The Growing Unemployment Crisis in Ghana

By benim
In Analysis
Jul 16th, 2011
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The importance of employment to human sustenance and a country’s development cannot be overemphasized. To a nation employment is not only as a catalyst to growth but also a means to poverty reduction. To the individual employment does not only improve the quality of life but also provides opportunities for self fulfilment. In Ghana the importance of employment is underscored by the recognition of the right to work not only as a basic human right, but also a constitutional right. Article 24 (1) of the 1992 Constitution, for instance, defines this right as an economic right: “Every person has the right to work… Article 34 (2) even makes it obligatory on the government to report annually the realisation of the right to work. This right to work, however, is gradually becoming very difficult for both government and indi¬viduals to realise due to the rising levels of joblessness. Today unemployment seems to be the most serious development challenge confronting the nation, so much so that it has become, according to the Afrobarometer, the number one concern of Ghanaians that they want the government to address.

Indeed the unemployment problem has reached a crisis peak, given that the unemployment rate, using the international accepted definition, has consistently increased from a very low level of 2.8% in 1984 to an unacceptably high rate of 10.4% in 2000. After a brief respite and a fall in the rate to 6.5% in 2008 it currently stands at 8.5% in 2010. The incidence of underemployment has also worsened off late. Curren¬tly it is estimated that almost four million people out of the 14 million people within the age group of 15-64, regarded as active or working population, are without employment, i.e., those who do not receive any kind of earnings, whether as wage payment or as compensation in self-employment. This is equivalent to about 28% of the total active population (15-64) of Ghana. The proportion of Ghanaians without employment even increases to 47.2% if we consider only paid employment. This translates into about 6.7 million of active Ghanaians who are not in any paid employment. The worst affected groups of the Ghanaian job crisis include women, young people, the disabled and the elderly. The situation, however, seems to be more precarious for the youth population aged between 18-35 years. This age group indeed makes up only about 26% of the entire population of the country, but they account for over 45 % of the total unemployed Ghanaians. The seriousness of Ghana’s job market crisis is that it seems to be caught on a “small one-way road into a bottomless pit”. Statistics indicate that whilst about 250,000 young peo¬ple enter the labour market annually, less than 5000 (2%) are able to find employment in the formal sec¬tor, leaving about 98% unemployed or to survive in the informal sector on unsecured income. A new frightening dimension of the unemployment problematic is the rising levels of graduate unemployment, which is estimated to have reached currently over 44% of graduate school leavers. The rising levels unemployment in Ghana can largely be attributed to the inability of the economy and precisely the government of Ghana to create sufficient jobs to absorb the growing numbers of Ghanaians in the labour market. Moreover, there is also a mismatch between the demand for and supply of labour in terms of both size and qualifications, leading to a qualification deficit and rising levels of unemployment. The situation appears to have been exacerbated by large scale privatisation of state owned enterprises, retrenchments and redeployments of large numbers of public service workers that began in the eighties and continued into the nineties. For instance, beginning from the eighties, the size of the Cocoa Board’s payroll was reduced from 100,000 to 50,000, as part of the retrenchment exercise. The civil service also lost 36,000 jobs by the same token. Private sector employment was equally not spared and fell from about 149,000 in 1960 to 31,000 in 1991, representing a decrease of about 79.2% and an average decline of 2.7% per annum. Over the period between 1985 and 1990 alone public sector retrenchment and redeployment is estimated to have contributed to about 89% of the loss of about 235,000 formal sector jobs. Indeed the labour market to date does not seem to have recovered from this serious blow. This is underscored by the substantial decline in the overall employment, as reflected in the labour participation rate, from 84.5% to below 70% during 1991-2010.

The government of President Kuffuor, having recognized employment as a catalyst in growth and pover¬ty reduction, mainstreamed employment in national development policy frameworks (GPRS I, II). In the two poverty reduction strategy docu¬ments, employment generation was considered key in the coun¬try’s drive to combat poverty with the private sector as the major driving force. The government consequently provided the enabling environment and support to the private sector under its declared policy of a Golden Age of Business. The private sector also responded with increases in production and consequently labour demand. Real GDP thus grew successively from 3.7 % in 2000 to 8.4% in 2008, with the various sectors of the economy contributing massively to this growth success. Rapid growth in both industrial and agricultural sectors, averaging 6.3% and 5% respectively (according to the old GDP series) during the same period, coupled with the implementation of several employment focussed programmes (includ¬ing National Forest Plantation Development Programme, Mass Cocoa Spraying Programme, Alternative Employment Programme, NYEP, MASLOC, Venture Capital Trust Fund, etc.), created space for employ¬ment. Even though pau¬city of reliable information on employment makes it difficult for a proper analy¬sis of labour market trends in Ghana, evidence from labour market observations lends credence to subs¬tantial improvements on the job market during 2001-2008. For instance, the number of newly registered members of SSNIT, an indicator of job placements of new entrants into the labour market, increased suc¬cessively from 60,166 in 2000 to 63,094 in 2002 and to a peak level of 119,748 in 2008. Information from the Ghana Investment Promotion Centre also reveals that about 271,687 jobs were expected to have been created from foreign investment projects it registered during the same period. However, these labour mar¬ket improvements could not result in sufficient employment generation for the growing working popula¬tion of the country.

It was probably partly for this reason why Ghanaians voted for Prof. Atta Mills in the last general elections, with his manifesto promise to invest in people, jobs and the economy “…in which all who seek work will have jobs” (page 16). The last two and half years of the NDC regime have, however, witnessed rather growing incidence of unemployment, underemployment and poverty. This can be attributed to the sheer absence of enabling macro-economic policies that promote employment. Even though, similar to other previous ones, the employment sector strategy, as contained in its development strategy -GSGDA- seeks to pursue cross-sectoral development interventions that ensure that employment expands along with production and that the benefits of growth are widely shared. The reality, however, is different. The shift in development policy focus from growth orientation of the Kuffuor regime back to a Bretton Woods Ins¬titution supported stabilization programme has caused a severe deceleration of the economy, with the GDP growth rate tumbling from 8.4% in 2008 to 4.7% in 2009 before rising to 6.6% in 2010. Particular¬ly, growth has been very slow in high labour absorption sectors such as manufacturing, construction, tourism and food crop activities. In 2009 for instance, the manufacturing and construction sub-sectors even contracted by 1.3 and 1.7% respectively before levelling off at 1 and 7.9% in 2010.

The sluggish growth performance of the economy, as reflected in these two sub-sectors, which provide the bulk of private sector formal employment, seems to have adversely affected employment generation in the economy. This has made it, particularly, difficult for new entrants into the job market to find decent work and this is underscored by the declining trend of newly registered members by SSNIT from 119,748 in 2008 to 116,625 in 2009 and further to 114,118 in 2010 in the wake of rising active labour force. Indeed the poor situation on the job market appears to be exacerbated by a net employment freeze in the public sector, which is part of conditionalities of the stabilization pact of the government with the World Bank. Apparently the lack of new employment focused macroeconomic and sectoral strategies of the government has given way to the concentration of efforts on the inherited NYEP, and the introduc¬tion of new modules. The success of the NYEP has, however, been limited since it appears to suffer from the fact that it creates only low quality short term jobs, which are mostly concentrated in the services and public sector, constrained by limited finances. Hence despite this emphasis, it is estimated that the NYEP has achieved only 20% of its employment target.

Over the period there appears to be a general tightening of credit conditions, particularly, for small and medium-sized enterprises and households as both monetary and fiscal policies reveal extremely conser¬vative tendencies. Coupled with a lack of clear private sector policy, this austere macro-economic policy have contributed to a general malaise in the business community, with consumer and business confidence ratings having sunk successively to their lowest ebb. This declining confidence in the economic environment has translated into slowing down of business activity and limiting of space for employment, thus pushing the majority of the unemployed Ghanaians into the informal sector. This is, however, the sector that has received the least policy attention. It is thus no wonder that poverty incidence is now on the increase. According to World Bank estimates poverty levels are expected to increase by 500,000 between 2009-2012. Addressing the unemployment challenge, however, requires coherent and coordinated growth and emp¬loyment strategies and the necessary political commitment to implement and monitor employment tar¬gets agreed upon in the national development policy frameworks. Ghanaians, therefore, expect from this government active employment policies through the promotion of long-term employment strategies and measures to: (1) raise productivity, competitiveness and encourage the development of industries and en¬terprises that can provide large number of jobs; (2) deepen SOE reform to create space for sustainable employment; (3) strengthen HRD; (4) enhance business start-up capacity and employability of the labour force; and (5) take advantage of abundant labour resource by taping international labour exchanges.

 

Kojo Appiah-Kubi, PhD

kojoappiah@gmail.com

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