Dr. Shanta Devarajan, the chief economist of the Africa Region with the World Bank, recently sat down with emerging market investment consultant Wilmot Allen to discuss youth employment in Africa. Part I of the interview series will appear today; Part II will appear on Friday.
Youth employment is a major challenge for Africa because it is the youngest continent as measured by the proportion of youth compared to the total population. In 2010 nearly 70 percent of the population was under 30 years of age. According to the United Nations, slightly more than 20 percent of Africa’s population is comprised of youth (the UN defines youth as individuals between the ages of 15 and 24). Given this significant demographic how important is this issue in your mind and how are you seeing it addressed?
Youth employment is arguably the most important issue facing the continent today. The demographics represent a huge opportunity. First, the ratio of working age people to the old and very young (the inverse of the so-called dependency ratio) will rise over the next decades, creating opportunities for greater savings, investment and sustained economic growth. Second, Africa is one of the few places with a young population, so it has the potential to be the world’s manufacturing hub.
At the same time, if this large cohort of young people cannot find productive jobs, they will be frustrated (especially given high expectations in this globalized world) and this huge opportunity will be lost. Finding productive jobs is therefore the biggest challenge. Here, it’s important to note that most young people will work in the informal sector—either in smallholder farms or household enterprises. We need to improve the productivity of these jobs, while creating more jobs in the formal sector. Critical to both is improving the skills of the labor force—both basic skills such as literacy and numeracy, and soft skills to function better in enterprises. Equally important is the business environment, including infrastructure, access to finance and a conducive regulatory environment. Governments need to realize that “informal is normal”, and the informal sector is a source of growth and poverty reduction whose productivity can be enhanced.
In terms of the UN’s Millenium Development Goals for Africa, which aim to reduce poverty by 2015, there are already youth empowerment programs underway in places like the slums in Nairobi. In your opinion, what are the most effective ways in which youth empowerment can be integrated into MDG strategies aimed at reducing poverty? Are there models/programs which follow your guidelines, in addition to those that are already being implemented?
Youth empowerment in Africa can benefit the MDGs in two ways. First, as a way of helping young people enter the labor force. These programs teach soft skills, enable them to network, and give them mentors who help with apprentice programs and the like. Second, these programs are incubators of innovation. Young people come up with their own ideas about improving productivity. The Ushahidi platform for crowd-sourcing natural disaster relief is a case in point. Often these innovations can accelerate progress towards the MDGs faster than traditional approaches.
What does the future of work hold for young Africans in terms of talent mobility? What obstacles remain for talent mobility and how do we overcome them?
The main mobility will be that of low-skilled Africans to better paying jobs. We have a win-win opportunity here. Europe, Japan and the U.S. are aging. They need young people to perform low-skilled services for them as they get old. Africa has the largest concentration of low-skilled young people. Studies show that a low-skilled young African can quintuple his or her earnings by migrating to the OECD. To be sure, some countries are reluctant to admit more migrant workers for social and cultural reasons, but the economics is so compelling that I expect there will be more low-skilled migration in the future.
Shantayanan Devarajan is the Chief Economist of the World Bank’s Africa Region. Since joining the World Bank in 1991, he has been a Principal Economist and Research Manager for Public Economics in the Development Research Group, and the Chief Economist of the Human Development Network, and of the South Asia Region. He was the director of the World Development Report 2004, Making Services Work for Poor People. Before 1991, he was on the faculty of Harvard University’s John F. Kennedy School of Government. The author or co-author of over 100 publications, Mr. Devarajan’s research covers public economics, trade policy, natural resources and the environment, and general equilibrium modeling of developing countries. Born in Sri Lanka, Mr. Devarajan received his B.A. in mathematics from Princeton University and his Ph.D. in economics from the University of California, Berkeley.
Wilmot Allen is Founder of 1 World Enterprises, an investment consultancy for emerging and frontier markets.