Central Data Catalog

Citation Information

Type Journal Article - African Development Review
Title Labour market flexibility, Wages and Incomes in Sub-Saharan Africa in the 1990s
Author(s)
Volume 18
Issue 3
Publication (Day/Month/Year) 2006
URL http://core.ac.uk/download/pdf/6489219.pdf
Abstract
This paper provides an overview of how African labour markets have performed in the 1990s. It is argued that the failure of African labour markets to create good paying jobs has resulted in excess labour supply in the form of either open unemployment or a growing self-employment sector. One explanation for this outcome is a lack of labour market ‘flexibility’ keeping formal sector wages above their equilibrium level and restricting job creation. We identify three attributes of labour market flexibility. First, whether real wages decline over time; secondly, the tendency for wages to adjust in the face of unemployment; and thirdly, the extent of wage differentials between sectors and/or firms of various size. Recent research shows that real wages in Africa during the 1990s may have been more downwardly flexible than previously thought and have been surprisingly responsive to unemployment rates, yet large wage differentials between formal and informal sector firms remain. This third sense of the term ‘inflexibility’ can explain a common factor across diverse African economies — the high income divide between those working in large firms and those not. Those working in the thriving self-employment sector in Ghana have something in common with the unemployed in South Africa — both have very low income opportunities relative to those in large firms.

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