Dividend or disaster: youth unemployment in Africa

Inclusive Economy26 Mar 2014Kate Meagher

It is time for development economists to look beyond the stylized facts to the dire realities of Africa’s frustrated youth and burgeoning informal economies.

Enthusiasm about a resurgent Africa has been dampened by the shadow of rising youth unemployment. In the wake of the Arab Spring, there is a growing awareness that a decade of exuberant growth has failed to create adequate jobs for Africa’s growing population. Youth unemployment rates are double those of adults across most of the continent. Part of the problem lies with the notoriously low employment-generating capacity of natural resource extraction, on which many African economies are heavily dependent. The legacies of deindustrialization, the slow progress of economic diversification and the closing of the land frontier in many African countries have severely limited the capacity of fast-growing African economies to absorb their own labour.

To make matters worse, the sobering realities of ‘jobless growth’ are confronting a population tsunami across Africa that puts 8 million new entrants a year onto the job market (World Development Report 2013, pdf). Population growth rates in Sub-Saharan Africa are double the global average, flooding local labour markets with growing numbers of desperate job seekers. The comparatively modest youth unemployment rates of 13.7% are only the tip of the iceberg. The real issue, in countries where few can afford the luxury of remaining idle, is one of ‘disguised unemployment’. Sub-Saharan Africa hosts a vast informal economy estimated at 72% of the non-agricultural labour force, where the majority eke out a living at incomes below the poverty line. The volatile combination of poverty, a young and rapidly growing population, and dashed expectations of expanding opportunity poses a growing threat of social unrest.

The current search for policy solutions has focused on unlocking the dynamic potential of African labour markets by harnessing Africa’s ‘demographic dividend’, and turning large informal economies and rural labour markets into drivers of employment. Parallels are drawn with Asia’s dynamic development trajectory by highlighting that one-third of the East Asian miracle was accounted for by mobilization of the ‘youth bulge’, while others note that effective policy in China and India has turned large informal economies into ‘engines of growth’ (Garcia and Fares 2008, pdf; Jutting and de Laiglesia 2009, pdf). Recent reports on African youth unemployment claim that harnessing African youth through linkages with the global economy can turn Africa’s young and growing labour force from a threat into an opportunity.

But there is mounting evidence that these policy perspectives are out of line with African realities. Recent studies have shown that in many African countries, there is no demographic dividend to be reaped. The AIDS pandemic and the hardships imposed by economic restructuring during the 1990s have undermined many of the key drivers of the demographic transition. In over half of the African countries for which there is data, anticipated declines in population growth have stalled, and in some cases even reversed, resulting in persistently high dependency ratios. This is exacerbated by the realities of youth unemployment and informal employment, which have delayed social autonomy for young adults well into their twenties and even thirties. A population profile characterized by rapid population growth and high levels of dependency is not associated with a demographic dividend as in East Asia, but with poverty and vulnerability to conflict (Bongaarts 2008, pdf; Cincotta 2010).

The notion that Africa’s large informal and rural labour forces can be turned into engines of growth is also in need of a reality check. Far from providing effective labour sponges, informal and rural labour markets across much of the continent have already been saturated by decades of economic hardship and declining access to land, especially among youth. Sub-Saharan Africa has the highest rate of vulnerable employment in the world, estimated at 77% of the working population (Ibrahim Forum 2012, pdf; ILO 2013, pdf). The suggestion that this can be resolved through linking African informal and rural labour markets into the global economy ignores existing evidence that global linkages are associated with intensifying rather than reducing informality and vulnerable employment (Barrientos 2011, pdf). The competitive logic of global value chains has been linked to an increase in casualization, contract labour, and the expansion of low-paid, unprotected work, exacerbating informality and vulnerability.

Addressing the scourge of youth unemployment in Africa requires that we look beyond Asian models to African realities, and focus on the quality as well as the quantity of jobs. Demographic pressure and the growing frustration of African youth have become a ticking time bomb which will not be defused by recasting low-paying informal employment as opportunities. While labour market statisticians seem happy to re-categorize informal employment as a job, this is not an opinion shared by large sections of African youth, who are growing restless in the face of the yawning gap between the promise and the realities of Africa’s miraculous recovery. It is time for development economists to look beyond the stylized facts to the dire realities of Africa’s frustrated youth and burgeoning informal economies.