Jobless growth: What is the problem?

Tuesday March 17 2020

A woman hawks sponges in Kampala. Whereas

A woman hawks sponges in Kampala. Whereas Uganda’s economy is growing, this growth has not been inclusive enough as it has not translated into jobs, poverty reduction and significant wealth for Ugandans according to a PwC report. PHOTO BY ERONIE KAMUKAMA 

By Ismail Musa Ladu

Youth unemployment poses a serious political, economic and social challenge to the country, including its leadership.

Despite being aware of the implications of what various researchers and policy experts interviewed for this special report describe as “a ticking time bomb”, empirical evidence suggests unemployment is still the (fast-growing) elephant in the room.

Uganda’s economy is projected to grow at around six per cent, and has consistently hovered in the mid-to-upper single digits for more than two decades. However, the number of new jobs resulting from this growth has been disappointingly low, and of poor quality.

Latest statistics shows that about 700,000 young people reach working age every year in Uganda. This is expected to rise to about one million in the decade from 2030 to 2040. According to a new World Bank report, this is already creating a mismatch between labour demand and supply.

While Uganda’s youth are renowned for being highly enterprising, according to the Global Entrepreneurship Monitor, an academic research consortium, many of these enterprises suffer from a high mortality rate.

The Uganda Jobs Strategy for Inclusive Growth report by the World Bank examines the state of the job market in the country and how it can increase demand for labour or create jobs for a fast-growing labour force, where fewer than four per cent of Ugandans are employers.

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The report further reveals that half are working for themselves only, and 43 per cent are unpaid family workers. Around 77 per cent of the population aged 15 to 64 works. Currently, unemployment is negligible at 3.2 per cent for the adult population and 5.3 per cent for youth. Worrying, though, is the nature of jobs in terms of quality and quantity.

“The quality of jobs, however, is low. Only one in five workers are in waged employment, although outside of agriculture, the share is about half in waged work,” reads the report.

It adds: “Most Ugandans (two thirds) still work for themselves or for their families in agriculture. Among youth, three in five work in unpaid occupations, contributing to household enterprises, which are mostly farms.”

According to World Bank and Uganda Bureau of Statistics data, Uganda has one of the youngest populations in the world with 77 per cent aged below 25. There are slightly over 7.3 million youth aged between 15 and 24 living in Uganda.

However, most young people, especially those of employable age, have no jobs to meaningfully earn incomes from. The unemployment rate for young people in Uganda aged 15–24 is 83 per cent.
This rate, according to the World Bank report “is even higher for those who have formal degrees and live in urban areas.”

The missing link?
For years, the private sector in Uganda has warned of a disconnect between the products of the country’s education system and the needs of employers in key economic sectors such as manufacturing and agriculture.

To borrow a well-worn cliché, the education system produces job seekers instead of job creators – and they are not very good. Unchecked, the working-age population, which grew at around four per cent per annum between 2011 and 2017, will bulge into job seekers, creating more pressure.

World Bank researchers estimate that the working-age population will increase by 13 million people by the end of the decade. If nothing is done to reorient the status quo, majority of them will be job seekers.

The World Bank report notes that a gap between academic degrees and vocational skills needed for the available jobs. It further notes that those without degrees are also unable to get jobs because they lack the required skills or the resources such as land or capital for their entrepreneurial journey. Other young Ugandans simply look down on certain jobs.

“The cycle is making it increasingly difficult for Uganda to break out of poverty. Young women also more often have to stay at home in a maternal role from a very young age which limits their ability to work,” reveals the report.

This is further worsened by the low wages paid in the informal sector, which accounts for nearly 50 per cent of the economy, according to government statistics.

Only 3.2 per cent of youth work in waged employment and 5.8 per cent are self-employed with about nine out of 10 in informal employment according to Ubos and World Bank data.

Powerless economy
After rebasing, Uganda’s economy is estimated to have grown by 6.5 per cent in 2018/19, according to Ubos, a marginal 0.3 per cent higher than the previous financial year.

Economists agreed with the report’s assertion that the economy has not been creating enough jobs with higher earnings for one of the world’s fastest growing workforces. With almost three quarters of young people still joining the workforce on farms, the country’s economic transformation into off-farm waged jobs in urban areas has not been supported by the “growing economic growth”.

The Uganda Economic Outlook – 2019 authored by PricewaterhouseCoopers (PwC), a tax and audit consultancy firm, confirms that although the economy is growing, it is not creating enough jobs.

“This growth has not been inclusive enough as it has not translated into jobs, poverty reduction and significant wealth for Ugandans,” the report notes.

A major reason behind the jobless growth, PwC notes, is that in the past 10 years growth has originated mainly from investments in public infrastructure as well as the mining and oil and gas, which are capital-intensive, instead of the traditional labour-intensive sectors such as agriculture, manufacturing and tourism.

Although, the working population increased by eight per cent between 2012/13 and 2016/17, thanks to growth in agriculture, forestry, fishing as well as industry and services, there was negligible impact on employment and quality of jobs created.

There’s no jobs crisis, says labour chief

“Crisis? What crisis?”
That is how a senior labour technocrat responded to a question on whether the country is facing an unemployment crisis.

Mr Martin Wandera, the director of labour, employment and occupational safety and health at the Ministry of Gender, Labour and Social Development, dismisses reports that Uganda has an unemployment problem.

He said: “There is no job crisis in this country. Those claims are inaccurate. There would be a job crisis if there [was] no potential for the economy to create employment. Our economy has the potential to create jobs. Therefore, there are several measures being taken to unlock the potential of the economy to create employment.

“Many people do not seem to understand the value of peace we are having. This allows you to start up a business and run it. We now have considerable amount of energy, so you cannot say it is difficult to run a factory here. Movement of goods and raw materials shouldn’t be a problem because we have good roads. The only challenge is the cost of credit, something that should be addressed.”

Mr Wandera believes those talking about a job crisis are missing the point given that such an argument could only hold water if the economy was experiencing recession.

He, however, admitted that despite the economy’s potential to create jobs, it is not generating employment at the pace at which the labour force is growing.
Skills training, he says, is not the magic bullet for unemployment question.

Citing Portugal, Italy, Greece and Spain, all grappling with high unemployment in Europe, despite having some of the best vocational training systems, means the problem is not skills or their lack.

“You cannot say the problem is shortage of skills. Note that the problem of getting jobs in Uganda is a demand side issue not at the supply end of things,” said Mr Wandera.

He continued: “If you skill people and the economic sectors are not growing, then you will have a skilled population without jobs. There is no job in Uganda which Ugandans cannot learn on the job.

“So what we should focus on is to ensure that our people learn how to learn. So the focus should be in numeracy and literacy skills because there is no job that doesn’t require these skills.”

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