Development, economy and the challenge of the labour crisis

SID President Amb. Juma Mwapachu shares his thoughts about the challenge of the labour crisis in Europe and Africa as part of a broader discourse about Development, Economy and Labour during the SID Netherlands seminar held in the Hague on April 10th, 2014.

Juma Mwapachu | The McKinsey Global Institute in May 2012 published a report titled, ‘Trading Myths: Addressing misconceptions about trade, jobs, and competitiveness’ in which it points out that “strains and global labour market are becoming increasingly apparent-especially in the aftermath of the ‘Great Depression’ (a reference to the global financial crisis of 2007-2008). Joblessness remains high, and there are expanding pools of the long-term unemployed and other workers with very poor employment prospects; youth unemployment is approaching crisis proportions. And even as less skilled workers struggle with unemployment and stagnating wages, employers face growing shortages of the types of high-skill workers who are needed to raise productivity and drive GDP growth. Jobs and income inequality have become grave political and economic concerns.”

The problem of youth unemployment is particularly disturbing.  In the European Union, youth unemployment has been double or even triple the rate of general unemployment in the last two decades.

An article by Mona Mourshed, Jigar Patel and Katrin Suder titled, ‘Education to employment: Getting Europe’s youth into work’ published in McKinsey Quarterly of January 2014 shows that 5.6 million young people are unemployed across Europe and a total of 7.5 million are neither being educated nor are they working. Altogether, in February this year there were 25.9 million people unemployed in the EU 28 member states  out of a potential labour force of about 244 million. In the Eurozone alone, unemployment now stands at 11.9%. What is more disturbing, however, going by the Eurostat, the EU Statistics Bureau’s data released this week, half of all new jobs created in the EU in 2013 were temporary positions and offering wages below living wages.

Going by the explanation of Christine Lagarde, the Managing Director of the IMF made a week ago in a speech to the Johns Hopkins University School of Advanced Studies, the stubborn high levels of unemployment in the global economy are a result of sluggish growth. She called for higher, well-prioritised investment to increase potential output and to create jobs. More critically, she posed a question which lies at the heart of our seminar:

'At a time when the world is still recovering from the Great Depression-and at a time when geopolitical tensions (in reference to the Ukrainian Question) are increasing-how can we strengthen the international cooperation that is essential to address these challenges?'

In the African context, on the other hand, the African Development Bank’s publication titled, ‘Youth Unemployment and Political Instability in Selected Developing Countries which studied a sample of 24 developing countries over the period 1980 to 2010 found that in Africa youth unemployment is exacerbated by the large youth population, weak national labour markets and persistent poverty.

About 62% of Africans today are less than 35 years old. Over 25% are aged between 15 and 24. Moreover, it is estimated that by 2020 three of every four Africans will be less than 20 years. Thus whilst Africa is celebrated as the second fastest growing continent with average GDP growth of 5% per annum and almost consistently for about a decade, this growth exists side by side with depressing and worrisome high levels of poverty and inequalities. The youth and women in particular are the most vulnerable. One is reminded of what triggered the Arab Spring. The rallying cry in the Egyptian Revolution in January 2012 was ‘bread, freedom and social justice’. At the heart of these Arab revolutions is high youth unemployment.

Today, 60% of the continent’s unemployed are aged 15 to 24, half of them are women. It is also estimated that 72% of Africa’s youth population lives on less than US$ 2 a day! The challenge of addressing this condition is made more onerous by the fact that 10-12 million young people enter the labour market each year. Tanzania alone unleashes between 800,000 and 1 million school and college graduates each year. Only about 10% of these young people are assured of decent jobs that offer social security.

On the face of it, Africa may be going through a ‘demographic dividend’ but its usefulness would much depend on how it shifts from the traditional economic growth model of development to adopting broad and robust inclusive social and economic transformation strategies. What is needed is:

  • Better management of fertility rates, going forward;
  • Improvement of quality of education including broadening the scale of vocational training to develop skills needed by the fast growing knowledge economy that is largely service driven,
  • Promotion of more manufacturing industries especially within the SME sector where more jobs can be created,
  • Boosting of agricultural productivity through science, technology, innovation and commercialisation through greater injection of capital, adding value to agricultural commodities,
  • Deeper and wider regional and continental integration that open up economic spaces and enlarges markets that thrive on competitive economies of scale in infrastructure and skills.

Let me conclude by emphasising that international cooperation is critical to addressing many global challenges, the labour crisis being one of them. You simply cannot effectively deal with the crisis of unemployment without tackling the fundamental challenge of economic transformation.
Unfortunately, international cooperation is yet to deal frontally with this dimension of development. Going into the post-2015 development agenda, it is vital that international cooperation is well seized of what is involved especially because of the rollercoaster lessons gained from the planning, financing and execution of the Millennium Development Goals in the past 14 years.

One clear lesson is that traditional development aid focused on budget support has never provided the critical stimulus needed for economic transformation. It is rather necessary to address the following: 

  • Aid for trade that helps developing countries to unlock structural bottlenecks such as poor infrastructure;
  • Investments that help to create skilled and decent jobs;
  • Technical assistance to bolster education standards and apply modern research findings that enhance agricultural productivity and spurs rural jobs- both farm-based and off farm;
  • Fairer rules in Economic Partnership Agreements; radically reforming the EU Common Agricultural Policy;
  • More flexible approaches to trade negotiations under the WTO Doha Development Agenda and
  • The adoption of a fair, equitable and legally binding agreement under the UN Framework Convention on Climate Change which is supported by a US$ 100 billion funding per year by 2020 to assist in adaptation and mitigation implementation measures.

Short of a different model of develoment cooperation, migration from the South, especially from North and West Africa, may continue unabated. Just a few days ago, 4000 African migrants youths, some well educated, were intercepted by Italian Coastguard making an attempt to get into Italy in seach of greener pastures. But clearly, migration offers no permanent solution.

International cooperation must direct itself in assisting Africa to unlock its economic potential which still lies fallow. Of course, at the end of the day, international cooperation can only do that much in assistance. Africa must provide much needed leadership to find internal solutions to its own transformation that can create wealth, jobs and inclusive prosperity for all its citizens.

Full speech | SID Netherlands Chapter seminar

 

Juma V. Mwapachu is President of SID and former Secretary General of the East African Community (EAC). Prior to his appointment to the EAC, Amb. Mwapachu was Tanzania's ambassador to France and has previously held positions in both the public and private sectors. In 2005, The University of Dar es Salaam conferred on Amb. Mwapachu a Doctor of Literature degree (Honoris Causa) and in December 2011, he was awarded Kenya's third highest presidential honour - The Moran of Gold Heart (MGH) - for his outstanding tenure as Secretary General of the East African Community.

Amb. Mwapachu has been a  founding member of the SID Tanzania Chapter in 1984, its first Secretary General, and a member of the SID International Governing Council.  Amb. Mwapachu holds a Bachelor of Laws degree from the University of East Africa, Dar-es-Salaam (1969) and a Postgraduate Diploma in International Law, International Institutions and Diplomacy from the Indian Academy of International Law and Diplomacy, New Delhi, India. He is author of several books.