorities for Addressing that shape young people’s potential to find a Youth Employment pathway to productive work in the three sec- tors: human capital and the business environ- To understand the challenges constraining ment. Box O.5 describes this framework more productivity and earnings for youth and to fully. orient how policies should be targeted, this On the human capital side, the role of basic report considers the three main sectors where education dominates interventions in all three people work: agriculture, nonfarm household sectors. As a complement, different approaches enterprises, and modern wage employment. are needed to build post-school skills in agri- It then distinguishes between two dimensions culture, household enterprises, and the modern Youth Employment in Sub-Saharan Africa 9 Figure O.6  Family formation starts earlier for young women than for young men a. Females b. Males 100 100 80 80 % of age cohort % of age cohort 60 60 40 40 20 20 0 0 15 20 25 30 35 15 20 25 30 35 Age (years) Age (years) Ever had a child Ever married Ever had sexual intercourse Source: Based on demographic and health survey data in 28 countries (most recent data available). Box O.5 Framework for analyzing youth employment Three main sectors of employment: The modern wage sector includes small, medium, and large firms that employ five or more workers on a continu- Agriculture is where the vast majority of work takes place ous basis. It also includes the public sector, which in some in Sub-Saharan Africa. Agriculture occupies more than 70 countries is a large share of the modern wage sector. In the percent of the labor force in Africa’s low-income countries low- and lower-middle-income countries of Sub-Saharan and more than 50 percent in its lower-middle-income coun- Africa, roughly half of wage employment is in the public sec- tries. African farmers are predominantly smallholders who tor. In this report, we focus only on the private sector, where consume a large share of what they produce. One recent the potential for job growth is the greatest. collection of household surveys estimates that the share of own-consumption is around 50 percent (versus 20–30 per- Two dimensions that shape the pathways to productive work: cent outside of Sub-Saharan Africa). • Human capital—the supply side, meaning the abilities, edu- Household enterprises are unincorporated, nonfarm busi- cation, skills, family connections, networks, and other char- nesses owned by households. They include self-employed acteristics that are embedded in an individual and allow people running businesses that may employ family mem- that person to find opportunities to be productive, increase bers without pay, but may also employ less than five non- earnings, and achieve income security family workers on a continuous basis. The vast majority • Business environment—the factors outside the worker’s (70 percent) of nonfarm enterprises today are pure self- immediate control that affect productivity (access to land, employment: just the owner operating the HE. About 20 capital, and finance; infrastructure; technology; and mar- percent of these enterprises include a family member in the kets), as well as the government policies, regulations, and operation, and only 10 percent have hired someone outside programs that may affect the choice of economic activity of the family. and how the activity is conducted. wage sector. On the business environment side, structure services and access to finance as well raising farm productivity requires enabling as a space to operate will play critical roles; to farmers to gain access to finance and secure boost modern sector wage jobs, business regu- land tenure; in the nonfarm HE sector, infra- lations and infrastructure will be important. 10 Youth Employment in Sub-Saharan Africa Human Capital: The Fundamental complete primary school have low levels of Role of Basic Education basic skills: among sixth-graders 43 percent in Tanzania and 74 percent in Mozambique are Sub-Saharan Africa has seen a rapid increase at or below the “basic numeracy” level, while in the number of children who complete pri- 44 percent in Mozambique cannot “read for mary school, from about 50 percent in 1991 to meaning” (Hungi et al. 2010). A few years of 70 percent in 2011. The average young Gha- low-quality basic education will not confer naian or Zambian today has more schooling much of a gain in productivity if students never than the average French or Italian citizen had master even basic literacy and numeracy— in 1960 (Pritchett 2013). The current cohort of although so-called “second-chance education” youth in Sub-Saharan Africa will be the most approaches offer some potential for catching schooled ever. up. For many, however, primary schooling is Educational attainment shapes employment the highest level of schooling they will achieve. opportunities, as reflected in the substantial These results are especially troubling because variation in the educational profiles of young they suggest that school leavers have a fragile workers in each sector (figure O.7). Interna- foundation on which to build more specialized tionally benchmarked learning assessments skills. suggest that many young people nevertheless Even students who make it to the second- lack the skills to compete in a global market- ary level—those who will most likely head place. Schooling is not learning. Deep deficien- to the modern wage sector—are not globally cies in the quality of education mean that the competitive. In the most recent internationally effect of schooling on productivity is far below benchmarked assessment of eighth- and ninth- its potential. The poor quality of education grade students, 79 percent of Ghanaians and 76 directly constrains productivity and hinders percent of South Africans do not surpass the individuals from acquiring new skills. lowest measured level of math proficiency. For Learning in primary school is often mini- comparison, the international mean is 25 per- mal: 80 percent of Malian third-graders and cent, and the corresponding scores are 67 per- more than 70 percent of Ugandan third-graders cent for Indonesian students and 45 percent cannot read a single word (Cloutier, Rein- for Jordanian students.2 Beyond these cogni- stadtler, and Beltran 2011). Even students who tive skills, many youth lack the behavioral and Figure O.7  Education shapes opportunities a. Ages 15–24 b. Ages 25–34 100 100 80 80 60 60 Percent Percent 40 40 20 20 0 0 Agriculture Nonfarm Wage Wage Agriculture Nonfarm Wage Wage household without with household without with enterprise contract contract enterprise contract contract No education Primary not completed Primary completed Lower secondary completed Upper secondary completed Post-secondary Source: Based on standardized and harmonized household and labor force surveys (most recent data available). Youth Employment in Sub-Saharan Africa 11 socioemotional skills, sometimes called “soft It has plentiful supplies of land and often of skills,” that are needed to get, keep, and be pro- water, unlike other regions. If young people can ductive in a job. gain access to these resources and use them in Addressing this lack of learning is not easy. conjunction with strategies to make agriculture Surveys of schools reveal substantial failures more productive, the results could be transfor- in service delivery. For example, absenteeism mative for livelihoods and economic growth. among teachers is between 16 and 20 per- More than two-thirds of the young people who cent on a given day in Kenya, Senegal, and work in rural areas already work in agriculture, Tanzania, and primary school students in and most will remain there, even if the non- those countries experience only about two farm sector develops extremely rapidly. to three hours of learning a day.3 Reform- Although agriculture is the most immediate ing the accountability framework that allows means of generating income and employment such poor performance to persist is key. Bet- for large numbers of young people, efforts to ter information on performance must be accelerate agricultural growth and improve complemented by targeted approaches that food security in Africa have been conceptually increase oversight by the people who are most separated from efforts to create jobs for young affected: students and their parents. Steps to people. Yet these goals are highly complemen- ensure that teachers are well prepared for tary. Increasing young people’s opportunities teaching and supported in their tasks are crit- for productive work in rural areas is arguably ical for creating a cadre of high-performing the most important catalyst for Africa to reap professionals. The rise of private schools in its demographic dividend. Africa—schools that often deliver superior Low agricultural productivity is the primary performance at lower cost—should not be impediment to overcome. Agricultural produc- stifled but should be encouraged and chan- tivity remains lower in Africa than in any other neled to give larger numbers of students the region of the world, and agriculture is the least opportunity to learn. productive sector in African economies. This is Improvements in basic education will lay true, despite the fact that total factor productiv- the foundation for improvements in produc- ity, as well as land and labor productivity, have tivity. At the same time, to maximize young been increasing in African agriculture since the people’s chances of transitioning successfully 1990s (Fuglie and Rada 2013; Nin-Pratt, John- to remunerative employment, complemen- son, and Yu 2012). Productivity may increase tary actions are required to improve the busi- further as food prices continue to rise, because ness environment and develop human capital. the value of output for the same amount of Those actions will vary by sector of employ- inputs will increase, but these productivity ment, as discussed next. indicators are far below levels achieved in other regions during their phases of rapid economic growth. Indeed, African countries are not fol- Raising the Productivity of lowing the trajectory of other regions in which Smallholder Farmers productivity gains on farms, combined with higher productivity and more opportunities off Agriculture can and should be a sector of the farm, shifted labor rapidly out of agriculture. opportunity for Sub-Saharan Africa’s youth. The effects of low agricultural productivity The growing demand for food means that extend well beyond rural areas and farm house- there is scope for supply to take advantage of a holds. An underappreciated result of low agri- growing market. And growth in demand is not cultural productivity in Africa is high domestic limited to Africa’s expanding domestic markets. food prices. Local prices are poorly correlated Global food prices are at their highest point with global prices, especially in the interior. in several decades, and they are expected to When domestic prices are high, this increases remain high for at least the rest of the decade. the cost of food and pushes up wages, contrib- Africa is well positioned to produce for this uting to Africa’s overall lack of competitiveness. large and potentially lucrative global market. High domestic prices undermine real earnings 12 Youth Employment in Sub-Saharan Africa for everyone except those farmers who are net on regulatory and policy reform, and some food sellers and whose production costs are attention to including young people, agricul- relatively low. Greater agricultural productivity ture could absorb the large numbers of new job will reduce the domestic cost of food and cre- seekers and offer meaningful work with large ate more and better-paying nonfarm jobs for public and private benefits. everyone, especially youth. Broadly speaking, three pathways are avail- Understanding why the least productive able for rural youth in agriculture: (1) full-time sector is also the largest may provide insight work on family farms, (2) part-time farm work, into how farmworkers can increase their pro- combined with running a household enterprise, ductivity. Small-scale farmers may be caught which can include the sale of farm services or in a trap that prevents them from generating inputs, and (3) wage work. To increase the sufficient earnings to invest in expanding pro- productivity of these pathways to agricultural duction and productivity. The vast majority employment, constraints need to be relaxed in of African farmers work on tiny plots of land, at least four areas: credit and financial services, often under uncertain tenure arrangements. land policies, infrastructure, and skills. They cannot take advantage of economies of scale (where they exist), modern agricultural Credit and Financial Services inputs, and mechanization. Poor rural infra- Because they work in a risky environment and structure (transport, electricity, and irrigation) lack collateral, rural households face major frustrates farmers’ efforts to obtain afford- constraints in obtaining capital and credit. able inputs such as seed and fertilizer, market Traditional financial institutions do not find their output profitably, or harness new land it profitable to provide agricultural credit. for cultivation. The lack of irrigation makes Instead, various nongovernmental organiza- agriculture more vulnerable to the vagaries of tions (NGOs) and banks have been innovating weather. with new instruments and institutions, some Low levels of education and pervasive health of which look promising. First started in Niger problems (two outcomes of the poor delivery in 1991, village savings and loan associations of services) prevent farmers from increasing (VSLAs)—where members save on a regular their own productivity, much less migrating to basis and lend money on terms determined by areas where agriculture or some other occupa- the group—have spread to 39, mostly African, tion might be more productive. Rural youth countries. They hold great potential for assist- have significantly lower levels of education ing young people to save the funds to invest in than their urban counterparts. Many endemic a farm and to get access to credit, while also diseases are not difficult to manage or cure, but benefiting from the mentoring and access to these areas of health policy often receive little information that come from being a member. attention despite their high cost to the rural VSLAs could help youth in rural areas to estab- economy. Illness, apart from reducing the labor lish themselves in agriculture as well as in non- available to farm households, can deplete sav- agriculture sectors. ings through costly treatments and cause dis- Various institutional arrangements and tress sales of assets. incentive schemes can also widen access to For Africa to raise agricultural productiv- credit. Examples include different forms of ity sufficiently to support overall growth and collateral (chattel mortgages and others), leas- provide a remunerative livelihood for those ing (which requires no collateral, such as the working in the sector, farming must shift rap- DFCU Leasing Company in Uganda), linking idly from being an occupation of last resort and credit to extension services (thereby addressing low productivity to one of technical dynamism multiple constraints simultaneously, because and recognized opportunity (see box O.6 for a young people also need information), and con- discussion of the link between productivity and tract farming (in which the wholesaler provides jobs in agriculture). With much higher priority credit for inputs). accorded to well-designed programs of public None of these innovations in rural finance investment in agriculture, continued progress is exclusively for young people. Nor should Youth Employment in Sub-Saharan Africa 13 Box O.6 Does labor need to move out of agriculture as productivity grows? If Africa’s farms get bigger as productivity grows, will work- in the developed world in favor of technology-intensive ser- ers be pushed out of the sector and have nowhere to go? vices and products. The cost of capital in Africa remains high, Some observers have raised this concern, and it is under- reflecting low saving rates, high costs of doing business, standable. In other parts of the world, growth in produc- and rising demand for capital-intensive infrastructure invest- tivity has been accompanied by an increase in farm size, ments. Agriculture’s share in African GDP (and ability to a reduction in labor intensity, and the exit of labor from employ labor) therefore could remain steady or even grow, agriculture. rather than shrink, with development. Reserves of good Africa’s endowment of land and labor and its recent his- tory offer perspectives to quell this concern. If land is avail- Table BO.6.1  Increase in crop area harvested, agricultural labor able and crop area is still expanding, increased farm size force, and output per worker in Sub-Saharan Africa, 1960–2008 need not displace labor, especially where the cost of capital and 1990–2008 to invest in mechanization is high. As shown in table BO.6.1, % increase between 1960 and 2008, crop area in Africa expanded, Indicator 1960–2008 1990–2008 the workforce in agriculture grew, and output per worker Crop area harvested 42 20 increased despite the larger number of workers per hect- are. During the later years, from 1990 to 2008, the pace of Agricultural labor force 125 21 growth in the labor force slowed relative to the expansion of Output per worker 21 9 land, and output per worker continued to increase. Source: Fuglie and Rada 2013. Africa’s farms can grow in number, size, and productiv- ity without displacing labor. The subcontinent’s experience land, abundant water, and an energetic young labor force with structural change in the twenty-first century is not likely are tremendous assets at a time when the global economy to replicate the experience in other regions in earlier times. urgently needs more food and fiber. Whether Africa can use The current context is one of high global food prices, huge these assets productively depends on finding ways to ease potential for growth in area and yield, few nontradable the constraints on access to land and address the barriers to manufactured goods, and shifts in comparative advantage agricultural growth highlighted in this report. young people be segregated as a group and The problem of insecure and unclear land offered financial services designed specifically rights can be addressed by developing an inven- for them. The risks of working with this cli- tory of registered land and improving land ent base are high, and separating young people registration. Geographic information systems from a larger pool for sharing risks would make have made this process increasingly practical. them even less attractive to financial institu- Tenure security is also reinforced by improving tions. A better approach is to support a range land titling procedures. When farmers know of innovations in finance that facilitate out- that their land rights are secure, they are more reach to small farmers and rural entrepreneurs. likely to invest in improving their land. A recent When necessary, additional features should be impact evaluation of a land registration pilot added to enhance the ability of these programs in Rwanda shows that more secure land tenure to serve young people. increased investments in soil improvement by 9 percent among male farmers and 18 percent Land Policies among female farmers (Ayalew Ali, Deininger, Insecure and unclear land rights, as well as and Goldstein 2011). constraints on renting or otherwise using land, Once land is registered and titled, land rental pose problems for young people in agriculture. markets can develop. Land rental markets have Some young people own land (albeit small been shown to promote commercial farming in plots), but ownership is strongly concentrated Ghana and to encourage the transfer of land among older adults (figure O.8). to smaller-scale farmers in Sudan. By contrast, 14 Youth Employment in Sub-Saharan Africa Figure O.8  Young people are unlikely to own land 2008), but even here, investments should be evaluated case by case and not accepted across 80 the board. For example, paved rural roads are 70 not always a good investment, especially in areas % who own at least one plot of land where motorized traffic is low. Paved roads are 60 more expensive to maintain, so maintenance is 50 often not funded; another issue is that roads are prone to becoming tools of political patronage 40 (Raballand and Macchi 2009). 30 Skills 20 Given their low levels of formal education (fig- 10 ure O.7), youth in rural areas can increase their productivity with more and better schooling. 0 In turn, higher productivity increases demand 15–19 20–24 25–29 30–34 35–39 40–44 45–49 50–54 55–59 60+ for schooling, triggering a virtuous cycle. The Age (years) evidence used to identify externalities in edu- Tanzania Uganda Malawi cation usually comes from agriculture: farm- ers learn from neighboring farmers, especially Source: Based on data from the World Bank’s Living Standards Measurement Study, Integrated Surveys for Agriculture (2011 in Malawi, 2010 in Tanzania and Uganda). more educated ones, who are also more likely to adopt new technologies (Conley and Udry 2010; Rosenzweig 2012). All of these effects apply more strongly to young farmers. restrictions on land rental markets have inhib- In addition to basic education, high-­ ited both the farm and nonfarm sectors, dis- productivity farming requires specific skills, couraging people with land from taking jobs in such as skills in processing, marketing, machin- the nonfarm sector for fear of losing their land. ery operation and repair, transport, logistics, Agribusiness can increase productivity, and and quality control. In some countries, agri- parts of Africa, especially the Guinea savannah, cultural vocational training institutes (some of have huge potential for commercial agricul- which are associated with universities) tradi- ture on both large and small farms (Morris, tionally have provided these skills. These insti- Binswanger-Mkhize, and Byerlee 2009). Large tutes have a mixed track record, mostly owing commercial landholdings and agribusiness to the disconnect between academic, lecture- may prove politically contentious, however. style teaching and the need for on-the-ground, How large farms are integrated into a diverse practical training. farm structure and how smallholders are com- Agricultural extension programs have a dis- pensated for land that they make available to appointing history in Africa, mainly because large commercial operators are critical issues to of poor incentives and accountability. Better resolve. Other ways of aggregating smallhold- results are coming from new programs that ers, such as producer associations or contract empower farmers by giving them a choice of farming, could also be practical approaches for providers and services from among a range of improving productivity when increasing the public, private, and nongovernmental agen- scale of production will contribute to lower cies. Another approach, farmer field schools, costs. involves participatory methods of learning, technology development, and dissemination Infrastructure and appears to be especially successful in build- In some—but not all—cases, investments in ing women’s skills. Business incubators and rural infrastructure can have huge rates of rural alliances that bring together commercial return. Typically such investments occur in buyers with producer organizations are further more densely populated areas (World Bank ways of boosting agricultural incomes. In all Youth Employment in Sub-Saharan Africa 15 such efforts, the use of information and com- and imports. As a result, HEs that are involved munication technology can benefit, and benefit in manufacturing do not persist as long as HEs from, the participation of young people. that provide services. Historically, HEs have tended to remain tiny or to disappear; very few grow into even small Increasing the Productivity of or medium enterprises. Data from West Africa Nonfarm Household Enterprises show that, even after 10 years of operation, the capital stock of these businesses remains The majority of people who work outside the the same. Most enterprises never hire another farm sector are engaged in informal, household worker. So the employment they provide, enterprises. Often such an enterprise is one pil- including the employment for young people, lar of a diversified livelihood strategy: Many comes from seizing a business opportunity and households are engaged in the farm and non- starting a new enterprise. farm sectors at the same time (30–50 percent Despite their small scale, HEs are an instru- of rural households have a nonfarm HE). In ment for reducing poverty in Africa, with the urban areas, many households with an enter- potential for becoming an even more power- prise have a family member earning a wage ful one. They tend to be found in richer areas. income, a pattern that is likely to increase over Households with enterprises are less likely to time (Fox and Sohnesen 2012). be poor and are clustered in the middle quin- Although their productivity is relatively tiles of the income distribution. Rural house- low, HEs provide earnings that are usually holds gain a higher hourly income from HEs higher than anything their owners could than from agricultural work. In urban areas, obtain in the agriculture sector. Most HEs have some HE owners make more money than they no employees and are pure self-employment. would from a wage job. In fact, controlling for Few include a family member as additional education and skills, the reported consumption labor, and only 10 percent hire outside the of rural and urban households with an HE in family. Some are started in response to a Africa is no different from that of households local business opportunity (such as increased in wage employment (Fox and Sohnesen 2012). demand for a service), whereas others are Indeed, they also report being “happier” (Falco started because the household lacks alterna- et al. 2013). tive means to earn a living. Most governments continue to ignore, What do HEs do? They mostly sell services neglect, or undermine the potential of this (hairdressing, repairs) and internationally and sector. Hawkers and sellers are regarded as an locally produced consumer goods (used cloth- ing, household supplies, vegetables, eggs). They unattractive annoyance to be chased out of the also contribute to the industrial sector, trans- business districts in capital cities. Advocates forming agricultural goods or natural resources of formal employment criticize HEs for not into charcoal, bricks, iron work, or processed offering the benefits and security of a wage job. grain. Some pursue artisanal activities such as Thinking that HEs can be transformed into woodworking, dressmaking and tailoring, and small and medium enterprises—for which they construction. have a strategy—governments try to formalize HEs sell low-cost goods and services mainly these informal enterprises. This transformation for the local market, which lacks a modern rarely takes place, however, because this is not service sector. In urban areas, the traders and the intention of the owners. Lacking support, hawkers substitute for convenience stores and HEs just try to survive. In Tanzania, the law shopping malls. The low-quality manufac- prohibits businesses from operating without tured goods these enterprises produce, such fixed premises, but it does not stop the govern- as homemade bricks and furniture, eventually ment from collecting taxes and fees from those are replaced by higher-quality locally produced same enterprises. (This describes 80 percent goods (made in brick and furniture factories) of HEs.) 16 Youth Employment in Sub-Saharan Africa By contrast, Ghana, a country with a rich cult to implement the law—if there is one. For trading history dating to precolonial times, example, in Dar es Salaam, Tanzania, local gov- explicitly incorporates HEs in its strategy doc- ernments are not empowered to decide whether uments and the institutions that implement hawkers can use the land next to national roads. them. In 2006 the government established an Just as land rental markets can facilitate access objective to “enhance productivity and income/ to agricultural land, they can facilitate access to wages … in all sectors of the economy, includ- space for HEs to do business. ing the informal economy” (Republic of Ghana In addition to secure space, HEs need ser- 2006). The Trade Union Congress supports the vices, such as security, sanitation, electricity, development of HE organizations and their transport, and water supply. For the most part, integration into the consultative mechanisms they are willing to pay for these services (and between government and the private sector. do pay for them) through fees and taxes. In fact, To realize the potential of the HE sector for HEs pay local business taxes at a higher rate productive youth employment, national strat- than large businesses but often fail to receive egies that recognize the sector’s potential and any services. HEs have little leverage to improve propose a supportive policy framework need this situation (Fox and Sohnesen 2012). Local to be developed. Such strategies should endorse authorities are not accountable to HEs, because the creation of independent HE associations to ineffective political decentralization and weak reduce the costs of reaching individual enter- legal status deprive HEs of a voice in local prises and to give this sector a voice in govern- governance. ment decision making. Local interventions need to address three key areas: the local busi- Credit and Financial Services ness climate in urban areas, access to credit and Lacking access to formal sources of finance, financial services, and skills. young people struggle to raise capital to start and operate a business. The problem is exacer- Urban Policy bated by the fact that business and household One of the most frequently cited constraints finances are linked, so that lumpy household on the productivity of urban HEs is the lack of expenditures (school fees, repairs, and so on) access to space and sometimes outright harass- and external shocks (family illness) spill over ment, legal and extralegal, by local authorities. to the business. Virtually all HEs in Africa Insecurity of premises discourages entry (the today report that their own funds or loans main form of growth in this sector) as well as from friends and relatives enabled them to investment in the enterprise. Governments can start their businesses, and the overwhelming help rather than hurt this sector by incorporat- majority of existing businesses report that they ing the growth of HEs in planning processes. did not obtain any type of loan over the last 12 Without planning, traders and vendors crowd months. An expansion of credit cannot make sidewalks and roads, leading to massive conges- up this gap and may even make it worse, as tion. Usually the situation escalates to a crisis, recent experiences in India have shown. To use and authorities use police or security forces credit effectively, a borrower has to be able to to “decongest” the city. Because the eviction put aside money regularly to service the loan. policy is rarely permanent, the cycle usually For this purpose, the establishment of a savings resumes. If governments had planned for the mechanism is critical. growth of HEs and provided adequate space for At the root of the credit problem for HEs is them in the key areas of foot traffic in the city, the lack of financial inclusion among house- employment growth and social stability would holds in Africa (World Bank 2014). Households have followed. not only lack sources of credit but also have dif- Alongside planning, national policy makers ficulty finding reliable places to safeguard their can clarify land rights in urban jurisdictions, savings. As a result, it is challenging for them giving local governments scope to provide HEs to accumulate the funds to start or expand a with locations to operate. Overlapping land business. This problem is especially acute for regulations and responsibilities make it diffi- youth and for females. Research has shown that Youth Employment in Sub-Saharan Africa 17 access to a secure place for savings is particularly develop low-cost products for small savers and important for women’s ability to build up sav- for households to use banks by channeling pay- ings for a business (Dupas and Robinson 2013). ments to households through banks, including The challenge of providing access to finan- microfinance banks with a client base among cial services for poor people is a common one. lower-income households.4 Ghana developed Because of economies of scale, the spread of a system of rural banks to process payments formal banking services (banks, postal savings, to cocoa farmers; today these banks provide formal savings institutions other than banks) low-cost accounts in rural areas. Ghana and usually rises with income and urbanization— Rwanda are both encouraging the spread of banks go where the money is. But this is not mobile banking to further widen access to the whole story in Africa. FINDEX data show financial services. Countries in the Western that even at the same level of income per cap- and Central African monetary unions using ita, national policies can produce very different the CFA currency (UEMOA and CEMAC) are results (figure O.9). Low- and lower-middle- also changing their regulations to foster more income countries such as Ghana, Kenya, and inclusion. Benin, which encouraged the estab- Rwanda have achieved greater financial access lishment of microfinance institutions, was an than other African and non-African countries early mover in this group. at similar income levels. They have done so pri- marily by reducing the costs of serving small Skills savers and those in remote areas. Training can help to structure a pathway to In Kenya, banking access increased through youth employment in HEs. Training pro- the pioneering use of mobile banking technol- grams—both for entry and for improving ogy. By increasing branchless banking, mobile incomes and sustainability—are the most com- banking allows accounts to be maintained monly provided government and donor inter- at relatively little cost to savers and borrow- vention to support HEs, whether or not they ers. Today, about half of the adult population target youth. Programs provide (1) technical of Kenya uses mobile banking. In Rwanda, training in a specific sector (such as tailoring, government provided incentives for banks to metalworking, operating a bakery); (2) business Figure O.9  At the same level of income per capita, national policies can produce very different levels of financial inclusion 100 Individuals ages 25 and older with a bank account (%) 90 80 MUS MNG 70 THA CHN 60 ZWE RSA 50 AGO 40 RWA KEN IND EGY NGA BWA 30 UGA SWZ GHA COM BFA GAB 20 10 COG SEN NER MLI TKM 0 350 3,500 Log of GDP per capita 2011 (current US$) CFA countries Non-CFA Sub-Saharan African countries Rest of the world Trend of CFA countries Trend of non-CFA Sub-Saharan African countries Trend of rest of the world Source: Based on Global Financial Inclusion (Global Findex) Database, World Bank, Washington, DC, http://www.worldbank.org /globalfinder 18 Youth Employment in Sub-Saharan Africa skills or financial literacy (such as basic account- the engine for employment and growth in the ing or money management); (3) behavioral and medium to long term for Africa. No country life skills; or (4) a mix of these skills. Programs has developed without this sector coming to specifically intended for youth focus primarily dominate employment. This is the sector that on providing the skills needed to enter the HE can exploit economies of scale and produce sector and have included all four types of train- for export. The multiplier effects to the house- ing. Programs targeted at existing HEs tend to hold economy from the creation of wage jobs focus more on business skills to strengthen or are strong. Most secondary-school graduates expand HEs. aspire to work in this sector. When these aspi- The good news for youth employment is rations are not fulfilled and graduates must that programs designed to facilitate entry (ver- resort to working in the household enterprise sus those focusing on productivity) appear to sector, for example, the risks for social insta- have had some success, so positive models are bility and political violence are high. While emerging. Apprenticeships and on-the-job Africa’s young people seem to have no spe- training can help young people, provided that cial advantage or disadvantage when it comes these programs are closely tied to market sig- to modern wage employment, they remain a nals. For this reason, private providers, includ- consistent share of that employment when it ing existing businesses, are often the best source grows (figure O.10). for this training. Youth often face multiple The modern wage sector has been creat- constraints in entering the HE sector, and the ing jobs at a fairly rapid pace in Sub-Saharan most promising pilots are delivering interven- Africa—usually faster than GDP growth. The tions that tackle multiple constraints (offering problem is that the sector has grown from such behavioral, business, or technical skills training a small base that it still cannot absorb the mil- together, or combining training with measures lions of young people entering the labor force to tackle credit constraints through savings every year. To generate jobs at a rate that is groups, grants, and other means). Many of these commensurate with growth in the labor force, “bundled” interventions have been expensive, the export-oriented enterprises—with their however, and they are yet to scale up in Africa. potential to sell to global markets—will have Overall, despite the large number of train- ing programs, evidence of their effectiveness Figure O.10  The share of youth in wage employment in the HE sector in Africa remains thin. More tracks the share in the general population systematic use of careful evaluations is clearly required, including impact evaluations that 100 measure outcomes among program partici- Share of wage employment for population 90 pants and compare them to a relevant group 80 of nonparticipants. At the very minimum, gov- 70 ernments should encourage all programs to ages 15–34 (%) track and report outcomes. At the same time, 60 governments should not attempt to deliver 50 training directly but rather focus their efforts 40 on market-enhancing programs that dissemi- 30 nate information about training opportunities and enable disadvantaged youth to access train- 20 ing that is already available. 10 0 0 10 20 30 40 50 60 70 80 90 100 Improving Competitiveness to Share of wage employment for population Boost Modern Sector Wage Jobs ages 15–64 (%) 45 degree line Although small (16 percent of the labor force), Source: Based on household and labor force surveys (most recent the formal wage employment sector represents data available). Youth Employment in Sub-Saharan Africa 19 to be the engine for job creation in this sector. tion. Infrastructure policies and regulations Since most African economies are small, access block firms’ access to infrastructure services, to external markets is the key to unleashing and building infrastructure without improving the modern wage sector’s full potential. The policies and institutions is unlikely to solve the scope for trade is wide. Even services are traded problem. Conversely, improving policies such internationally, although these tend to call for as electricity and water tariffs or trucking regu- relatively high-level skills still lacking in much lations can go a long way to improving services of Sub-Saharan Africa. Moreover, the employ- and attracting the private sector. ment effects of trade go beyond exporting Expensive or limited financing prevents firms, as rising demand from the export sec- firms from investing to improve productivity tor—for inputs, consumer goods, and ser- and also keeps productive firms from grow- vices—increases opportunities in other parts ing. Banks in Africa set high collateral require- of the economy. ments and high risk premiums partly because What factors are constraining export-­ they lack the credit information systems that oriented enterprises in Africa today? The main help lenders to evaluate prospective custom- constraint on the growth of an export-oriented ers. This problem can be addressed by policy sector in Africa is low productivity. and regulatory reform. Africa also needs bet- The underlying causes are not identical ter, well-enforced creditor rights, which will across the continent, even if they have similar ease lending by providing protection for lend- effects. In some countries, the cost of comple- ers when borrowers default. Improved creditor mentary inputs to labor (electricity, overland rights and contract enforcement will also allow transport, and so on) is too high. Clearly, the borrowers to use a broader range of assets as cost of transporting goods across borders is collateral. prohibitively high in the region, and the need In developed economies, innovative new for better transport infrastructure, simpler cus- firms are constantly emerging and growing, toms procedures, and expedited inland border while unproductive incumbents are leaving. crossings is acute. In other countries, bureau- This churning is a major source of aggregate cratic red tape delays investors’ access to land productivity and employment growth in the or permits. The high costs of financial interme- modern wage sector. In Africa, this process diation are starving firms and entrepreneurs of is held back not only by financial constraints the capital needed to implement good ideas. on entrepreneurs but also by difficult formal In many countries, poor connectivity has frag- requirements for business entry or expansion. mented local markets, suppressing competition Governance issues, such as corruption in the and reducing the pressure to improve produc- granting of business licenses and other permits, tivity. These business climate issues would be hamper this process as well. a problem for productivity (and hence, youth In short, the constraints to Africa’s pro- employment) even if firms only produced for ductivity are a combination of market and domestic markets. government failures. Government failures in What can be done to increase Africa’s low particular either have been difficult to rectify— labor productivity? The entire business climate especially when they require economywide pol- comes into play here, with some exceptions. For icies such as deregulation or tariff reform—or, example, labor market regulations—consid- when implemented, have not delivered results. ered an important determinant of productivity Vested interests inside and outside government elsewhere—do not play a major role in Africa, can prevent reforms or their implementation. except for South Africa. In many settings, reg- Analysis of Ethiopia’s light manufacturing sec- ulations may exist on the books, but they are tor shows that the leather goods industry could rarely enforced. create 90,000 jobs (it currently employs 5,000). To unleash this potential, value-chain analy- Infrastructure and the Business Climate sis shows that the government has to remove Infrastructure is a major problem, but build- a series of policy-induced constraints, such as ing new infrastructure may not be the solu- trade restrictions, anticompetitive practices, 20 Youth Employment in Sub-Saharan Africa and financial regulations that affect the sector important for all types of wage workers, partly (Dinh et al. 2012). The scale of such a reform because they facilitate further training and on- means that it could take some time. the-job learning in firms. A complementary approach is to create a To avoid creating more unemployable uni- localized environment—say, a special economic versity graduates, higher education policies and zone (SEZ), with the requisite infrastructure curriculums also need to be geared toward pri- and deregulation—in which industries that vate demand. Financing in public universities could benefit from proximity can cluster and should include a private component (especially flourish. The government provides land and for those who can pay), so that signals from the functioning infrastructure services for the SEZ. private sector are received (Devarajan, Monga, Although in China this approach attracted for- and Zongo 2011). Such a shift would improve eign investment and know-how and helped equity in access to higher education as tuition China to become an export manufacturing payments become means-tested rather than powerhouse, it has not yet been implemented free across the board. Also, those who pay will successfully in Africa. demand value for money. Besides giving careful thought to the The Sub-Saharan African experience with design and implementation of these interven- technical vocational education and training tions, policy makers must evaluate each one (TVET) has been disappointing. Secondary in terms of its susceptibility to political cap- and post-secondary vocational training costs ture, which plagued industrial policy when it at least three times more than basic second- was last attempted on a large scale in Africa. ary education, yet often provides no better Any subsidy creates a rent. Politically powerful foundation for private sector jobs. Training in interests, if they capture those rents, will resist ­government-run programs has not been geared efforts to reduce them, even though that step to private sector needs. is necessary for industries to compete in world Governments in Sub-Saharan Africa should markets. focus on support for public goods in TVET such as quality assurance and information. To Skills promote access to training for poor and disad- Is demand for secondary-school graduates vantaged youth, governments should provide simply insufficient in Africa’s modern wage financial support for training in either the pub- sector, or is there a skills mismatch? In fact, lic or the private sector. Information about the both of these problems appear to be present. returns to alternative training options can help Secondary and post-secondary graduates say to align young people’s training choices with the they have trouble finding a job because of lack realities of the labor market. To the extent that of demand. There is a much larger supply of governments support specific training options, labor for unskilled (factory floor) jobs than for those options should emphasize portable skills skilled jobs as mechanics and factory engineers rather than the firm- or job-specific skills that or for office jobs as accountants and managers. employers should already have an incentive to Meanwhile, employers are requesting permits provide. They should ensure that programs are to import experienced skilled labor. Graduates closely linked to the private sector, potentially at all levels without technical training and some through public-private partnerships. Programs work experience (where they can acquire and for disadvantaged youth that integrate training demonstrate the equally valuable “soft” skills) with internships show promise. face an especially crowded job market, reflect- The visibly poor management practices ing an “aspirational” mismatch as much as a in African firms suggest considerable scope skills mismatch. for improving productivity by investing in As with the farm and HE sectors, perhaps business and management skills training and the most important step toward resolving these perhaps even in individualized management problems in the modern wage sector is to get consulting. The evidence for such programs is basic schooling right. Foundational skills are mixed but promising, and governments should Youth Employment in Sub-Saharan Africa 21 consider testing and refining them through It is equally urgent to undertake other careful piloting. actions to address constraints that will only yield payoffs in the medium term. For exam- ple, improvements in basic education, the Building an Effective Youth foundation for developing all other skills, will Employment Policy take time to translate into higher productiv- ity and better youth employment outcomes. The challenge of youth employment in Africa Reforms to the business climate will require is not amenable to simple solutions. It reflects sustained effort, and it may take time for the challenges and opportunities of countries investors to respond. But policy makers must themselves in a globalized world. The key rise to these urgent challenges. Failure to act employment issue is that productivity, and now means that future cohorts of young peo- therefore earnings, are low, while aspirations, ple may also lack clear pathways to productive especially those of youth, are high—and per- work. haps higher than those of their parents. Despite These priorities are, of course, only a general progress in many countries, most youth in guide. Addressing the challenge in any given Africa today will not have an easy or structured country will require a country-specific analy- path to a sustainable livelihood, one of the sis. The framework put forward in this report, core aspects of adulthood. All stakeholders— the general diagnostics that it provides, and the governments, private firms, private and non- evidence that it marshals to illustrate successful governmental training providers, and young or promising approaches provide a foundation people themselves—have a role to play in sup- for such an analysis and indicate policy direc- porting this transition. tions to pursue. But a country-based analysis Progress requires a comprehensive approach is required to address the specific local issues to relieve the constraints on human capital and surrounding the following questions: What is the business environment that prevent the constraining earnings growth in agriculture, private sector from seizing opportunities and HEs, and the modern wage sector? Why is it increasing productivity in agriculture, HEs, and hard for youth to start HEs and work produc- the modern wage sector. Governments need to tively in them? Why isn’t private investment in take a holistic view of how to address the situ- labor-intensive firms flowing in to increase the ation—they need to “own” the whole problem. number of modern wage jobs on offer? What A common tendency is to perceive can and should government, NGOs, and other ­government-provided technical and vocational private sector actors do to ease the constraints skills training as the key. But such action, by that youth face in making the transition to pro- itself, will not address the more fundamental ductive employment? problems. Government intervention should The basis for a successful country-­ specific focus on public goods—those things that will analysis will be more and better data on support higher productivity in the economic employment; such data are currently sparse activities of households and enterprises. Spe- and often of low quality (see the discussion in cific actions can relieve the most pressing con- Fox and Pimhidzai 2013). The basis for build- straints in the short term, such as increasing ing a much better evidence base of which access to finance for HEs as well as modern approaches are potentially effective and cost- firms; improving access to land and technol- effective will be more experimentation with ogy for young people to expand earnings in promising interventions—and careful evalua- agriculture; building supportive infrastructure tion of their impacts. that enables all enterprises to be more produc- At its core, the youth employment challenge tive; and opening access to regional markets is closely aligned with the challenge of pro- so that firms can broaden the reach of their moting inclusive growth, defined not only as products. Table O.1 summarizes the priority growth in which the poorest segments of soci- actions. ety share but also as growth in which young 22 Youth Employment in Sub-Saharan Africa Table O.1  Priority actions to take now to address the youth employment challenge “Do now for now”: “Do now for later”: Area for intervention Actions to affect the current cohort of youth Actions to affect future cohorts of youth Agriculture   1. Enable rental markets for land   1. Establish effective land registration and transaction systems   2. Pilot intergenerational land transfer programs   2. Scale up intergenerational land transfer programs, based on lessons from pilot programs   3. Support high-quality, demand-driven extension services (covering information as well as skills)   3. Mainstream youth into smart interventions aimed at increasing productivity (producer organizations, livestock development,   4. Link agricultural credit to extension services irrigation, and others)   4. Build skills through rapid improvements in education systems in rural areas Agriculture and household   5. Promote rural village savings and loan associations and self-help enterprises groups   6. Enable financial inclusion for households   7. Use safety net programs as a platform to deliver interventions to disadvantaged youth Household enterprises   8. Develop a national strategy for household enterprises that reflects   5. Build foundational skills through rapid improvements in education the voice of their owners and youth systems   9. Ensure access to workspace and infrastructure for household   6. Address infrastructure needs of household enterprises in urban enterprises through improved urban policy development planning 10. Leverage nongovernmental organizations to deliver interventions that support disadvantaged youth to enter the sector by addressing multiple constraints (building a range of skills together; building skills along with providing access to finance) Modern wage sector 11. Reduce the cost of infrastructure services by addressing quality   7. Increase the quantity of infrastructure services and efficiency   8. Expand regional markets for products 12. Address logistics bottlenecks   9. Build foundational skills through rapid improvements in education 13. Reduce corruption and the cost of business start-up systems 14. Reform technical and vocational education and training and pursue 10. Improve access to credit through financial sector reform public-private partnerships for delivering demand-driven training Cross-cutting areas 15. Increase awareness of opportunities and pathways to self- 11. Promote early child development and nutrition to build a stronger employment, especially for young women foundation for skills development 16. Consider second-chance education for basic skills 12. Build behavioral skills (consider reforms within the school system) 13. Reduce fertility rates to lower the size of future youth cohorts (through more girls’ education, improved maternal and child health, increased access to family planning) 14. Build better employment data and a stronger evidence base to identify country constraints, priorities, and opportunities people’s vitality is harnessed and rewarded. For References African countries that meet this challenge, the Ayalew Ali, Daniel, Klaus Deininger, and Markus P. benefits will build on each other. The demo- Goldstein. 2011. “Environmental and Gender graphic dividend will yield returns, and Africa’s Impacts of Land Tenure Regularization in Africa: prosperity will grow and be shared. 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