Why an African Economic Outlook on Youth Employment?

As successive editions of the African Economic Outlook have shown, Africa’s rate of growth has outperformed the global rate over the last decade. Yet high growth is not sufficient to guarantee productive employment for all. Large sections of the population, and particularly the young, can be left behind and become frustrated. In the absence of a political process allowing them to express their views and produce policy changes, instability can result, as it did last year in a number of North African countries. This is an opportune time to reset the policy agenda of African governments towards an inclusive, employment-creating and sustainable growth strategy, aimed particularly at addressing the special needs of the young.

Africa has been experiencing fast economic growth. From 2001-10, six of the world’s ten fastest-growing economies were in sub-Saharan Africa. Africa weathered the 2008 financial crisis well, with many economies already growing at rates close to their pre-crisis averages. Assuming that the current market turmoil in developed countries passes without serious consequences for Africa, prospects for the coming decade seem equally good.

With almost 200 million people aged between 15 and 24, Africa has the youngest population in the world. And it keeps growing rapidly. The number of young people in Africa will double by 2045. Between 2000 and 2008, Africa’s working age population (15-64 years) grew from 443 million to 550 million; an increase of 25%. In annual terms this is a growth of 13 million, or 2.7% per year (World Bank 2011a). If this trend continues, the continent’s labour force will be 1 billion strong by 2040, making it the largest in the world, surpassing both China and India (McKinsey Global Institute, 2010).

Africa’s youth population is not only growing rapidly, it is also getting better educated. Based on current trends, 59% of 20-24 year olds will have had secondary education in 2030, compared to 42% today. This will translate into 137 million 20-24 year olds with secondary education and 12 million with tertiary education in 2030 (Figure 6.1). Although significant quality gaps remain, these trends offer an unrivalled opportunity for economic and social development if the talents of this swiftly increasing reservoir of human capital are harnessed and channelled towards the productive sectors of the economy. However, they could also present a significant risk and threat to social cohesion and political stability if Africa fails to create sufficient economic and employment opportunities to support decent living conditions for this group.

Figure 6.01. Africa is experiencing a rapid growth of educated young people (20-24 year-old cohorts by education, 2000-2030)

Although many jobs have been created, there have not been enough to accommodate the number of young people in search of work. The International Labour Organization (ILO) estimates that between 2000 and 2008 Africa created 73 million jobs, but only 16 million for young people aged between 15 and 24. As a result, many young Africans find themselves unemployed or, more frequently, underemployed in informal jobs with low productivity and pay. Of Africa’s unemployed, 60% are young people and youth unemployment rates are double those of adult unemployment in most African countries. The problem is particularly acute in middle-income countries (MICs). In 2009 in North Africa youth unemployment was 23.4%, and the ratio of youth-to-adult unemployment rates was estimated at 3.8. In South Africa, youth unemployment was 48% and the ratio of youth-to-adult unemployment rates was estimated at 2.5. Among the employed young, the proportion of work in informality is significantly higher than that of adults.

 

The costs of inadequate employment are high. Poverty is the most obvious consequence. On average 72% of the youth population in Africa live with less than USD 2 per day. The incidence of poverty among young people in Nigeria, Ethiopia, Uganda, Zambia and Burundi is over 80% (World Bank, 2009). The highest rates of poverty can be observed among young women and young people living in rural areas. But the costs go much deeper. The first years in the labour market, the skills developed and the experience then accumulated considerably affect young people’s future professional development. Long spells of unemployment or underemployment in informal work can “permanently impair future productive potential and therefore employment opportunities” (Guarcello et al., 2007). For the few that manage to obtain a formal sector job, which offers increasing wages, initial unemployment can have significant negative effects on lifetime earnings (OECD, 2010). In fragile states, the lack of adequate employment is among the major risks to stability (Box 6.1).

Box 6.1. Youth employment and unemployment in fragile states

Why is youth unemployment a critical issue in fragile states? Grievances among the young are most likely to be expressed violently, if non-violent political channels are not adequate or responsive (USAID 2006), and these grievances revolve around unemployment, involving considerations of both income and social cohesion. One in two young people who join a rebel movement cites unemployment as the main reason for doing so (World Bank, 2011b). In Liberia, which has suffered two civil wars since 1989, driven by a combustible mix of ethnic divisions, predatory elites, corruption and competition for the profits from natural resources, today it is unemployment that is seen as a major risk to stability (International Crisis Group, 2011). Conflict in one country shaves an estimated 0.5 percentage points off the annual rate of growth in a neighbouring country (Collier et al., 2003). It can create a refugee population, disrupt trade, provoke an arms race, provide a haven for rebels and itself become theatre of a new war.

Source: International Network on Conflict and Fragility (INCAF), Organisation for Economic Co-operation and Development (OECD) Development and Co-operation Directorate

Without urgent action to modernise their economies, African countries risk wasting the tremendous potential offered by their youth. In a paper titled “The Economics of the Arab Spring” Malik and Awadallah (2011) point to the “singular failure” of the Arab world to develop a private sector that is independent, competitive and integrated into global markets. Although such harsh words are not warranted for all of Africa, they do make a valid general point: given Africa’s strong population growth and the necessary downsizing of the public sector in many countries, a vigorous private sector is the most important source of jobs for the young. Yet this analysis of 53 countries in Africa reveals that a lack of sufficient job creation is by far the biggest hurdle young Africans face today.

 

Maximising the impact of a stronger private sector and economic growth on youth employment requires intelligent policies based on a sound understanding of the issues that the young face in finding, and holding on to, decent employment opportunities. This chapter aims to make a contribution by painting a picture of youth in employment and unemployment, the needs they have and the obstacles they face.

The next section presents the data and definitions used.

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