Labor productivity and employment gaps in Sub-Saharan Africa

Summary

After carefully measuring labor productivity across sectors using newly available, nationally representative household survey data, this study finds that agriculture in Sub-Saharan Africa is not a bastion of low productivity, but, rather, a large reservoir for underemployment.

Situation

Structural change is integral to economic development. In the development context, it refers both to the reallocation of labor from one low-productivity sector to another, higher-productivity sector, and to the economic growth resulting from this shift. The larger the productivity gap between agriculture and other sectors, the larger the opportunity to achieve productivity growth as labor shifts across sectors. The premise of higher returns to labor outside of agriculture is quite central to structural change. Individuals and firm owners making labor allocation decisions in developing countries do so based on the micro incentives that they face. Are these productivity differentials really as high as national accounts data suggest?

Response

The study uses a new micro-level dataset to measure key structural change parameters – sector participation, time use, and labor productivity – from a micro perspective. This paper draws on the Integrated Surveys on Agriculture from the Living Standards Measurement Study group at the World Bank (LSMS-ISA datasets), which explicitly collect information about respondents' time use across sectors. Particular attention is paid to farm labor, which is often neglected in large scale, multi-topic surveys because of the challenges involved in collecting detailed agricultural data.

Impact

After carefully examining labor inputs, I find that cross-sector productivity gaps observed in national accounts data reflect sectoral differences in employment levels rather than differences in returns per hour worked. Annualized worker productivity measures based on micro data are similar to national accounts-based measures that are typically used to characterize structural change. However, because agricultural workers supply far fewer hours of labor per year than do workers in other sectors in all of the countries analyzed, productivity gaps shrink by half, on average, when expressed on a per-hour basis. Across household surveys, agricultural workers work fewer hours per year – 700 hours per agricultural worker compared to 1850 hours per non-agricultural worker. Underlying the productivity gaps that are prominently reflected in national accounts data are large employment gaps. These employment gaps call into question the productivity gains that laborers can achieve through structural transformation. They also cast doubt on the notion that agriculture is intrinsically less productive than other sectors. It is important to better understand the reasons for low labor supply by agricultural workers in order to identify opportunities to increase annual output per agricultural worker. This paper has been accepted for publication at Food Policy and is currently in press. I have presented the results, by invitation, at the United Nations Food and Agriculture Organization, where the findings influenced the global strategy for tracking progress towards the Sustainable Development Goals.

State Issue

Agricultural Profitability and Sustainability

Details

• Year: 2016
• Geographic Scope: Multi-County
• County: Clarke
• Program Areas:
  • Agriculture & Natural Resources