chapter  2
82 Pages

Macroeconomic perspectives

ByGUSTAV RANIS, DOUGLAS GOLLIN

This chapter reviews macroeconomic perspectives on youth underemployment in Sub-Saharan Africa. We focus on underemployment, rather than classical unemployment, because relatively few people in Sub-Saharan Africa fit the standard definitions of unemployment. Almost everyone works in some fashion, but many individuals (including many young people) earn their living from self-employment or family business. This complicates notions of labour force participation and unemployment. Our chapter examines conceptual, theoretical and empirical frameworks for thinking about the causes of youth underemployment, and it discusses some macro and micro policies that may help alleviate the problem. By some measures, one in five Africans between the ages of 15 and 24 is

underemployed, although estimates differ widely.1 Moreover, many of these youths are experiencing long and persistent spells of underemployment, which are likely to have long-term impacts on their labour market outcomes. Youth underemployment differs significantly between urban and rural areas, between young men and young women, and between those with different educational levels. Our goal in this chapter is not to duplicate previous efforts. Instead, we seek to

focus on the policy challenges that result from the youth employment situation. Our starting point is an understanding that youth unemployment in Africa differs markedly from the problems of unemployment in most advanced countries. In particular, underemployment is far more prevalent than unemployment per se, as poverty forces most Africans to find work of some kind. Data show that underemployment is concentrated in rural areas, both in agriculture and rural non-agriculture and in the urban informal sector. Some argue that unemployment has been due to slow growth-but in fact growth has been fairly robust despite recent economic downturns in the developed world. In our view, youth underemployment in Africa is best viewed as a problem

related to the structural characteristics of poor African economies, rather than as a business-cycle phenomenon. As a result, many of the policy responses that are appropriate in advanced economies (e.g. programs designed to

address temporary employment shocks) may be less useful in Sub-Saharan countries. As we review policies and programs that might alleviate the problems of youth underemployment, we argue that the principal challenge is to create high-quality jobs through economic growth. This chapter is organized as follows. Section 1 reviews some background

information about youth underemployment in Africa. Section 2 reviews descriptive data on structure, prevalence and characteristics of youth underemployment in Africa through an analytical framework. Section 3 describes previous macroeconomic experiences and is complemented by Section 4, which introduces micro foundational policy experiences of selected countries that have had different degrees of success in their efforts to limit and manage youth underemployment. Section 5 draws on the lessons learnt from developing countries in Asia and South America. Last but not least, Section 6 offers policy recommendations and Section 7 concludes.