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Ethiopia Urban Labour Markets in Ethiopia

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Ethiopia Urban Labour Markets in Ethiopia Report No.38665-ETEthiopia Urban LabourMarketsinEthiopia I Volume Report No. 38665-ET Ethiopia Urban Labour Markets in Ethiopia Challenges and Prospects Public Disclosure AuthorizedPublic Disclosure Authorized (In Two Volumes) Volume I: Synthesis Report March 2007 Poverty Reduction and Economic Management Unit Africa Region) Public Disclosure AuthorizedPublic Disclosure Authorized Public Disclosure AuthorizedPublic Disclosure Authorized Document of the World Bank Public Disclosure AuthorizedPublic Disclosure Authorized CURRENCY AND EQUIVALENT UNITS (as ofNovember 2006) Currency Unit = Ethiopian Birr ETB) US$1 = Br8.7 FISCAL YEAR July 8 - July 7 WEIGHTS AND MEASURES Metric System ABBREVIATIONS AND ACRONYMS ADLI Agricultural Development Led Industrialization AEMFI Association of Ethiopian Micro Finance Institutions ALMPs Active Labour Market Policies ALMS Addis Labour Market Survey CEM Country Economic Memorandum CGE Computable General Equilibrium CLFS Child Labour Force Survey CSA Central Statistical Agency DG Director General EBDSN Ethiopian Business Development Services Network EEF Ethiopian Employers Federation FCSC Federal Civil Service Commission FeMSEDA Federal MSE Development Agency GDP Gross Domestic Product GOE Government of Ethiopia ICA Investment Climate Assessment IFPRI International Food Policy Research Institute ILO International Labour Organization IMF International Monetary Fund IVCAGs Integrated Value Chain Analysis Groups KILM Key Indicators of the Labour Market LFS Labour Force Survey LMTC Labour Market Technical Committee MAMS Marquette for MDG Simulations MDAs Ministries, Departments and Agencies MDGs Millennium Development Goals MFI Micro finance Institution .. - 11 - MOE Ministry of Education MOFED Ministry of Finance and Economic Development MOLSA Ministry of Labour and Social Affairs MTEF Medium-Term Expenditure Framework MTPRS Medium-Term Pay Reform Strategy MSEs Micro and Small Enterprises NGO Non-Governmental Organization OECD Organization for Economic Cooperation and Development PASDEP Plan for Accelerated Sustained Development to End Poverty PND Private SectoriNGOsAIonors PPA Participatory Poverty Assessment PRSP Poverty Reduction Strategy Paper ReMSEDA Regional MSE Development Agency SASE Selective Accelerated Salary Enhancement SOEs Statement of Expenses SMEs Small and Medium Enterprise SSA Sub-Saharan Africa TVET Technical and Vocational Education Training UBEUS Urban Employment and Unemployment Survey UN United Nations UNECA United Nations Economic Commission for Africa VAT Value-added Tax WED Wellbeing in Developing Countries Vice President : Hartwig Schafer Country Director : Ishac Diwan Sector Director : Sudhir Shetty Sector Manager : Kathie Krumm Task Leaders : Jeni Klugman and Caterina Ruggeri Laderchi ... - 111 - ACKNOWLEDGEMENTS We would like to thank our primary counterparts, the Ministry of Labour and Social Affairs (MOLSA), and in particular H.E. Woz. Zenebu Tadesse, State Minister, and At0 Tamiru Jeba, Head, Department of Planning and Programming. The Central Statistical Agency (CSA) provided essential support in accessing and understanding key data sources, and especially Woz. Samia Zekaria, Acting Director General, At0 Yasin Mossa, Acting Deputy D.G, Economic Statistics, At0 Yakob Mudesier, Acting Deputy Director General of Operation Methodology and Data Processing, At0 Mekonnen Tesfaye, Head, Social Statistics Department, and At0 Kassu Gebeyehu, Manpower, Wages and Salaries Statistics Analysis and Research Expert Team Leader, Social Statistics Department, CSA. The Ethiopian Labour Market Technical Committee (LMTC), chaired by MOLSA, served as focal point for collaboration. Through a series of consultations they contributed to the agenda and reviewed background papers. The LMTC includes members from MOLSA, Ministry of Finance and Economic Development (MOFED), Ministry of Education (MOE), Ministry of Trade and Industry, Central Statistical Authority (CSA), Ethiopian Federal Civil Service Commission (FCSC), Ethiopian Employers Federation (EEF) and Confederation of Ethiopian Trade Union (CETU) . This study also benefited from the close coordination with the LO, both in Geneva and in Addis. A joint two-day workshop was held in December 2005 to discuss the emerging results of the EO“Flexicurity Study” and this study. The team would like to thank in particular Sabina de Gobbi, George Okutho, Larry Kohler, Zafar Shaheed, Muhammed Muqtada, Marva Corley, and Ato Bedada Urgessa. Generous finding from the German Trust Fund program on “Job Creation, Core Labour Standards, and Poverty Reduction” is gratefully acknowledged, as is the support of Achim Johansen, Deputy Head of Division, German Federal Ministry for Economic Cooperation and Development (now at BDI) and Hein Winnubst, First Secretary, Development Cooperation at the Embassy in Ethiopia. Support is also acknowledged from the Swedish and the Danish Consultant Trust Funds. The team was composed of Jeni Klugman and Caterina Ruggeri Laderchi (task team leaders), Emily Kallaur, Eyerusalem Fasika, Taye Mengistae, and Simon Commander. Background papers were prepared in collaboration with the team by Abebe Shimeles, Alula Pankhurst, Arne Bigsten, Bo Rosendhal, Feleke Tadele, Hans Lofgren, Martha Getachew, Mohammed Mussa, Niels-Hugo Blunch, Peter Madsen, Philippa Bevan, and Rahimaisa Abdula. Angela Cipollone and Martin Cumpa provided excellent research assistance. Thomas Pave Sohnesen and Jacob Ladenburg also provided research support. Administrative support was ably provided by Dora Harris, Lucy Kang’arua, Marjorie Kingston, Monica Wachera Ndungu, and Senait Kassa Yih. The team benefited from the overall guidance of Ishac Diwan and Kathie Krumm. Useful suggestions and substantive inputs were received from a range of colleagues, and we would especially thank Louise Fox and the Afiica Labour Market Analysis Group, Arvil Van - iv - Adams, Amy Luinstra, Bill Maloney, Furio Rosati, Gary Thiesen, Gordon Betcheman, Irena Omelaniuk, Jean Fares, Jee-Peng Tan, Keith Hinchliffe, Jemal Mohammed Omer, Lorenzo Guarcello, Luc Christiaensen, Magdi Amin, Marito Garcia, Mesfin Girma Bezawagaw, Gizaw Molla, Bob Rijkers, Jennefer Sebstad, and Pieter Serneels. Finally, but not least, we are grateful to our peer reviewers, Pierella Paci and Tamar Manuelyan-Atinc, for valuable advice. -v- CONTENTS EXECUTIVE SUMMARY ............................................................................................... ix 1. INTRODUCTION ......................................................................................................... 1 Summary Outcomes .................................................................................................. 3 2 . SETTING THE STAGE - BASIC INDICATORS AND TRENDS ............................. 5 A Snapshot of Urban Labour Markets ...................................................................... 5 Recent Trends in Job Creation ................................................................................ 12 Some Stylized Facts ................................................................................................ 14 A Note on Data Sources and Comparability ........................................................... 18 3 . WHY SO LITTLE JOB CREATION? ........................................................................ 21 The Transition Process: Expectations Versus Reality............................................. 21 The Pace of Reallocation: Individual Worker Mobility .......................................... 23 The Impact ofPublic Sector Employment and Remuneration Policies ..................27 Constraints on Jobs Growth in the Private Sector ................................................... 32 The institutional framework for the labour market ................................................. 35 The impact of the business climate ......................................................................... 36 The Functioning ofthe Informal Sector .................................................................. 38 4 . UNEMPLOYMENT .................................................................................................... 45 Levels and Trends ................................................................................................... 45 Profile ofthe Unemployed ...................................................................................... 48 Youth Unemployment ............................................................................................. 50 Regional Perspectives ............................................................................................. 51 Determinants ofUnemployment ............................................................................. 51 Key Implications ..................................................................................................... 55 5. MIGRATION, URBAN LABOUR MARKETS AND POLICIES ............................. 57 A Snapshot of Internal Migration............................................................................. 57 The Impact of Migration on Growth and Poverty Reduction ................................. 64 Policy Challenges .................................................................................................... 67 6 . ADDRESSING THE POLICY CHALLENGES ......................................................... 70 The Urgency ofthe Labour Market Agenda ........................................................... 70 Enhancing the Private Sector Contribution to Employment ..................................
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