The source and pattern of growth that reflects the creation of productive employment and improvement in incomes of workers is critical for the realisation of effective poverty reduction. Indeed, the poverty reduction effect of growth depends on the employment outcome of growth and wage and income effect of employment which in turn depends on the kind of economic activity the poor are engaged in. The employment outcome of growth for poverty reduction does not only imply the number of jobs that could be generated from growth but, also, more importantly, the type of jobs.
According to Okun , growth-employment elasticity varies between 0. Using cross country data, Islam demonstrates the link between poverty reduction and the employment intensity of growth, confirming earlier studies 4. The poverty reducing effect of employment also depends on a number of factors including promotion of wage employment, increase in real wage and increase in productivity in self-employment culminating in the reduction in vulnerable employment. Higher growth recorded in many developing countries has not effectively translated into significant reduction in poverty because of the high incidence of informal employment associated with low productivity and limited expansion of wage employment.
In sub-Saharan Africa, wage employment accounted for 25 percent of total employment in compared with 45 percent in East Asia, and 64 percent in Latin America and the Caribbean ILO, In Ghana, informal sector constitutes over 80 percent of total employment with less than 20 percent engaged in wage employment in spite of the average 5 percent growth of GDP experienced since In effect, growth-poverty nexus that emphasises employment intensity of growth measured by gross output elasticity of employment without looking out for the type of job has been questioned.
Thus, economic growth that fails to increase wage employment and promote the expansion of productive self-employment would not be associated with effective poverty reduction. The dismal growth trend that characterised the Ghanaian economy ended in with the introduction of economic reforms supported by the Bretton Woods institutions.
The country recovered strongly from low and negative growth in the late s and early s to record 8. This remarkably favourable growth has continued until now with little variance. The decade that followed witnessed a slower growth rate with an annual average growth of about 4. The economy picked up again to record a 5. The impressive post growth rate was largely driven by the industrial sector which recorded annual average growth of 9.
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This emanated from the remarkable growth performance of the manufacturing sub-sector which was largely attributed to improved capacity utilisation on account of the minimisation of foreign exchange constraints that resulted from the foreign exchange reforms. The liberalisation of the foreign exchange market created the opportunity for industrial enterprises to easily access foreign exchange for importation of needed raw materials, spare parts and equipment for industrial production. The worst performing sector has been agriculture with less than 3 percent growth rate during the period.
The sector however picked up gradually in the second half of the s but could not match the strong growth performance of services and industry. Based on constant prices; original figures for — adjusted to There has been a shift from agricultural dominance to services with little change in the share of industry in GDP. Agriculture has witnessed a consistent decline in its share from about 48 percent in the second half of s to Industry contribution to GDP has seen marginal improvement from Manufacturing, which has a relatively high labour absorption rate, has however seen its contribution to GDP drop from 11 percent to only 8 percent reflecting its dismal growth performance over the past two decades.
Lack of consistent supply of power, high cost of credit, and competition from external sources are some of the challenges confronting manufacturing. The mining and construction subsectors have been the main drivers of industrial growth with the gradual collapse of hitherto dominant manufacturing subsector. With the discovery and commercial production of oil, the composition of national output and export earnings is expected to change. This undoubtedly has adverse implications for employment, poverty and inequality if steps are not taken to prevent potential neglect of the productive sectors of agriculture and manufacturing.
The dominance of the services sector has largely been driven by wholesale, retail, restaurants and hotels which are considered to be low-order sub-sectors. As shown in Figure 2 , the share of these activities in GDP has consistently increased from 6. This is consistent with faster growth of the trade sub-sector relative to other services. The trade sub-sector recorded an average annual growth rate of 7. The dominance of the services sector has become much more pronounced with the rebasing of national accounts from a base year to The rebasing exercise raised the share of servicesin GDP to The share of trade and related activities also appreciated on the new base to about The share of remaining sub-sectors also increased in the new series.
The increasing importance of trade and related activities in the overall national economy could be linked to the external trade liberalisation that accompanied the economic reforms introduced in and the increasing incidence of globalisation. Employment is the outcome of interaction between demand and supply of labour.
Agricultural policy monitoring and evaluation
The supply of labour in aggregate terms is generally determined by the growth and skills of the labour force. On the one hand, labour demand is mainly influenced by the growth of the economy and on the other, source of growth. The favourable growth performance in response to economic reforms appears to have failed to translate into adequate and good quality employment growth in Ghana and this has implications for unemployment and poverty.
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This is largely explained by the slow growth of manufacturing and agriculture which are noted as the high labour absorption sectors. Indeed, mining, finance and telecommunication considered to be the driving force behind the favourable economic growth of recent times, are estimated to have low labour absorption capacity. Generally, over the past 25 years employment growth has not kept pace with economic growth and this is reflected in a consistent decline in employment elasticity of growth from 0.
Indeed, a 4. Consequently, unemployment rates rose from 2.
The s, however, saw an improvement in the labour absorption rate, with strong annual employment growth of 3. This was reflected in a marginal surge in the employment-to-population ratio from The improved job creation effort could not be sustained beyond the s as the employment-to-population ratio dropped again by 7 percentage points between and In effect, annual GDP growth of 5percent was able to create annual employment growth of only 2.
Agriculture remains the main source of employment for the growing workforce in Ghana even though its share in total employment has shrunk by 8 percentage points between and During the same period the contribution of industry and services increased by 2. Between and , agriculture lost 7 percentage points of its employment share in favour of industry and services which gained 5. The declining share of agriculture in employment in favour of industry and services has not been as drastic as the drop in the contribution of agriculture to GDP. Indeed, agriculture remains the main source of livelihood for Ghanaian workers, accounting for about 55 percent of total employment in compared with 31 percent in services and 14 percent in industry.
Manufacturing remains the key source of industrial sector employment, accounting for over 80 percent of total industrial sector employment or 11percent of total employment despite its poor performance in terms of national output. Within the services sector, trade and related activities accounted for over half of employment or 18 percent of total employment in As reported in Table 3 , the contribution of trade and related activities to total employment increased from Generally, trade employment is dominated by own account work or self-employment.
Wage employment constituted about 13 percent while 5 percent comprised of employers or self-employed with employees.
Generally, overall wage employment has remained consistently low since , accounting for less than one fifth of total employment. The proportion of wage employment declined marginally by 0. Self-employment is considered to be a vulnerable type of employment and constitutes the major employment type. In , about 60 percent of Ghanaian adult workers were self-employed with over half of them engaged in agriculture see Table 3.
Only 8 percent of self-employed people have employees with over 90 percent engaged as own account workers with very low earnings. In effect, the impressive growth performance in Ghana has not translated into the generation of gainful and decent employment which comes from the formal sector. The reduction in public sector employment through retrenchment and privatisation coupled with slow growth of the private sector could be blamed for the lower proportion of wage employment. On the basis of the recognition that decent and productive work for all is central to addressing poverty and hunger, a new target and four new indicators were added to the Millennium Development Goals MDGs in The four indicators used in monitoring the employment target are; growth rate of labour productivity;, employment-to-population ratio, working poverty rate; and vulnerable employment rate.
The other employment indicator relates to gender empowerment and is measured by the share of women in wage employment in the non-agricultural sector. It is measured by the annual change in GDP per person employed of a country.
Indeed, productivity increases often influence the social and economic environment positively, leading to poverty reduction through investment, sectoral shifts, trade, technological progress and increases in social protection ILO, On the other hand, a low ratio means that a large proportion of the population is not involved directly in market-related activities, because they are either unemployed or out of the labour force altogether. The third indicator is the working poverty rate, defined as the proportion of working poor in total employment.
It provides a measure of quality of employment and poverty reduction implications of job creation. It is measured by the number of employed persons living in a household with incomes below the poverty line as a percentage of total employment. The rate is an indication of the lack of decent work i.
The fourth indicator is the vulnerable employment rate and it measures the proportion of employed people working in precarious circumstances as indicated by the employment status. It is computed as the proportion of own-account and contributing family workers in total employment and gives an indication of quality of employment in the country.
The increased growth of labour productivity between and has not translated into the creation of decent and productive employment as measured by a reduction in the number of vulnerable jobs and working poor. As reported in Table 4 , annual growth of labour productivity fell from 1. Consequently, the vulnerable employment rate rose marginally by 0. At the same time, the working poverty rate surprisingly declined by 9 percentage points to 35 percent with the extreme working poverty rate dropping by about 6 percentage points.
Employment-to-population ratio also went up by about 6 percentage points while vulnerable employment rate dropped from about 83 percent to 77 percent, indicating some improvement in the creation of productive and decent employment. Nonetheless, the vulnerable employment rate remains high and this can be explained by the limited availability of formal sector employment and large number of uneducated workers.
Baah-Boateng and Sparreboom estimate that about a third of employed adults have not had any formal education. The proportion of employed adults in households living below the upper poverty line further declined by 10 percentage points to This is against the backdrop of the improved educational attainment of women over the years Baah-Boateng, Ghana is one of the few countries in sub-Saharan Africa that has been able to almost halve poverty within a period of 15 years.
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The country witnessed a remarkable reduction in national poverty incidence from At the same time, the incidence of extreme poverty consistently dropped by about 10 percentage points from Poverty in Ghana is fundamentally a rural phenomenon with about Within rural areas poverty is said to be most endemic in the rural savannah and lowest in rural coastal areas. Poverty in urban areas is observed to be relatively low and was estimated at The urban coastal area, excluding Accra, has the lowest poverty incidence while urban savannah has the highest poverty incidence in urban areas.
Poverty incidence in the urban coastal and urban savannah areas surged in the s before dropping afterwards. One important dimension of the incidence of poverty is the main economic activity in which the household is engaged. Poverty incidence in Ghana used to be highest among food crop and export farmers confirming the general assertion that poverty is a rural phenomenon.
Poverty incidence is also estimated to be high among non-farm self-employed. Unsurprisingly, the lowest poverty incidence is reported among formal sector employees where higher income opportunities exist with low-risk vulnerability in employment. The incidence of poverty has consistently declined in all economic activities since with workers in the formal sector and export farmers experiencing the most drastic decline. This culminated in a consistent decline in the contribution of the formal sector and export farming to national poverty between and The decline in poverty incidence is however moderate among food crop farmers and this accounted for a surge of the contribution of this economic activity to national poverty by over 11 percentage points over the 15 years.
Although, the minimum wage determined by the National Tripartite Committee NTC had no legal backing until the passage of the Labour Act in , Act , formal sector workers have nonetheless benefited from the implicit government policy of keeping the minimum wage above the poverty threshold. In contrast, workers in the informal economy, particularly food crop farmers and non-farm self-employed, hardly benefit from minimum wage provisions.
The substantial decline in poverty incidence among export farmers is also linked to the technical support and other export promotion packages the government continues to provide. Baah-Boateng, Over the years, farmers in the cocoa sector have benefited from guaranteed prices and other forms of support such as cocoa mass spraying and these have created stable and increased income among farmers in this sector.
On the other hand, no such comparable schemes are available for food crop farmers, making them more likely to continue with low productivity and low incomes.
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Poverty among workers in the trade sector is estimated to be relatively low and declining over a period of 15 years. This is due to more jobs created in the sector and its contribution to economic growth. As a result, the contribution of the sector to national poverty also dropped from 9.