Youth Employment in a Changing World – Implications for Private Sector Development

Published on 12th June 2018

Introduction

I see the youth employment situation as the world’s greatest challenge as well as its greatest economic opportunity, and one of the most consequential global megatrends.

I still remember when I was in the same position as these young people growing up in northern Côte d’Ivoire. After high school, in 1992, I decided to immigrate to the United States. I was full of energy, ambition, and a strong belief that I can do anything, even change the world. It did not matter that I had no family member in the United States. It did not matter that I did not speak English. Even, my mother’s reservations about the adventure did not change my mind.

My professional journey took twenty six years, during which, I obtained my Bachelor’s degree from U.C. Berkeley, and a Master’s and Ph.D. in Economics from the University of Michigan. In between, my fascination with technology, like most young people today, led me to Silicon Valley where I spent two and half years as a management consultant.  After my Ph.D., I joined the Federal Reserve Board in Washington DC as a junior economist. By the time I joined Brookings to lead the Africa program at Brookings, I was Chief for emerging market and developing economies. As I reflect on my journey so far, I find that two critical elements were important in making it possible: my drive and the opportunity to study in some of the best schools in the world given to me by my parents who provided financial support for the first years of my education.

As I look at the young people today across Africa and around the world, I see even greater levels of determination. Their drive and ingenuity is only matched by their confidence, creativity, and entrepreneurial spirit. Every day, young people across Africa accomplish extraordinary things with few resources and in difficult circumstances.  Two months ago, a story surfaced about Elvis Chidera, a 19‑year old Nigerian who lived in the rural southeastern part of the country. Elvis had the ambition to change the world using technology even though he had nothing but a basic Nokia phone. His first project was to overtake Mark Zuckerberg and eclipse Facebook. Needless to say that he failed since Facebook is still thriving everywhere including in Nigeria. To his credit, he was smart enough to recognize that it was too tall of an order. However, you have to admire the boldness and self-confidence of anyone with no computer, growing up in rural Nigeria, who decides to take on Facebook as his first venture.

Elvis then moved on to his next project to develop an app and website to cut the cost of communications in Nigeria. He taught himself how to program in Java. Because he could not afford a computer, he programmed using his basic Nokia phone. He spent several days programming, and was able to build an app and a website after a few months. For those who know something about programming, building a website without a computer is no easy feat. It required perseverance. Elvis relied on Facebook friends to check the website and provide feedback at every step because he could not afford the cost of the local cyber café. In the end, the app he developed cut the cost of texting in Nigeria by over 60 percent [1]. Elvis, now just 19-years old, works for the MIT-backed startup dot Learn in Lagos where he builds educational apps to help students in developing countries.

Africa is filled with young people like Elvis who have tremendous talent and extraordinary entrepreneurial spirit. Each year, my team at Brookings hosts the fellows of the Young African Leaders Initiative. I am impressed by their energy and optimism. What most of them lack and need is a window of opportunity, and they will change Africa and the world. I see private sector development initiatives as important opportunities to help these young people unleash their potential and help low-income countries meet their economic development challenge.

As I noted earlier, I see the youth employment situation as both the world’s greatest challenge as well as its great opportunity, and one of the most consequential global megatrends.

Africa’s demographic boom as a an opportunity for the world

Nowhere is the demographic boom and youth bulge more acute than in Africa. Seventy percent of Africa’s population is under 30 years of age and population growth continues to be very rapid at around two and half percent per year. By the turn of the century, Africa will be home to 40 percent of the world’s population or 4.4 billion people, according to United Nations population projections. That is more than double the population in Europe, North America, Latin America and the Caribbean, and Oceania combined. At the same time, population aging is increasing rapidly elsewhere in the world, notably in the advanced economies and several countries across Asia. As a result, 42 percent of the global working‑age population will be in Africa, providing a large offset to the elderly bulge elsewhere. This is a great opportunity for the global economy if this large labor force is equipped with the necessary skills for the jobs of the 21st century and beyond. As healthy and productive members of the global economy, this workforce will significantly expand global economic opportunities. The global middle class will expand exponentially and create tremendous market opportunities for the benefit of all [2].

Africa’s demographic boom also poses a daunting global challenge

If, on the other hand, Africa does not overcome its development challenge and create enough good quality jobs for its young populations, then the region’s youth bulge, which should be a global economic asset, will become a global liability. We could experience mass unemployment with millions of desperate young people. We could see widespread social and political instability the likes of which we have not seen before. Migration challenges will rise multiple fold, as will insecurity given the prevalence of state fragility in parts of Africa. Terrorist organizations such as Boko Haram, al-Shabab, al-Qaida in the Islamic Maghreb, among others, will exploit the social instability [3]. Unfortunately, given that terrorism is also global and more sophisticated, no country will be immune from the consequences of a significantly deteriorated security situation in Africa.

This analysis of Africa’s demographic trends as both a global challenge as well as a global opportunity reminds me of the words of wisdom of the first World Bank President, Eugene Meyer, during the First Annual Meetings of the institution in 1946 when he said, “Prosperity, like peace, must therefore be viewed as indivisible. And even from the narrowest considerations of self-interest, each of us must be concerned with the economic development of the world as a whole. For we shall prosper individually only as we prosper collectively.”

What we do or do not do in next years will determine which scenario plays out

Although the scenarios I have laid out assess the situation by the turn of the century, which may look very far away, I believe that we are currently at a crossroads. The actions we take or do not take over the next few years will determine which of the two scenarios materializes, and the problems or opportunities associated with each of the two scenarios will begin to play out long before we reach the end of the century.

Africa’s economic story is not one of weak growth, but growth that has not been good enough.   

Africa will have to chart its own path toward economic development.

My reading of Africa’s economic story is that it is not an issue of weak growth, but one of growth that is not generating enough good quality jobs. Several economies have been growing at robust rates since the early 2000s, supported by stronger governance, improvements in economic management, and favorable global economic conditions. Based on the most recent projections, by 2023, about one-third of the economies in Africa will have an average growth rate of 5 percent or more since 2000 [4]. That is almost one-quarter of a century of solid economic growth. However, the growth has not been good enough to absorb the growing labor force. By some estimates, Africa need to create at least 10-12 million new formal sector jobs just to employ the young people entering in the labor market every year. Yet, the job creation capacity of the African economies is only half of what it should be. Moreover, the quality of jobs created is low, leaving about one-third of the workers in poverty. For these reasons, based on some work by one of my colleagues to track global poverty in real time, we estimate that by 2030, one‑quarter of Africa’s population will still be living in extreme poverty, and Africa will be home to 90 percent of the world’s poor unless the pace of poverty reduction picks up considerably. This is far from the target of eradicating poverty in the United Nation’s Sustainable Development Goals [5].

Even so, I remain optimistic that Africa’s youth employment challenge can be addressed because Africa is not facing a challenge today, which, historically, has not been faced and successfully addressed by other countries. However, some contextual differences mean that Africa will have to chart its own path toward economic development.

Historical economic development experiences: similarities and differences with Africa

Historically, countries have addressed mass employment challenges based on the development of labor-intensive manufacturing industries. Because productivity or output per worker is higher in these industries than in agriculture, the movement of labor from agriculture to manufacturing boosted overall productivity growth and transformed the economy, a process known as structural economic transformation.

In countries’ quest to develop labor-intensive industries, wage competitiveness has been one of the most important catalysts for success. Since the Industrial Revolution in the West, Japan, several East Asian countries, and more recently China have all undergone large-scale industrialization partly because they had ample labor and competitive wages, similar to Africa’s current situation. However, this model of economic development has become very difficult to replicate. Globally, the share of manufacturing in overall economic activity has declined over time. Moreover and, importantly for Africa, the labor intensity and job creation capacity of manufacturing has declined. For example, whereas manufacturing could absorb up to 30 percent of labor during the time of early industrializers like Great Britain, nowadays, it can only absorb about 15 percent of the workforce. In Africa, the share of manufacturing in economic activity has peaked at a low level of 10 percent, and the share of workers employed in manufacturing has peaked below that level.

While the causes of this phenomenon, known as premature deindustrialization, continues to be studied, leading hypotheses point to the role of technological innovations in making manufacturing more capital and less labor intensive [6]. Additional factors include globalization and competition. The lack of industrial development in Africa has caused labor to move from agriculture into low‑productivity services, bypassing the industrial sector. These observations have led many economic development experts to become skeptical about the prospects for structural transformation in Africa, but not me.

This reminds me of a story about the late famous baseball player Lawrence Peter Berra, better known as Yogi Berra. It took place one spring, when he was managing the New York Yankees. During a training game, a group of fans ran onto the field, naked, wearing only sneakers and masks over their heads. Afterwards, when Yogi told his old teammates and friends about the incident, they wanted to hear more, and asked him whether those who interrupted the game were men or women. Yogi replied: “I don’t know, I told you they were wearing masks.” Yogi’s example illustrates perhaps one of the main issues in economics: the tendency to look for answers only in familiar places at the risk of missing obvious clues.

Industries without smokestacks: Africa’s new path to structural transformation?

To avoid the Yogi Berra syndrome, new research by the Africa Growth Initiative at Brookings and UNU-WIDER has looked in unfamiliar places and discovered evidence to suggest that Africa might be undergoing a more profound structural economic transformation than we think. It is occurring, not through the traditional industries, where we have been looking, but in tradable services and agro-industries that resemble traditional industries. These industries include horticulture, agri-business, tourism, and information and communication technology (ICT)-based services. For example, services exports from Africa grew more than six times faster than merchandise exports between 1998 and 2015. In Kenya, Rwanda, Senegal, and South Africa, the ICT sector is flourishing. In Rwanda, tourism is now the single largest export activity, accounting for about 30 percent of total exports. Ethiopia, Ghana, Kenya, and Senegal are all integrated into global horticultural value chains, and Ethiopia has become a leading player in global flower exports [7].

As these ‘industries without smokestacks’ have grown, they have generated new patterns of structural change. Indeed, if properly stewarded, they could play the same role in Africa’s development as manufacturing did in other regions, most recently, in East Asia. In addition to being tradable, these industries have higher productivity than agriculture; they benefit from technological change, economies of scale, and agglomeration; and, very importantly, they can absorb large numbers of moderately skilled workers. They also have the additional advantage of being environmentally sustainable and less exposed to automation, which, notwithstanding its many benefits, presents challenges for countries where the overriding priority is to generate large-scale formal‑sector jobs.

While economic development experts have been increasingly confident that Africa’s development model will be different, they have been less certain about what shape it will take. The industries-without-smokestacks model offers one possible answer. From a policy perspective, African leaders and Africa’s development partners should explore ways to support the growth of these industries through targeted reforms, and by incorporating them into national industrialization strategies and broader development agendas. From a private sector development perspective, this research suggests that interventions aimed at boosting job creation and economic transformation in Africa should prioritize these industries [8].

To be sure, I do not view industries without smokestacks as a substitute for the development of traditional ones where such opportunities exist. The development of industries without smokestacks should occur alongside efforts to develop those with smokestacks, thus offering a multifaceted approach to accelerate Africa’s structural transformation. At Brookings, we will continue to research and push the knowledge frontier on the potential of industries without smokestacks, including assessments of their linkages to other sectors of the economy, their job creation potential, and the labor skills required to fully develop these industries.

Conclusion

Let me conclude with some final thoughts. As intimidating as the challenge of Africa’s youth unemployment might appear, I am optimistic that we will end up on the better of the two possible paths I laid out at the beginning of my remarks. My optimism is largely based on the energy, creativity, and entrepreneurial spirit of Africa’s young people. Through sound leadership on the continent, strengthened governance, well-designed development agendas, and private sector development initiatives, the tremendous potential of young people will be unleashed to enable this outcome. As you work with your partners across Africa to help address these challenges, let me offer the following suggestions:

To the young people, my advice would be, if you are not invited to the decision-making table, bring your own chair, and if there are no more chairs, make your own.

First, develop an understanding of the local environment and integrate, whenever possible, social and cultural dimensions into your interventions. Let me share another story with you. A well‑known development agency once had a viable project to build a water well in a village in rural Africa to provide easy access to clean water. It would have saved the women a lot of valuable time, as they had to travel a few miles each way to collect water from the closest river. The project made sense from every aspect, except that when it was completed, the women continued to travel to the river despite the abundance of clean water in the well, using the well only on a few occasions. As it turned out, the trip to the river was not just about collecting water. For these women, it was also about escaping from their busy and demanding daily routines, and having time to themselves and with each other to catchup, share gossip and build camaraderie. Had the development agency consulted with these women on the location of the well and integrated this social and cultural dimension into the project, it could have resulted in an even better outcome.

Second, avoid the Yogi Berra syndrome. In your interventions, do not only look for solutions in familiar places. The best and most effective solutions can come from interventions you had not initially considered, and the best ideas could come from people or organizations you did not suspect. Broadening your consultations ahead of interventions could be very valuable. Also, lean heavily on rigorous, data-driven, and evidence-based policy research, whenever possible, to inform your interventions and track their impact.

Third, unfortunately, it is unlikely that there will be a silver bullet to the issue of youth unemployment. Interventions will need to be multifaceted and aim at all three categories of the labor market: demand, supply, and market functioning. On the supply side, interventions should ensure that young people have the skills suited for the labor market. Skills  development begins with basic education and cognitive abilities, which lays the foundation for the ability to upgrade the skills and for other forms of trainings. In the process, do not overlook the importance of soft skills such as critical thinking, collaboration, communication, which are just as important for success on the job or for entrepreneurship. On the demand side, prioritize interventions in labor‑intensive industries. Industries without smokestacks offer a viable path not yet explored, although traditional industries should not be ignored. Emphasize entrepreneurship and private sector development, which represent the most direct routes for young people and women to create their own jobs, control their own destinies, and lift themselves out of poverty. On the functioning of the labor market, interventions to enhance the efficiency of job search and matching are also important. Seek also, whenever possible, coordination and collaboration with other organizations. It could be the best approaches for achieving maximum impact with limited resources.

Fourth, leverage technology in your interventions whenever possible. The challenges that we are facing are nonlinear, and addressing them require the nonlinear solutions that technology offers. As such, interventions to develop ICT infrastructures, to broaden connectivity across Africa so that no one is left offline, and to provide access to computers or smart phones, will provide the necessary foundation to deliver solutions efficiently and at scale.

Fifth, to the African leaders, addressing youth unemployment and other issues related to young people involves empowering them by increasing their representation in decision-making processes. They are not just Africa’s future; they are also Africa’s present. To the young people, my advice would be, if you are not invited to the decision-making table, bring your own chair, and if there are no more chairs, make your own or stand by the table to make your voice count. If policymakers continue to ignore your voice, make sure that when the time comes for the next election, they are no longer in office to ignore you. You have the numbers. Make them count.

Finally, let us all remember that the world does not have problems, only challenges. It is only when we stop working on them that they become problems.

The world does not have problems, only challenges. It is only when we stop working on them that they become problems.

By Brahima Sangafowa Coulibaly

Senior Fellow - Global Economy and Development  Director - Africa Growth Initiative

The Brookings Institution.

References

Africa Growth Initiative. 2018. “Foresight Africa: Top priorities for the continent in 2018”. Brookings Institution. Washington, DC. https://www.brookings.edu/multi-chapter-report/foresight-africa-top-priorities-for-the-continent-in-2018/

Coulibaly, Brahima. 16 June 2017. “Africa’s Race Against the Machines”. Project Syndicate. www.project-syndicate.org/commentary/automation-africa-industrialization-by-brahima-coulibaly-2017-06?barrier=accesspaylog

Coulibaly, Brahima. 3 May 2018. “Africa’s Alternative Path to Development.” Project Syndicate. www.project-syndicate.org/commentary/africa-industries-without-smokestacks-by-brahima-coulibaly-2018-05

Page, John. 2018. “Rethinking Africa’s Structural Transformation.” In Foresight Africa : Top priorities for the continent in 2018. Brookings Institution. Washington, DC. www.brookings.edu/research/rethinking-africas-structural-transformation/

Rodrik, Dani, 2014, “The Past, Present, and Future of Economic Growth,” in Franklin Allen and others, Towards a Better Global Economy: Policy Implications for Citizens Worldwide in the 21st Century, Oxford University Press, Oxford and New York.

[1] https://www.cnn.com/2018/01/12/africa/rural-nigeria-lagos-mit-startup/index.html

[2] For example, the Better Business Better World estimates that achieving the Sustainable Development Goals will generate at least $12 trillion in new consumer and business spending by 2030. Available at http://report.businesscommission.org/uploads/BetterBiz-BetterWorld.pdf

[3] The African continent suffered at least 1,426 incidents of terrorism-related violence between 1 January 2016 and 30 September 2016, according to data collected by the Centre on Religion and Geopolitics’ Global Extremism Monitor.

[4] International Monetary Fund. April 2018. “World Economic Outlook Database”. Available at https://www.imf.org/external/pubs/ft/weo/2018/01/weodata/index.aspx

[5] World Poverty Clock. June 2018. World Data Lab. Available at: http://worldpoverty.io/.

[6] Rodrik, Dani, 2014, “The Past, Present, and Future of Economic Growth,” in Franklin Allen and others, Towards a Better Global Economy: Policy Implications for Citizens Worldwide in the 21st Century, Oxford University Press, Oxford and New York.

[7] Brookings Africa Growth Initiative Foresight Africa: Top priorities for the continent in 2018.

[8] Coulibaly, Brahima. 3 May 2018. “Africa’s Alternative Path to Development.” Project Syndicate. www.project-syndicate.org/commentary/africa-industries-without-smokestacks-by-brahima-coulibaly-2018-05

Courtesy: Brookings


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