BUREAU OF LABOUR AND SOCIAL AFFAIRS OF THE AMHARA NATIONAL REGIONAL STATE OF ETHIOPIA

Creating employment opportunities

Paper presented for the training entitled Employment-Intensive Investment for sustainable Development ITC/ILO, Turin, Italy. 19-23 May 2008 Produced By: K. Mesfin Raji
5/15/2008

This brief report is prepared as gesture of participation in a training program organized by the ITC/ILO regional office situated in Turin, Italy. The paper discusses the employment aspects of Ethiopias Plan for Accelerated and Sustained Development to end Poverty (PASDEP) (2005/06 - 2009/10) strategy. The document only reflects the authors own opinion and not intended to portray as critical review. The paper may or may not get official recognition as its presentation will depend on the schedule of the organizers.

Creating employment opportunities

Ethiopia's poverty reduction strategy for the ongoing five years comprises of the following eight pillars; 1. Building all inclusive implementation capacity; 2. A Massive push to accelerate growth; 3. Creating the balance between economic development and population growth; 4. Unleashing the potentials of Ethiopia's Women; 5. Strengthening the infrastructure backbone of the country; 6. Strengthening human resources development; 7. Managing risk and volatility; and 8. Creating employment opportunities. Creating Employment opportunitiesi

In Ethiopia underemployment and unemployment-especially in urban area and among the youth are serious challenges. Creating employment and income earning opportunities; in the modern sector, the informal sector, and on farms is thus central to the effort to accelerate growth.

The working age population /labor force/ stood at 54% of the population in 2004/05 and is growing by about 1.2 million people per year. It is important to note the fact that pressure on the labor market comes directly from the supply of labor, which in turn, is induced by the growth rate of the population. The challenges faced by the government in fulfilling the demand for increased employment are thus two -fold: Managing the dynamics of population growth, and Expansion of labor-intensive productive activities. Therefore PASDEP's strategic emphasis is on growth of: The rural, industrial, export, construction, and other labor intensive sectors. Particular focus is given to the promotion of MSE development as well.

The MSE growth and integration with TVET system development will be instrumental in increasing the employment of youth. The returns to education are high, and improving education levels both through general education and through specialized TVET skills training, is an

Paper presented for Employment-Intensive Investment for sustainable Development ITC/ILO, Turin, Italy. 19-23 May 2008

Creating employment opportunities

important part of this effort, as is providing the capital for the unemployed to work within the form of investments in infrastructure, a well-functioning financial system, and specialized programs to promote opportunities for self-employment. Currently a great number of job opportunities are being created through urban development strategy using MSE development linked with TVET, and in integrated housing program in major towns of the country including Addis Abeba. Youth and employmentii

Youth defined as those aged (15-29) make up 28% of the population. They represent the future of Ethiopia, and it is important that they have productive opportunities to grow into adulthood. And to contribute to society and the economy, Ethiopia's first national youth policy was formulated in 2004, with the broad objective of encouraging the active participation of youth in the economic, social and cultural life of the country. The policy addresses a wide range of issues ranging from HIV/AIDS to environment protection and social service, although the most central element relative to PASDEP relate to education, training and the employment of youth.

According to the policy, the government is developing a multi-sectoral youth development strategic plan, and two corresponding five years youth sector development programs (YSDP), the first of which covers the PASDEP period, 2006-2010. The youth policy promises to facilitate the growth of safe employment and formal/informal employment opportunities, and to create condition conductive for rural youth to acquire farming plots and grazing lands on the basis of existing laws. The policy outlines a vision for creating an enabling environment for youth to benefit from education and training, and for out-of-school youth to develop their reading and writing skills through adult education services.

The new education policy in chapter VII focuses on producing a skilled labor force, rather than a large cohort of relatively unskilled secondary graduates, as was the case in the past. The TVET program described in chapter VII is a central part of this strategy. During the PASDEP, the effectiveness of technical training will be upgraded to provide more demand-driven training through closer linkage with the labor market, and to increase the link with employer and the

Paper presented for Employment-Intensive Investment for sustainable Development ITC/ILO, Turin, Italy. 19-23 May 2008

Creating employment opportunities

work force. The labor law codifies the practice of apprenticeships and allows for contract to be entered with those at least 14 years of age. For rural youth, the agricultural TVET program aims to reduce unemployment. Create trained agricultural practitioners with increased productivity, encourage self-employment, and create more market-oriented farmers.

Since many youth are engaged in the informal sector, particular attention is being given to the role of micro and small enterprises development /MSED/. The /MSED/ strategy underpinning PASDEP pays particular attention to female-operated enterprise, school dropouts, and unemployed youth. Under this strategy the government will provide entrepreneurships and business management training, appropriate technology research, market support, information and counseling, business support service, and help with access to credit and basic infrastructure for MSEs. Employment and labor force issues:iii

The main story regarding the labor market is the rapid growth of the workforce, as a result of high population growth. Combined with fewer farming opportunities for the next generation, and relatively slow creation of new jobs in the modern sector, this is resulting in growing unemployment and under-employment pressures.

Economic activity rates in urban areas are relatively low, and have been declining somewhat (from 66% in 1999 to 58% in 2003), although this is to some extent a reflection of growing school enrolments that keep youth out of the labor force longer. The incidence of unemployment was relatively lower for those with non-formal education (9%) and holders of diploma and above (12%). Underemployment, on the other hand, is very high, especially among youth.

Surveys for the 5 years (1999-2004) show a slight decline in urban unemployment among male, and a slight increase among females; and also that the duration of unemployment has shortened. As in most countries, unemployment is highest among youth (who have less marketable skills and experience, but who also tend to live with their families, and often not subject to the same immediate pressures to find work that apply to slightly older married men and women). It is also

Paper presented for Employment-Intensive Investment for sustainable Development ITC/ILO, Turin, Italy. 19-23 May 2008

Creating employment opportunities

generally higher among women than men. Of wage employment, the public sector still accounts for about 40%.

Wages are low, and for the less educated, Wages in urban employment are just about at the poverty line. Wages rise dramatically with education levels, for example persons with even basic non-formal education make about 23% more than illiterates, and those with higher education making 148% more. While schooling clearly pays, in the future it is likely that completing primary and secondary education will be less of a guarantee of finding employment than it was in the past, as the labor market becomes more saturated.

Nonetheless with the expansion of education, the average skill level of the workforce is increasing, and this should pay off in productivity gains. Although wages are lower than most counties, potentially making Ethiopia an attractive location for labor-intensive manufacturing and export production, productivity is also low-too low at the memento to be highly attractive to FDI.

There are big urban-rural, formal-informal, and gender gaps in employment and wages. Labor mobility is limited, especially between rural areas and towns, although there is increasing evidence of 'step-migration' from smaller to large towns. As in most countries, immigrants start out near the bottom of the urban job market, but there is evidence that their lot improves over time. The informal sector is large, and pays about a third less than more formal sector employment1. Definitions vary, but by one estimate showed that the informal sector accounts for 75% of the workforce. The constraints appear to be related mostly to access to capital, and of course to skill and education levels. Panel data (1994-2004), however, does show an increasing movement over time from informal to formal jobs.

The solutions, to be pursued in PASDEP include enabling faster job creation (by opening up private sector growth, maintaining stability, and strengthening the investment climate); building

Note this is based only on paid informal sector employees; the average among all, especially family workers, is almost certainly lower.

Paper presented for Employment-Intensive Investment for sustainable Development ITC/ILO, Turin, Italy. 19-23 May 2008

Creating employment opportunities

human capital through education, TVET, and special effort to provide skills training to the unemployed; and selected public works employment interventions. The goal of the policy is to make sure that the youth gets enabling environment, benefit from the exercises of democracy, good governance, social, cultural and economic activities in an institutional manner. Experience of Regional states (Amhara)iv

Employment situation in the region is discussed (due to incomplete data) from the data of urban employment, among the total economically active urban population of the region, 81% are employed among which 49.6% constitute females. The remaining 19% are Unemployed. Hence, unemployment in urban areas is rising and becoming among the prominent problems. An integrated effort has to be carried out among various sectors in the aim of minimizing the problem. Besides creating a better favorable condition to the private sector, expansion of the micro trade and manufacturing areas are some among several that the region has to pay attention to minimize unemployment situation.

With regard to the investment situation, 768 projects amounting to a capital of birr 7.27 billion, with job opportunity of 134660 are issued in the late 2005. Amongst 27.8% of the total investment projects go to the agricultural sector. From the prevailing high unemployment situation on urban areas, and on the other hand from the abundance of investment potentials in the region, much could be done. Therefore, it has to be strengthened further so as to primarily absorb the unemployed citizens. The private sector plays a vital role in the introduction and expansion of modern as well as labor- intensive technologies and entrepreneurship which ultimately leads the region to be competitive in the world market.

PASDEP (2005/- 2009/10), p53,Volume : Main Text, September, 2006, Addis Abeba Ibid, p197 iii Ibid iv Development Indicators of Amhara Region(Year 2006), p13-14
ii

Paper presented for Employment-Intensive Investment for sustainable Development ITC/ILO, Turin, Italy. 19-23 May 2008