AFRICAN businesses are reluctant employers. A given firm in Sub-Saharan Africa typically has 24% fewer people on its books than equivalent firms elsewhere, according to a recent paper from the Centre for Global Development (CGD), a think-tank based in Washington, DC. Given the links between employment and development, economists want to figure out the reasons for the shortfall.
The study calculates the missing jobs by crunching information on 41,000 formal businesses globally from a World Bank survey. The data capture only a sliver of what actually happens in Africa: nine in ten workers have an informal job. Shunned by the formal sector, workers turn to below-the-radar employment—toiling on family farms or otherwise beyond the government’s reach. But a big informal sector makes it harder for Africa to reduce poverty, even when economic growth is strong. Increases in income on the production side of the economy translate weakly into higher wages for workers. Indeed the relationship between economic growth and poverty reduction is weaker in Africa than any other developing region…
Read the full article.