Poverty alleviation would remain a crucial part of the overall development agenda in
Ethiopia in the years to come. The economy is among the most vulnerable in subSaharan
Africa and with per capita of only US$100. Ethiopia is one of the poorest
countries in the world. Nearly 50 per cent of the country’s GDP originates from
agriculture, which has suffered from recurrent droughts and extreme fluctuations of
output. The agricultural sector is dominated by smallholder households who produce
and cultivate more than 94% of the agricultural output. Small farm households depend
for their survival on agricultural production.
The main objective of the study was, therefore, to examine the relationship between
labor market conditions, sectoral growth, and poverty in the Ethiopian context. The
study used various types of analysis, including a descriptive and econometric analysis
of cross-section and time series data, and employment decomposition approach.
The tempo of economic growth over the last three decades was unsatisfactory: real
GDP has been growing at a rate of 2.6 per cent during the period 1960-2002, while
population has been growing, on average, by 2.7 per cent, implying a 0.1 per cent
decline in the growth rate of per capita income per annum. The pattern of sectoral
growth reveals that the industrial and services sectors accounted for a large share of
the growth of real GDP: agricultural, industrial, and service sectors grew, on average,
by about 1.4 per cent, 3.4 per cent, and 4.7 per cent per annum, respectively, during
the period 1960-2002. Agriculture contributed only 1.0 per cent of the growth of the
national economy while industry and services contributed 0.5 per cent and 1.8 per
cent, respectively, during the period 1960-2002. The growth of the economy was
largely attributed to the growth of the service sector.
The periods 1960-1973 and 1992-2002 witnessed a liberal type of economic policy
while the period 1973-1991 was marked by a planned economic system characterized
by extensive government intervention in all spheres of economic activities (socialist
system). The performance of the economy was worst during the central planning
system when real GDP registered an average growth rate of only 1.8 per cent per
annum. The economy recovered in the 1990s as real GDP grew on average by about
4.2 per cent per annum. However, the performance of agriculture remained poor,
registering an average growth rate of only 1.5 per cent per annum.
Between 1984 and 1999, the total labor force increased by 3.8 per cent per annum.
Over the same period, the urban labor force increased by 5.6 per cent per year, while
the rural labor force rose by 3.6 per cent per year and hence, the share of urban labor
force increased from 9.8 per cent in 1984 to 12.4 per cent in 1999 with significant
difference between males and females. For instance, the female labor force increased
by about 4.3 per cent, compared to 3.4 per cent of males over the same period. The
size of the labor force is estimated to increase from 44.2 million in 2004 to 81.9
million in 2030. About two million persons will be added to the labor force annually.