This Thursday Duke Center of International Studies invited Célestin Monga from the World Bank to give a talk about unemployment in Africa. The topic of his talk was artfully named “Jobs: An African Manifesto”.
Monga started his talk with some startling statistics. The unemployment rate in Sub-Saharan Africa is 17%, second highest in the world following Middle East and North Africa (22%). If we look at underemployment, 49% of the Sub-Saharan Africa population falls into this category (54% for Middle East and North Africa, unsurprisingly). Moreover, the percentage of population employed full-time is only less than 20% in Sub-Saharan African. Even if people are employed, most are involved in the low productivity agricultural sector. In Cameroon. only 2% of the population are employed in the government, 4% in the private sector, while 94% are in the agricultural and informal sector.
The importance of creating jobs in Sub-Saharan Africa cannot be overstated. With half of the population under 25, and about 2 to 3 million young people entering the labor force every year, the lack of jobs can lead to serious social unrest that will hurt economic development further.
The highlight of the talk is Monga’s new approaches to create jobs in Africa. He argued the traditional remedies to unemployment (including changes in hiring and firing practices, changes in benefits, reduction of the tax wedge, changes in wage bargaining institutions, implementation of active labor market policies and job applications) are ineffective. There are three major flaws of these policies. First, these are often misguided demand policies. Austere fiscal and financial policies to “restore macroeconomic stability” have not led to development. Second, laissez-faire policies alone often fail to attract investors. Third, it is difficult to improve the business environment (the policy recommendation often given by the World Bank) in Sub-Saharan countries.
If the traditional ways have disappointed us, what are our alternatives? Monga emphasized Africa’s low labor costs as a comparative advantage. This will become increasingly evident as China no longer has cheapest labor in the world. He also encouraged African countries to adopt less rigid fiscal policies that allow for targeted profitable investment. In addition, he suggested monetary policies should take on new roles of fostering growth and job creation as well as providing access to credit, instead of maintaining price stability (note that much of the inflation in Sub-Saharan Africa is imported).
At the end of his talk, Monga offered his views regarding how political economy plays a role in tackling the unemployment problem. New approaches to combat unemployment need to yield “quick wins” for politicians to stay in power to make long-term growth schemes possible. Governments should let foreign investment find a way to be incorporated into the local economy (see recent protests against Chinese investors). Identifying and setting priorities is important too, as he said: “Sometimes the government spends money building roads all over the place and each project gets little, and at last nothing is built and nobody is pleased.”