6.8 percent: that was July’s seasonally adjusted unemployment rate for US workers ages 18–44. For those ages 18–24, the rate was 9.5 percent. That’s a high rate for young people. But if you were 20 years old and lived in Africa, you might be thrilled with an unemployment rate like that.
Today, 60% of all those unemployed in Africa are youth. In South Africa, more than 55% of young people are unemployed. Those are staggering figures. And many who are working are underemployed: with a job in the informal sector, working only a few hours, or helping on family farms or in family businesses. They scrape by as “necessitous” entrepreneurs doing what they can to survive, often juggling multiple informal jobs.
Given that Africa has the world’s youngest population, the lack of steady, formal-sector jobs is an enormous political and economic risk factor. Unemployed youth are more likely to be criminals, may be lured into militant groups, and contribute to political unrest. With few other opportunities, the cost of engaging in harmful behaviors is lower than it otherwise would be. Economic vulnerability among the young contributes in important ways to overall social instability that frustrates economic growth.
This is not a new problem — African countries have had a tough time creating formal sector jobs for youth for decades.
Bad policies contribute to poverty in Africa
So what needs to change to fix Africa’s jobs problem? The problem of too few formal sector jobs for those who want to work is a problem of poor policies. In too many African countries, hiring and firing workers is too expensive. Governments create legal and regulatory barriers (or fail to address discriminatory social norms) that make it more difficult for employers to hire women. They restrict access to certain professions or limit the number of hours women may work. They also create barriers to firing poorly performing workers, which makes it riskier for businesses to take a chance on people with limited work experience. Youth and young women particularly tend to lose out.
As the most recent Doing Business report notes, “Low and lower-middle-income economies tend to have more rigid employment protection legislation compared to more developed countries.” These “rigidities” include things like limits on fixed-term (short-term or maybe part-time) work contracts — less than 60% of sub-Saharan countries allow for fixed-term contracts (Europe is even worse!). The legal requirement to give a worker severance pay when a job is ended may help in some cases but can have unintended consequences: it adds to the costs of hiring people, limiting the number of formal jobs created and the length of those jobs.
The region continues to rank abysmally in terms of starting a business. For example, in Sierra Leone, an employer is required to pay 132 weeks of severance for a worker with 10 years of tenure. Ghana and Zambia both require more than 86 weeks, Mozambique requires 65 weeks, and Equatorial Guinea more than 64 weeks. This means that 5 of the top 10 countries with the highest severance payment requirements are in sub-Saharan Africa (no developed countries are in the top 10).
Fixing labor laws to encourage more participation from women and young people would be one important way to promote job creation. It’s also critical to improve the overall business environment and to support conditions that encourage, not discourage, business creation and enable entrepreneurs to flourish.
Here, there’s a huge scope for improvement in sub-Saharan Africa. The region continues to rank abysmally in terms of starting a business, enforcing a contract, registering property, trading across borders, getting credit, protecting minority investors, and getting access to electricity. While some countries are taking steps to make it easier to do business overall, African countries continue to make it too cumbersome and too expensive to start, run, and then, if needed, terminate a business. The result is a dearth of jobs for all Africans but especially for youth.
Is There Hope for Improvement?
It’s this kind of change from within that holds the most promise for Africa’s millions of unemployed youth. Yes, so long as barriers to trade within Africa fall. In many countries, service industries are expanding. Economies still rely heavily on commodity production (oil, gas, gold, timber, etc.), but this is changing. More diversified economies are helping to meet domestic and international consumer needs for goods like processed agricultural products, cosmetics, textiles, and clothing. And African entrepreneurs, like entrepreneurs everywhere, are on the lookout for new and profitable opportunities.
Interested in seeing what some of Africa’s leading entrepreneurs are up to? They’re working in telecom, fashion, marketing, and branding for leading multinationals and the food industry, among other things. As they succeed, one hope is that they’ll push for more changes to African economies, creating a more vibrant, open, and competitive private sector. It’s this kind of change from within that holds the most promise for Africa’s millions of unemployed youth.
Reprint from Learn Liberty