Jobs for Africa’s expanding youth cohort: a stocktaking of employment prospects and policy interventions

2.1 Demographic trends

SSA is the youngest region in the world, with a large youth bulge that will continue into the future. The median age is 18 now—7 years younger than South Asia’s, the second youngest region—and will climb only to 24 by 2050.³ The region’s youth cohort is large and growing quickly. Between 2000 and 2015, the 15–24 age group grew by 2.6% each year on average. According to UN estimates, there were 190 million in this age group as of 2015, and this number is projected to increase at an annual rate of 2.5–2.7%, reaching 249 million in 2025, and 311 million in 2035. Over this period, SSA’s youth cohort will grow by about six million annually.

This youthful profile offers the potential for a demographic dividend, such as was widely recognized as an important contributing factor to East Asia’s rapid economic growth over the last third of the twentieth century (e.g., Bloom and Williamson 1998). Certainly, there are many factors that determine whether a youth bulge can accelerate economic development, including whether the conditions for growth and labor demand are present in the industrial and service sectors. But a necessary condition for securing the dividend is to reduce the dependency ratio. This requires significant declines in the fertility rate. It is unlikely, though, that this will occur in SSA. The fertility rate, now around five births per woman, is only projected to decline to the 3.5–4 range by the 2030s. As a result, the dependency ratio will decrease slowly, from the current 85 to 78 in 2025 and 71 in 2035.⁴ In contrast, East Asia’s dependency ratio fell from 76 in 1965 to 48 in 2000, driven by a dramatic fertility rate decline from over 5 to 1.5 in this period (Fig. 1).

2.2 Youth employment trends

Most empirical analysis of employment in sub-Saharan Africa relies on data from household surveys, such as labor force surveys and living standards measurement surveys. However, regularly repeated labor market surveys are carried out only in Tanzania, Mauritius, and South Africa (Szirmai et al. 2013). In other countries, these surveys are irregular and in some cases, they are not national in coverage. Many small surveys carried out have yielded useful analysis, but their representativeness is not always clear (Szirmai et al. 2013). In recent years, analysis of SSA labor markets has benefited greatly from efforts by international organizations to harmonize existing household surveys (e.g., World Bank), use non-traditional survey sources (e.g., African Economic Outlook, using the Gallup World Polls),⁵ or generate new surveys (e.g., the ILO-MasterCard Foundation School-to-Work Transition Surveys).

However, it is well known that these conventional indicators do not capture labor market outcomes very well in low-income settings, where the wage sector is small, agriculture is the dominant livelihood, and there is little formal social protection. Baah-Boateng (2015) shows that sub-Saharan Africa’s low unemployment rates, as defined using ILO standards, misleadingly understate true joblessness because they do not include discouraged workers, those who work in the informal sector as a substitute for unemployment, and workers who are underemployed. According to the World Bank, nearly 95% of the region’s labor force is in countries classified as low-income, lower-middle income, or resource-rich (Filmer and Fox, 2014). In these country groupings, between one half and two thirds of workers are in agriculture with another 20% or so in household enterprises.⁶ Only about 10% is in wage employment. It is only in the region’s upper middle-income countries, essentially in southern Africa, that a significant wage sector exists, accounting for about 60% of the labor force. However, only slightly more than 5% of SSA’s total labor force is in these countries (Filmer and Fox, 2014).

The employment challenges facing young people vary in these different types of labor markets. Youth unemployment is extremely high in upper middle-income countries, such as South Africa and Botswana.⁷ In the lower-income countries, open unemployment is relatively rare and underemployment and job quality are the main issues. However, there are no widely accepted and available measures of these latter concepts.⁸ We do know that workers in non-wage employment are more likely to be poor and food insecure,⁹ so some researchers equate these employment forms with “vulnerable” employment. In low-income SSA countries, almost all youth employment is vulnerable by this definition (Hamaguchi et al. 2013). Unemployment may be low but earnings are poor and precarious, and benefits and access to any meaningful formal social protection are essentially non-existent.

2.3 Will the employment structure change?

An important feature of labor markets in sub-Saharan Africa, and one which constrains opportunities for youth, is that the structure of employment has not changed much over recent decades. In other regions, most notably East Asia, structural change—from agriculture to industry and services—has been an important driver of economic development and better jobs. Structural change has been much less important in SSA, with the result that there has been not been significant upgrading of the employment structure (Fox et al. 2013).¹⁰ Growth in many SSA countries has been driven by commodities and other forces (such as aid) that not only are not labor-intensive, but also do not lead to structural change.¹¹ Young people continue to work more in agriculture than in the other sectors (African Development Bank (AfDB) et al., 2012) and, since agricultural productivity is low (Filmer and Fox, 2014), the prospects for good livelihoods in the sector are poor.

An important question is whether the region is now poised to undergo the structural change that will shift employment opportunities increasingly towards better jobs in industry and services. The McKinsey Global Institute (2012) contends that Africa, with its young population and improving education, will imitate the job-creation successes that some developing countries in other regions, especially Asia, have enjoyed. MGI concludes that somewhere between 54 and 72 million stable wage jobs can be created by 2020.¹² However, projections by Fox et al. (2013) are less optimistic. According to their analysis, only 20% of the new entrants to the labor force to 2020 will find wage employment; this amounts to about 30 million jobs.¹³

The upper boundary of McKinsey’s job creation estimates assumes that Africa could potentially create wage-sector jobs at the pace that East Asian economies did during their period of rapid structural transformation. That seems overly optimistic, given the confluence of factors (demographic, infrastructure, education, policy, etc.) that underpinned the East Asian manufacturing miracle and given the fact that light manufacturing is becoming less labor-intensive. Even when the forecasts by Fox et al. (2013) are adjusted to reflect the possibility that wage employment will increase more rapidly as happened in Asia, they still project that wage jobs will not be near the levels projected by McKinsey. Over the next 10 years, they estimate that only about one quarter of the region’s young people will find a wage job and “most young people will end up working where their parents do – in family farms and household enterprises” (Filmer and Fox, 2014: 5).

2.4 Obstacles to better jobs for youth

Many of the most important obstacles facing young people in sub-Saharan Africa are not youth-specific and constrain job creation more generally. Infrastructure, governance and corruption, and access to finance are issues almost everywhere (McKinsey Global Institute 2012; African Development Bank (AfDB) et al., 2012). Job creation obstacles can vary depending on the country’s level of development and other characteristics (World Bank 2012). For example, in lower-income, agrarian economies, where most people continue to be engaged in farming, low productivity in agriculture is the major constraint to good livelihoods. In middle-income countries, where urban economies are developing, the investment climate and the regulatory environment for labor-intensive business and productive microenterprises, access to finance, and skills are all constraints.

Better youth employment outcomes will require improvements on the demand side—i.e., in the overall economic environment, whether in agriculture, in microenterprises, or in the wage sector. However, though these are general issues, some of these demand constraints can disproportionately affect young people. For example, while credit may be a general problem in the region, access is particularly restricted for young entrepreneurs ((Elder and Koné 2014). As well, while SSA tends to have more rigid job security rules than other regions (African Development Bank (AfDB) et al., 2012), these typically have the effect of favoring prime-age workers over youth (Betcherman 2015).¹⁴

However, issues specific to young people especially come into play on the labor supply side through concerns about the human capital of youth.¹⁵ Employers identify lack of skills and experience as the main reasons for not hiring young people (African Development Bank (AfDB) et al., 2012). As an illustration, Chinese firms investing in the region find a lack of skills to be a serious constraint and have started to invest significantly in training programs (Bashir 2016). This unmet demand for skills is consistent with the high returns to education in SSA; according to estimates by Montenegro and Patrinos (2014), they are higher than in any other region. Despite improvements in educational attainment, most young people in SSA still do not have much schooling. About 60% of 15–24-year-olds have not gone beyond primary school and only about 10% have completed secondary school (Filmer and Fox, 2014).

There are also claims of mismatches between the needs of the labor market and skills offered by young people. Weaknesses include basic, non-cognitive, and vocational skills (African Development Bank (AfDB) et al., 2012). So, although education indicators are improving in the region, many young people remain ill-equipped for the labor market. The relevance of skills as an obstacle to youth employment increases as countries move up the development ladder. It is more important for wage employment but can also constrain productivity and living standards in agriculture and household enterprises.

3.1 Employment creation

Programs in this category include public works and wage subsidies. Public works programs directly create employment in the short run, while wage subsidies provide incentives to employers to hire targeted workers. However, in sub-Saharan Africa as elsewhere, public works programs are most often designed to provide a safety net; improving employability is typically a secondary objective. So targeting is usually oriented towards the poor. Wage subsidy programs, on the other hand, often do have specific demographic targets, such as youth.

3.2 Skills development

Skills development is the most common youth employment intervention in sub-Saharan Africa. These programs, offered outside the formal education system, include second-chance education programs, classroom-based technical and vocational education and training, workplace training, formal and non-formal apprenticeship schemes, soft- and life-skills training, and access to credit and financial incentives for employers to provide workplace training.

The international evaluation literature suggests a mixed record regarding the effectiveness of training programs for youth. Card et al. (2010, 2015) conclude that classroom and on-the-job training can have positive impacts on employment, especially over the longer run (e.g., after 2 years post-training); however, they found that youth tend to benefit less than adults from these programs in their 2010 meta-analysis, but not in their 2015 study. Looking at youth training programs, in particular, Betcherman et al. (2007) also find mixed results, though impacts seem to be more positive in developing than developed countries. An analysis by the Inter-American Development Bank of their own youth training programs found slightly more positive results (Ibarraran and Shady 2009). The recent meta-review of youth employment programs by Kluve et al. (2016) found that training, along with entrepreneurship programs, had the most positive impacts in low- and middle-income countries.

Skills development programs potentially have an important part to play in improving employment prospects for youth in SSA, since many young people remain poorly educated, without the skills to succeed in the labor market. In addition, some studies talk about skills mismatches, i.e., where educated youth do not have the competencies required by employers (e.g., African Development Bank (AfDB) et al., 2012). The development of relevant skills—both technical and non-cognitive or “soft” skills—is not just important for the formal sector, it is also critical for the informal sector where most young Africans work and will continue to work (Adams et al. 2013). Returns to technical education and training may be particularly high in sub-Saharan Africa as illustrated by a study of eight countries which found higher returns in five countries for vocational training than for general secondary education (African Development Bank (AfDB) et al., 2012).

Evaluations are too scarce for a rigorous assessment of the effectiveness of training programs in the region. However, there have been a few recent evaluations indicating that skills training, when combined with mentoring and/or access to finance, has positive results. For example, the Economic Empowerment of Adolescent Girls (EPAG) program in Liberia provided classroom-based training followed by 6 months of follow-up support and reported a 47% increase in employment (Adoho et al. 2014). However, the overall quality of youth training programs is considered to be weak (African Development Bank (AfDB) et al., 2012). Much of the training that is available is oriented towards white-collar jobs in urban areas, which represent a relatively small aspect of total labor demand. The large numbers of youth in rural areas, as well as workers in informal employment, have much less access to training opportunities (Adams et al. 2013).

One message from the evaluation literature is that private-sector involvement can improve the success of training by increasing the relevance of programs to the needs of the labor market and, to some extent, by improving quality through competition and innovation. The literature suggests that public-private partnerships can be helpful in improving quality and access (United Nations Economic Commission for Africa (UNECA), 2011). Examples of such partnerships, however, are limited in SSA. The private sector can also sponsor and deliver training independent of government programs though it is not clear how much employer-based training occurs in the region. According to the African Economic Outlook report on youth employment, sub-Saharan African firms provide very little training compared to firms in other developing-country regions (African Development Bank (AfDB) et al., 2012).

The private sector is also involved in skills development by providing training through commercial institutes; however, the extent to which these trainers are used for the delivery of vocational training varies by country. Commercial trainers are often preferred over public training institutions by policymakers and donors. However, Atchoarena and Esquieu (2002) point out that in SSA, private training institutions have not always had a better performance. There can be a wide variation in the quality of private trainers, especially if standards are not set and carefully monitored. So, even where private delivery of skills development programs is encouraged, governments still have a critical role, providing regulatory supervision in addition to setting the overall policy framework and funding (Department for International Development (DFID), 2011).

Training for workers in the informal sector is obviously very pertinent in a region where most people are employed in that sector. In some countries, such as Uganda, there are growing numbers of privately run, unregistered, and small-scale non-formal training outfits which are part of the informal sector themselves and serve workers in that sector. However, Adams et al. (2013) conclude that workers in informal employment are largely underserved by training opportunities and that this situation needs more attention. The main source of skills development for informal-sector workers in SSA continues to be informal apprenticeships, which have a long tradition in the region. However, there are many concerns about how much skills development actually occurs in these apprenticeships, mostly undertaken between a master craftsman and apprentice, partly because of the low level of education of most participants and partly because the content is often limited to traditional learning (Adams et al. 2013). In response, several countries, including Kenya, Nigeria, and South Africa, have now introduced apprenticeship programs that integrate theoretical learning with work experience (United Nations Economic Commission for Africa (UNECA), 2011).

In a region where many young people have little or no education, there is a strong rationale for second-chance programs. These programs can be particularly needed in countries where conflict has interrupted or ended schooling for many. Second-chance programs include accelerated learning programs and other non-formal education programs that focus on the acquisition of basic skills such as literacy, oral expression, numeracy, and problem-solving and may or may not lead to equivalency qualifications. However, second-chance programs can be expensive, and it is difficult to assess their cost effectiveness because of a lack of outcome data (Filmer and Fox, 2014).

Skills development programs are by far the most popular intervention for supporting youth employment in sub-Saharan Africa. However, their effectiveness is uncertain because of quality concerns and because of a focus on training for the relatively small formal wage sector in most countries. In any event, there is a need for more evaluation evidence to understand how skills development can effectively prepare the region’s young people not only for that sector but also for other livelihoods where many of them will work. Innovation can play a decisive role in providing this training, both through the use of ICT and through public-private partnerships.

3.3 Employment services

Employment services, such as job search assistance, can improve the functioning of the labor market through better information and intermediation between jobseekers and employers. Traditionally, employment services have been provided by public agencies but private agencies are increasingly important players. The evaluation record of employment services internationally is generally positive. They tend to improve employment and earnings prospects for participants and, since they are less costly than other types of interventions, their cost-effectiveness ranks well in comparison to other ALMPs (Kluve et al., 2006; Card et al. 2010; Betcherman et al. 2004). However, the usefulness of employment services tends to be limited, improving employment more for the skilled than the unskilled (Kluve et al., 2006). Their benefits are also greatest in the short run and tend to diminish over time (Card et al. 2015).

Employment services are most useful for the formal wage sector and have a smaller influence in countries where much of the employment is in agriculture and self-employment (World Bank 2012). They also tend to be more relevant in countries with unemployment insurance systems since they fulfill a function of assisting registered jobseekers. Not surprisingly, employment services play a small role in SSA countries. An experts survey in 37 countries in Africa (SSA and North Africa) carried out for the African Economic Outlook found that public agencies were estimated to reach more than 50% of young jobseekers in only seven countries and in only one did private agencies appear to have this reach (African Development Bank (AfDB) et al., 2012). Furthermore, any coverage by employment agencies is in urban areas. Most young people rely on family and friends to search for work (Elder and Koné 2014).

In recent years, there have been a few RCT evaluations of employment service interventions in SSA targeted at youth. These include skills certification in Ethiopia and Uganda, and job fairs and a transport subsidy in Ethiopia. The results of these evaluations, summarized by McKenzie (2017), confirm that employment services are a low-cost intervention; however, there is no evidence of significant positive impacts on employment.

While formal job search methods and employment assistance services may be rarely used by young people in SSA, this does not mean that information failures are not a problem. Just under half of the experts surveyed for the African Economic Outlook ranked lack of labor market information as a challenge for young people, although only a small percentage of young people themselves rated lack of awareness of available jobs as an issue (African Development Bank (AfDB) et al., 2012).

ICTs, most obviously mobile and smartphones, can potentially play a role in improving labor market information and helping young people search for jobs and other livelihood opportunities, including outside the modern wage sector. Technology can also connect youth with employment opportunities in other countries. It also offers them a chance of being employed in global markets without leaving their home countries.¹⁹ To succeed in this emerging market, however, sub-Saharan African countries need to ensure an effective regulatory framework, and the necessary technological infrastructure.

Overall, the evidence shows that formal job placement services, both public and private, play only a small role in the region’s labor markets and, where they are present, they largely focus on more educated urban youth. Yet, there is a need for better information and intermediation. Technological innovations that can potentially reach further into the informal sector, as well as target opportunities for youth beyond national borders, can play a role. This opens up a gap for in-depth research into this area of intervention in SSA.

3.4 Self-employment/entrepreneurship

Programs in this category address two different objectives. One is to support self-employment as a means for poverty reduction, with interventions that typically include some form of microfinance, at times in combination with technical assistance. The other is encouraging entrepreneurial activity, not primarily focused on supporting basic livelihoods but rather helping youth with entrepreneurial potential with the financial and technical needs they may have to start and develop their own businesses. Most self-employed youth undoubtedly fit into the first category. However, there does seem to be a considerable amount of true entrepreneurial potential among African youth.²⁰

The evaluation evidence on self-employment and entrepreneurship interventions for youth is very limited, especially in developing countries. However, as was noted earlier, the meta-analysis of youth programs by Kluve et al. (2016) identified entrepreneurship programs, along with training, as the most effective interventions in low- and middle-income countries. While an extensive body of evidence is lacking, most researchers agree on two factors that are important for successful youth self-employment and entrepreneurship programming (African Development Bank (AfDB) et al., 2012). One is targeting, since not all young people are inclined or suited to starting their own business. The other is providing both financing and technical support, since both capital and know-how can be obstacles to young entrepreneurs.

Since the wage labor market in almost all SSA countries generates very few jobs compared to the supply of labor, many young people have little choice but to create their own jobs. But they face several constraints in starting, sustaining, and expanding their businesses, the biggest being lack of finances. The ILO-MasterCard Foundation School to Work Transition Surveys show that most young people who have started businesses do so with very little capital, drawing on their own savings in most cases. Very few receive financial assistance from banks or microfinance institutions for either start-up or operating purposes. Yet, self-employed youth in all countries included in the School to Work Transition Surveys identified a lack of access to financial capital as their main challenge to doing business (Elder and Koné 2014).

Microcredit is a popular instrument in much of the developing world for providing access to financing for the self-employed and small entrepreneurs. There has been very little serious analysis of microcredit in sub-Saharan Africa but available research shows mixed and inconclusive results (Bertrand and Crepon 2014). In any event, the actual impact of microcredit to youth in sub-Saharan Africa is limited particularly since the demand for microfinance in the region is much higher than the supply. And microfinance institutions tend to lend to adults rather than youth, who are seen as riskier clients because of their lack of experience as borrowers and as entrepreneurs (Shah et al. 2010). Microfinance products need to be adapted to the needs of young people if they are to become a more relevant instrument. This might include modifications in lending conditions and the provision of training and counseling services to accompany the financial assistance (Shah et al. 2010).

A less frequently discussed obstacle to self-employment and entrepreneurship is the regulatory environment. Business regulations and urban policies may not seem directly relevant to a youth self-employment strategy, but they can matter. In this respect, many SSA countries have been introducing reforms to improve the business climate, which should support entrepreneurs, including youth. For instance, according to the 2015 Doing Business Report, sub-Saharan Africa accounted for the largest number of regulatory reforms for making it easier to do business. More than 70% of the region’s countries had carried out at least one reform (World Bank Group 2015). Most of the reforms in SSA are associated with reducing complexity and the costs of doing business.

Urban policies can also affect youth self-employment and the success of micro- and household enterprises where most young people in cities work. Yet the environment can be a very negative one, because of formal policies (e.g., use of public space, zoning, fees) or informal practices (e.g., harassment of small vendors). Informal street trading, for instance, is a large and rapidly growing form of entrepreneurship in urban areas of SSA that requires an enabling environment to thrive. In Tanzania, Ghana, Kenya, and South Africa, street vendors have formed informal associations that engage and negotiate with municipal authorities to be able to access formal training, finances, and infrastructure to support their trade (Filmer and Fox, 2014).

Recent analysis also highlights how innovative new business models such as technology advancement and value-chain development can encourage youth enterprises. Mobile banking systems are a good example of a new technology that has very quickly taken root among young people who have used it as a means of employment by selling airtime or pay-per-use phones. The private sector has played an important role in encouraging the use of such technology by providing technical assistance and technological expertise. For instance, Safaricom’s M-PESA in Kenya was one of the first mobile banking applications to be launched on the continent, followed by MAP Mobile banking in Uganda.

Given the scale of self-employment in SSA, its importance to poverty reduction, and its entrepreneurial potential, programs and policies directed towards self-employment and entrepreneurship should be an important part of youth employment strategies in the region. Access to capital is the number one barrier to be addressed. However, skills and technological advancement, as well as a supportive regulatory environment, also matter. It is also important to assemble evaluation evidence in order to learn more about what specific interventions can help young entrepreneurs in a cost-effective manner.

3.5 Agricultural livelihoods

Most young Africans work in agriculture so the livelihoods of young people in the region will depend heavily on improving the returns to farming. The low incomes and productivity in agriculture are due to a variety of factors including the small scale of farms, uncertain land tenure, low-yield crops, poor infrastructure, lack of mechanization, and low-skill farming practices in general (World Bank 2012; Filmer and Fox, 2014). Addressing these, and improving youth livelihoods in agriculture in the process, requires a range of interventions that fall well outside the traditional envelope of youth employment programs. Since accelerating growth in agriculture has not been framed as part of SSA’s youth employment challenge, there is very little literature and virtually no evaluation evidence to inform policy-makers about what types of interventions can improve the prospects of young people in the sector.²¹

The future of youth livelihoods in agriculture has some particular challenges. Dwindling land resources, land grabs, inheritance practices, limited profitability, and lack of investment in technology and infrastructure are combining to push many young people out of agriculture or, at least to create reluctance to pursue farming-based livelihoods (White 2012; Sumberg et al. 2012). Changing perceptions of traditional employment, the physically demanding nature of farming, and higher expectations also mean that agriculture holds less attraction for many rural youth, who want to transition to urban jobs and lifestyles.

Filmer and Fox (2014) identify four priorities to provide better livelihoods for young people in agriculture: skills, land policy, credit, and infrastructure. In addition to overcoming the low educational attainment of rural youth, the acquisition of farming skills in SSA traditionally has been hindered by the limited effectiveness of agricultural vocational training institutions and extension services. But some program evaluations are now showing positive employment effects of agricultural training programs (Bertrand and Crepon 2014). Second, land is a major issue for young people, and increasingly so as Africa moves from being a land-abundant continent to a land-scarce one. Rural youth depend on family plots but these get sub-divided into smaller and smaller parcels over time (Cling et al. 2007). The problem is exacerbated where families do not have secure control over the lands they farm.

Access to credit is also a major issue for young farmers, especially because they typically do not have sources of collateral. Some countries in sub-Saharan Africa are attempting to provide alternative forms of collateral to young farmers such as movable property and warehouse receipts (Filmer and Fox, 2014). Finally, the provision of rural infrastructure and modern technology can be key elements in creating opportunities for rural youth (Bennell 2010). Services such as transport, storage facilities, and modern irrigation practices are essential in attracting rural youth to agriculture and increasing their productivity.

The FAO is helping governments in the development of public-private partnerships fostering youth inclusion in agriculture and in the design of youth-friendly and climate-smart methods for technical and vocational education and training, e.g., Junior Farmer Field and Life Schools programs. In various SSA countries, including Senegal, Uganda, and Nigeria, FAO is supporting interventions to promote decent rural employment for youth (Food and Agriculture Organization (FAO), 2016).

Ultimately, agriculture will need a great deal of innovation to keep young people in the sector and to ensure that livelihoods through farming and related agribusiness activities improve. Research does suggest that the younger generation is more open to new crops and technologies that produce a higher yield than older farmers. Therefore, special agricultural extension services targeting rural youth can be effective in both improving the quality of rural youth employment and raising agricultural productivity in general.

Innovation can take the form of new seeds, fertilizers, and other methods (World Bank 2012). It can also occur through new products and markets, as well as new opportunities further up the value chain in food processing and distribution. Public sector involvement is a key to such innovation. New products and markets require research and coordination, which typically comes from government. Sub-Saharan Africa does not have a strong record in this area but there have been some effective research collaborations that have led to improved varieties of cotton and cassava (World Bank 2012).

While the development of agriculture and related businesses typically has not been seen as part of strategies to improve youth employment, these are complementary goals in SSA. If interventions can help young people develop the needed skills, access land and credit, and upgrade infrastructure and technology, the future could be more promising.