Malawi - Employment aspects of economic development

Report No. 3463-MAI Malawi Employment Aspects of Economic Development May 8,1981 FLE r Eastern Africa Regional Office rFIL i CO FOR OFFICIAL USE ONLY Document of the World Bank This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit = Kwacha (K) Exchange Rate Kwacha 1 = US$ US$1 = Kwacha Average 1973 1.2206 0.8193 Average 1974 1.1888 0.8412 Average 1975 1.1577 0.8638 Average 1976 1.0953 0.9130 Average 1977 1.1075 0.9029 Average 1978 1.1851 0.8438 Average 1979 1.2241 0.8169 ABBREVIATIONS AES - Agro-Economic Survey Unit GDP - Gross Domestic Product ILO - International Labor Office LFPR - Labor Force Participation Rate NRDP - National Rural Development Program NSO - National Statistical Office FISCAL YEAR April 1 - March 30  FOR OFFICIAL USE ONLY PREFACE 1. This report is one of a series of six special reports that have been produced as the result of the 1979 Basic Economic Mission.l/ The major purposes of the Basic Economic Mission were to review the performance of the Malawian economy since independence (1964) and to assess the future prospects for growth over the next decade or more, identifying the major constraints to development and making recommendations for their relief. The focus of the basic economic mission was upon macroeconomic performance (the national accounts, balance of payments, budget and public enterprises and employment), the development of agriculture and manufacturing; and the provision of government resources for the development of human capital and for meeting basic needs. 2. Despite the country's extremely low level of development at independence, the Malawi Government opted for an outward-looking strategy of rapid growth, based on encouragement of private enterprises, use of the market mechanism, favorable treatment of foreign capital, low levels of protection and wage restraint. The public sector investment program has emphasized the direct support of the commodity producing-sectors through the provision of agricultural services, internal and external transport links and power. The development of the social sectors (education, health, etc.) received relatively less attention until recent years. 3. These policies have been successful and the Malawian eccnomy has recorded an impressive list of accomplishments since independence. Real GDP has grown at about six percent per annum and growth in all sectors (except subsistence agriculture) has been rapid. Wage employment has grown almost as rapidly as modern sector output, suggesting a relatively labor-intensive pattern of development. Export volumes, at least those of the agricultural estate sector, have increased significantly. Domestic investment has grown from about 9 percent of GDP at independence to an average of 25 percent in recent years, while domestic savings have increased from virtually nil to 17 percent of GDP. The Malawian economy has also attracted large increases in foreign capital for private/public enterprise investments and for government projects. In addition, the domestic rate of inflation has been relatively low. 1/ The six reports are: The Development of the Agricultural Sector The Development of Manufacturing The Fiscal Performance of the Public Sector Employment Aspects of Economic Development The Development of Human Capital Basic Needs This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  ii 4. Despite this record of accomplishments, there is now concern about the prospects for future growth owing to: - the slow growth of smallholder output and exports; - the relatively poorer prospects for traditional estate exports; - the projected decline in the external terms of trade (relative to those of the 1970s); - the continued rapid growth of.population and labor force (and the rapid decline of unutilized cultivable land); - the deterioration in budgetary and public enterprise performance; and - the continued shortage of skilled manpower. 5. The basic economic report explores the possibilities for improving the outp,ut, trade, and employment performance of agriculture and industry through changes in price-tax-tariff policies, improvements in sectoral institutions, and improved government services. It analyzes the possibilities for improved resource management through better government revenue performance, increased allocations for recurrent operations to raise the payoffg to past government investments and measures to improve the efficiency and profitability of public enterprises; it also analyzes the effects on future budgetary balance of changes in the growth and composition of government investment expenditure or in the amounts and terms of foreign financing. In addition, it assesses the nature and magnitude of Malawi's manpower constraint, estimates the returns to investments in secondary education, examines the costs of expanding social services for meeting basic needs and, in the face of likely government budgetary constraints, explores the possibilities for meeting some of these costs.through higher user charges. 6. The basic economic report places the themes outlined in the preceding paragraph in a macroeconomic framework for an analysis of the future economic development possibilities in Malawi. We expect that the draft basic economic report will be discussed with Government in July 1981 and that circulation of the final version will shortly follow. The members of the basic economic mission were: William A. McCleary (Mission Chief) Gilbert Brown (Basic Needs) Peter Hansen (Public Finance) Kazuko Hashimoto (General Economist, Agriculture) Stephen Heyneman (Education) Richard LaCroix (Consultant, Agro-industry) Ben Lehbert (Industrial Economist) Katherine Sierra (Employment) Robert Wesselman (Consultant, Agricultural Extension) Dennis Wood (Consultant, Agro-industry) Shirin Velji (Research Assistant)  MALAWI EMPLOYNENT ASPECTS OF ECONOMIC DEVELOPMENT Table of Contents Page No. Preface ......................................................... i Summary and Conclusions. v I. POPULATION AND MIGRATION .. .. Population Characteristics and Movements . . . Rural-Urban Migration 1 . . . Inter-Rural Migration.. . . 3 International Migration. . . 4 Characteristics of Migrants. . . 6 II. THE LABOR FORCE AND EMPLOYMENT.. 7 The Labor Force. . . 7 Structure and Expansion of Wage Employment .. .10 Malawianization of Employment ...14 Employment of Women . ....... 16 Unemployment . .17 III. WAGE POLICY AND THE WAGE EXPERIENCE .....21 Wage Policy ..21 The National Wages and Salaries Policy .. .22 The Role of Statutory Minimum Wages .. ..23 The Role of Trade Unions ..23 The Wage Experience ...24 Productivity and Labor Costs . .28 Wage Structure: Minimum Wages ..30 Wage Structure: Civil Service Salary Scale . .34 An Assessment of Wage Policy ..... ............. 35 IV. THE RURAL AND URBAN LABOR MARKET ................ ........41 Introduction . . .41 The Rural Labor Market ..... .... ........................... 41 Opportunities for Non-Agricultural Employment in Rural Areas .... 48 Agricultural Wages: Smallholders ... 50 This report was written by Ms. Katherine Sierra, Economist, Latin America Regional Office.  Table of Contents, cont'd - iv - Page No. Agricultural Wages: Estate Laborers ..... ....................... 53 The Urban Labor Market ....... ................................... 56 V. FUTURE EMPLOYMENT PROSPECTS, 1980-1990 ........................ 59 LIST OF TABLES 1. Urban and Rural Population Growth, 1966-77 2. Number of Paid Employees on Tea and Tobacco Estates by Quarter, 1976 3. Statutory Minimum Wage for Unskilled Labor and South African Minimum Underground Mine Wage, for 1972, 1974, and 1976 4. Labor Force Participation Rates by Sex and Area, 1977 5. Labor Force and Employment Estimates 6. Details of Wage Employment, for 1968, 1973, 1976, 1978 and 1979 7. Growth of Wage Employment 8. Formal Sector Employment Elasticities, 1968-77 9. Employment by Race, 1970 and 1976 10. Details of Blantyre's Work Force, 1972: Race by Occupation Group 11. Female Employees as a Percent of Total Paid Employees, 1971 and 1976 12. Blantyre--Unemployment by Age 13. Blantyre--Unemployment by Education 14. Unemployment Rates by Sex and Area, 1977 15. Value Added and Average Earnings per Worker, 1977 16. Growth of Nominal and Real Wages, 1969-79 17. Growth in Labor Productivity, 1969-76 18. Labor Productivity and Costs, 1969-77 19. Statutory Minimum Wages for Unskilled Workers 20. Statutory Minimum Wage for Clerks in the Tobacco Handling Industry 21. Comparison of Statutory Minimum Wage for Tradesmen in the Building Industry with Official Civil Service Wage for Tradesmen 22. Indexes of Earnings, Labor Costs, and Goods Prices 23. Comparisons of Average Monthly Earnings in Manufacturing and Construction in Selected African Countries, 1970-77 24. Employment of Hired Labor by Smallholders 25. Percent of Households in Each Holding Size Group Employing Hired Labor, Thiwi-Lifidzi, 1975/76 26. Employment in Commercial Agriculture 27. SUCOMA Work Force by Origin 28. Reasons for Choosing Work at SUCOMA 29. Local Employment by Occupational Category, Lower Shire Valley, 1972 30. Average Daily Cash Wages in Lower Shire Valley for All Crop Tasks, 1972/73 31. Average Daily Wages in Bwanje Valley, 1972/73, and Namwera, 1973/74 32. Average Daily Wage Rates by Crop Task in the Lower Shire Valley, 1972/73 33. Tea Estate Employment 34. Average Monthly Earnings per Employee in Tea and Tobacco Industries 35. Occupations by Monthly Incomes and Educational Attainments, 1972 36. Employment Projections, 1980-1990 STATISTICAL APPENDIX  MALAWI EMPLOYMENT ASPECTS OF ECONOMIC DEVELOPMENT Summary and Conclusions i. Since independence, Malawi's wage/employment policy has aimed at providing adequate incentives for employment generation; moderating wage push inflation and maintaining the country's competitiveness in international markets; and limiting the size of the rural-urban gap. By all indications, this policy has been quite successful. Wage increases have been moderate compared with those in most other LDCs and compared to rates of price in- crease experienced in Malawi for consumer goods or for imported inter- mediate and capital goods. Moreover, employment expansion has been very rapid: employment growth has far exceeded 5 percent per annum in most sectors and its high rate of expansion relative to the growth of sectoral output is an indication that production methods are generally labor inten- sive. In addition, the economy has been particularly successful in gener- ating jobs at the low-income end of the pay scale. While there is no clear evidence of what has happened to the rural-urban gap over the period- the gap remains wide and the populations of cities, large and small, have been expanding rapidly. Nonetheless, the urban population remains a rela- tively small proportion of the total population, urban unemployment is quite low, and the incidence of urban poverty or of extreme deprivation is still quite low. ii. Crude estimates suggest that Malawi's labor force grew from 2.1 to 2.7 million between 1968 and 1977, adding about 66,400 workers per year. While the rate of growth of formal sector wage employment has been sub- stantial (8.3 percent per annum), formal sector expansion has only provided some 16,100 jobs per year, leaving a residual of 50,300 to be absorbed by the smallholder sector, the informal sector, the ranks of migrant workers abroad, or in unemployment. In 1977, about one-half of wage employment was provided by agriculture, fishing and forestry (mainly agricultural estates); its rate of employment generation was about 11 percent per annum between 1968 and 1977. Employment in the industrial and service sectors has grown less rapidly at 6.3 and 6.0 percent per annum, respectively. Private sector employment has grown at a much faster rate than that of government. The in- creasing share of the private sector in total employment is a result of the Government's explicit policy of encouraging private sector leadership in economic development. Between 1977 and 1979--led by agriculture, utilities, construction, and transport--employment expansion accelerated reaching a rate of 9.3 percent per annum. iii. The rapid expansion of employment as compared with real output growth shows that policies have been very successful. The overall employ- ment elasticity (rate oL employment growth compared to the growth rate in value added) for non-agricultural sectors is 0.8 and the sectoral ratios (especially those for manufacturing, trade and utilities) tend to fall around unity, re- flecting the country's low-wage, more labor-intensive approach to development.  - vi - i.v. Government policy on Malawianization has been guided by practical considerations. Thus, the phasing out of reliance on expatriates has been encouraged, but not at the expense of reasonable standards of efficiency. Localization has proceeded quite rapidly in a wide range of occupations in the private and public sectors, but shortages have persisted in the middle and upper levels of technical and managerial staff and the hiring of expa- triates has continued, sometimes expanding. In the public sector, employment of non-Africans actually increased between 1970 and 1976, due to the necessity of recruiting expatriates in the face of a shortage of skilled and experienced staff. Given the high female labor force participation rate in Malawi, it is evident that women are underrepresented in formal sector wage employment. The share of women in wage employment was only 10.3 percent in 1976 (up from 7.7 percent in 1970) and in no sector did they constitute more than 15 per- cent of the labor force. The low shares imply that most women are employed in subsistence agriculture and in the rural and urban informal sectors. v. There are no comprehensive data on unemployment in Malawi, but available information suggests that open unemployment is not a serious problem, probably amounting to no more than five percent of the urban workforce. Unemployment rates tend to be higher among women, the young and the uneducated. Except for the last, these findings are consistent with the experience of many other LDCs. Malawi's unemployment rates for educated labor are lower than those reported for many other LDCs and fall steadily with the level of educational attainment. These results undoubtedly reflect the country's shortages of skilled labor. vi. The Government has actively sought to create a favorable environment for the expansion of employment through its wage policies. In 1969, the Govern- ment introduced an incomes policy--the National Wages and Salaries Policy-- aimed at containing wages, especially those of unskilled and semi-skilled workers, in order to expand employment opportunities by encouraging the estab- lishment of labor-absorbing manufacturing firms and agricultural estates. The Government has also set an example for other employers in stabilizing wage costs and actively encouraged private industry to follow wage restraint. In addition, the implementation of the National Wages and Salaries Policy called for the freezing of minimum wages at the 1969 levels as an incentive to employers to increase the quantity of paid employment through the adoption of labor-intensive techniques. In practice, wage restraint by the private sec- tor has meant that any employer who wished to increase his firm's general level of wages by more than five percent a year had to apply to the Government's Wages and Salary Restraint Committee for approval. The employer must demon- strate that the wage increase has been matched by productivity increases and therefore will not lead to price increases. The Committee also examines the application to (a) determine whether the wage increase will lead to a sub- stitution of capital for labor thereby decreasing employment, (b) determine whether an increase is needed to attract scarce skills, and (c) compare the prevailing wages paid to government employees of comparable skills and terms of service. vii. The goals of the National Wages and Salaries Policy are supported by Malawi's minimum wage statutes coveringunskilled and semi-skilled workers.  - vii - The minimum wage is supposed to act as a "floor" to wages but in practice the Government has used it as the offered wage for its unskilled and semi-skilled employees and encouraged the private sector to follow suit. Proposals for changes in minimum wages are made by the Wages Advisory Board (a tripartite organization consisting of representatives of employers, labor and the public) and reviewed by the National Wages Commission, chaired by the Minister of Labor (a Wages Advisory Council performs similar functions for semi-skilled and skilled workers in certain industries--e.g., tea and tobacco handling, wholesale and retail trade). The number of times the Board has actually recommended changing minimum wages is not known but in fact the minimum wage for unskilled workers has only been changed twice since 1965. In recent years, wages for unskilled and semi-skilled workers have risen sharply, making the statutory minimums largely irrelevant. viii. Some indications of the long-term behavior of nominal and real wages in Malawi may be obtained by examination of the time series for average earnings in each productive sector. Interpretations of such data, however, must be made with considerable caution as the averages reflect changes in skill, occupational, racial and sex mix as well as changes in wage rates in each industry. In particular in Malawi, three forces have been at work which have tended to limit the increase in average earnings: a rapid expansion of employment at the lower end of the wage scale, the Malawianization of employ- ment and, to a lesser extent, the increased participation of women. ix. Between 1969 and 1977, average nominal earnings grew at 2.2 percent per annum, 3.1 percent in the private sector and 1.0 percent in the government sector. While wages in many sectors grew at five percent per annum or more (e.g., agriculture, manufacturing, utilities, construction and trade), low rates of increase were recorded for the Government reflecting its policy of wage restraint and a decline in the financial sector reflecting the rapid Malawianization of employment. By the end of 1977 it was apparent that considerable adjustments in wages were necessary, because the labor markets were tight and numerous reports were made of labor shortages on tobacco and tea estates. In addition, the civil service salary scale had gotten out of line with salaries in the private sector and the Government was finding it difficult to attract and retain qualified employees. Hence, in 1978 average earnings increased markedly as private sector wages were bid up in competition for labor and the Government revised the civil service salary scale upwards by between 32 and 75 percent. Average earnings rose by 17 percent, 9.7 percent in the private sector and 42.9 percent in the public sector. Earnings rose again by an average of 4 percent during 1979. Despite the large increases in wages and earnings following 1977, average earnings in all sectors have not kept pace with inflation and in real terms are lower than they were in 1968. Because the averages reflect large changes in the skill mix as well as changes in wages in each sector, it is not advisable to use the behavior of average real earnings as an indicator--of worker real income (or welfare) over the period. Because the bulk of new jobs created in both the private sector and public sector since 1969 have been at wage levels below the 1969 average, the expansion of employment has exerted a considerable drag on the rise in average earnings. Moreover, despite the evidence that average real earnings of government employees have fallen, it is possible to demonstrate  - viii - that the real incomes of civil servants at all skill levels were higher after the 1978 wage increase than they had been in 1970. x. The slow rise in average nominal earnings combined with greater labor productivity have led to moderate increases in unit labor costs over the period studied- The productivity of non-agricultural wage labor rose at an annual average rate of 1.7 percent per annum and labor productivity increased in all sectors (except community, social and personal services) by amounts ranging from a low of 0.5 percent per annum in manufacturing to a high of 4.5 percent per annum in construction. These productivity increases, which are quite respectable by comparison with LDCs in general or with African countries, were still not sufficient to offset the increases in nominal average earnings and unit labor costs rose in all sectors. The increases for the period 1969-1977 were less than 30 percent in all sectors except manufac- turing where unit labor costs rose 49 percent. It is unlikely that such changes have had any harmful effects on Malawi's international competitive- ness. In fact quite the contrary: the increase in average earnings or in unit labor costs have been significantly less than the increases in costs of imported goods and earnings in Malawi are still substantially less than in many other African countries. xi. The increase in average earnings or in unit labor costs have been substantially less than the rise in prices of consumer goods or of imported products. For example, while average earnings and unit labor costs in man- ufacturing were increasing by 68 and 51 percent respectively during 1970-79, the low income consumer price index grew by 104 percent and the prices of imported machinery and equipment, building materials and other inputs were growing by 180 to 200 percent.l/ This evidence provides support for two general con- clusions: (a) over the period, labor has become cheaper relative to capital and other inputs, which may help to explain the rapid expansion in the demand for labor and high employment elasticities found in Malawi; and(b) it is unlikely that wage increases have provided any fuel for inflation in Malawi, the more likely chain of causation being that wages are being pulled up by demand factors. In addition, crude comparisions of average earnings in manufacturing and construction between Malawi and six other African countries (Tanzania, Kenya, Zambia, Zimbabwe, Swaziland and South Africa) show that earnings in the other countries are from 50 percent higher to six times higher than those in Malawi. Unless such differentials are offset by large differences in productivity, labor costs alone would make Malawi competitive with its neighbors in inter- national trade (although many other factors besides labor costs must be taken into account in determining international competitiveness). xii. Available evidence suggests that demand and supply play a significantly greater role than non-market forces in determining the behavior of wage rates in Malawi. While industrial unions do exist, their role in wage negotiations has 1/ For unit labor costs the figure cited is for the 1970-77 period.  - ix - tended to be nominal and the Government has relied upon and encouraged employers' associations to make the case for wage increases. The Government has not acted as a wage leader but instead has set civil service salaries so as to maintain competitiveness with the private sector. Thus, wage changes have been the result of businessmen bidding for labor and, through profitability calculations, being willing to pay higher wages. This process has bid up the wages of all workers, unskilled to skilled, to amounts substantially in excess of the statutory minimums. Evidence shows that, as early as 1975 and 1976, workers on tobacco and tea estates were obtaining wages 60 percent above the minimum for unskilled labor and wages have continued rising since then. Moreover, prior to the civil service wage increase of 1978, the Govern- ment was having difficulty hiring and retaining workers at all skill levels; the 1978 pay raise substantially raised wages at all levels--in many cases substantially above statutory minimums. In addition, there is further evidence that supports the contention that market forces are important--that sectoral wage differentials are highly correlated with sectoral productivity differentials, that wage differentials in the urban sector in part reflect differences in education and experience, and that wages in rural areas vary with the season and with the difficulty of the task. xiii. In view of the apparent success of past wage policy in providing incentives for employment generation and skill development, maintaining Malawi's international competitiveness, and moderating the size of the rural-urban gap, few changes in future policy seem necessary or desirable. What suggestions might be made are aimed at making government policy more flexible in an inflationary environment and are consistent with the objectives of past policy. In the future, price increases of 6-10 percent per annum (and perhaps sometimes higher) are likely to be the rule rather than the exception. The origins of this inflation are likely to be largely foreign-- arising from rising prices of imported manufactured goods, petroleum, etc., perhaps aggravated at times by periodic transport difficulties. Under such circumstances, more frequent, say annual, and moderate wage adjustments would be desirable (this is particularly so for the civil service where past wage changes have tended to be infrequent and large). The role of wage reviews should not be to keep wages from rising: wages should increase and ordinarily--given the size of likely price increases--by amounts in excess of the gains in labor productivity (which have averaged less than 2 percent per annum in most sectors in the past); to limit wage increases to arbitrary limits (such as 5 percent or less) or to the size of labor pro- ductivity increases would result in falling real income for workers. By using the prices of imported goods and the prices of domestic consumer goods as guidelines, the Government's wage reviews would attempt to deter- mine whether proposed increases were consistent with its objectives of promoting employment, maintaining international competitiveness, providing incentives for the development of scarce skills, and controlling the size of the rural-urban gap. Guided by the former, the Government would attempt to keep wage increases in line with price increases for imported goods (including capital goods), thus helping to maintain Malawi's inter- national competitiveness and incentives for employment. Guided by the latter, the Government would review the effects of wage-price changes on real incomes, hence on incentives for skill development and on the rural-  urban gap. The use of such guidelines would provide only loose boundaries for wage decisions; the actual outcome in any case would depend on the relative values the Government places upon its various goals--providing incentives for employment generation or for skill development, maintaining international competitiveness and insuring balance between rural and urban welfare. xiv. During the next 10 to 20 years, the World Bank Mission expects that the annual increments to the labor force will continue to exceed the growth in wage employment with the residual being absorbed mainly in subsistence agriculture. However, this pattern of labor absorption will become more difficult because arable land will be in increasingly short supply. The labor force is projected to increase by an annual average of 84 thousand persons over the next decade, but continued rapid expansion of the modern sector will still be unable to provide sufficient employment opportunities. Depending upon assumptions about the rate of labor productivity increase, the projected rate of expansion of the modern sector (about 5.7 percent per annum) would only generate 15-27,000 jobs per year. For the modern sector to absorb all of the additions to the labor force, it would have to grow at 12-14 percent per annum on average, more than double the projected increase. To absorb the majority of additional workers at rising levels of productivity and real income in smallholder agriculture will require increased government emphasis on intensive agriculture. This has already begun under the Government's National Rural Development Program which is specifically designed to raise the level of smallholder production.  MALAWI EMPLOYMENT ASPECTS OF ECONOMIC DEVELOPMENT I. POPULATION AND MIGRATION Population Characteristics and Movements 1.01 Malawi's population grew at an average annual rate of 2.9 percent from 4.0 million to 5.6 million between the population censuses of 1966 and 1977. Owing to rapid population growth, the age structure of the Malawian population is quite young: 46 percent of the total population is less than 15 years old and 56 percent is less than 20 years old. l/ 1.02 With an average density of 59 persons per square kilometer, Malawi is one of the most densely populated countries in Africa. Most of the popula- tion lives in the southern and central regions which are the most fertile and traditionally the most developed parts of the country. In 1977, the population density in the south was 88 persons per square km as compared with 60 in the central region and 24 persons per square km in the northern region. If population continues to grow at 2.6 percent per annum, these densities would double by the year 2000. Rural-Urban Migration 1.03 The Government has implemented a number of policies since independ- ence which were designed, among other things, to restrain rural-urban migra- tion. These policies, some of which are discussed in Chapter III of this paper, include the containment of urban wages and the promotion of increased rural incomes through rural development projects. Despite these policies, Malawi's towns and cities have grown rapidly in the last decade. Taken together, the four main urban areas grew at 8 percent per annum between 1966 and 1977. In 1966, 4.7 percent of the population lived in urban places; by 1977, 8.4 percent were urbanized. It should be noted however that, despite high urban growth rates, Malawi's towns and cities are not marked by the high levels of unemployment and urban squalor found in some other African countries. 2/ 1/ See Statistical Appendix, table 1.05. 2/ See paras. 2.10-2.14 and IBRD, Malawi--Basic Needs (Washington, D.C.: May 1980).  - 2 - 1.04 There are four major urban areas which by 1977 had at least 10,000 inhabitants: Blantyre, Lilongwe, Zomba, and Mzuzu (table 1). In 1966, Blantyre was overwhelmingly the largest city, over five times larger than Lilongwe and Zomba and thirteen times greater than Mzuzu. Blantyre was and remains Malawi's industrial center and during the colonial period served as the country's administrative center. Zomba was the administrative capital until 1977 when the capital was moved to Lilongwe in an effort to develop the central region of the country. This move is reflected in a shift in the urban hierarchy. Blantyre remains the largest city, its population doubling between 1966 and 1977. Lilongwe's population grew dramat- ically during the same period (16.2 percent per annum between 1966-77), mainly due to the relocation of government offices. At 103,000 persons, Lilongwe's 1977 population was just under half that of Blantyre. Contrasting with Lilongwe's growth is the stagnation of Zomba whose population grew at a rate of 0.6 percent per annum between 1966 and 1977. Table 1: URBAN AND RURAL POPULATION GROWTH, 1966-77 Annual Growth Sex Ratio Population ('000) Rate, 1966-77 (males per 1,000 females) 1966 1977 (%) 1966 1977 Major Urban Areas a/ 157.0 362.0 7.9 1,304 1,208 Blantyre 109.5 222.2 6.7 1,311 1,223 Lilongwe 19.4 102.9 16.2 1,276 1,200 Zomba 19.7 21.0 0.6 1,320 1,145 Mzuzu 8.5 16.1 6.0 1,231 1,141 Small Urban Areas a/ 32.9 104.6 11.1 1,136 985 Northern 9.8 27.9 10.0 990 921 Central 12.1 34.1 9.9 1,157 1,007 Southern 11.0 42.6 13.1 1,259 1,010 Rural Areas 3,849.6 5,091.0 2.6 894 908 Northern 479.2 599.4 2.1 845 887 Central 1,443.4 1,985.0 2.9 902 947 Southern 1,927.0 2,506.6 2.4 900 883 All of Malawi 4,039.5 5,557.8 2.9 900 926 a/ "Urban areas" include all townships and town planning areas as well as all district centers. An urban area need not be an administrative center but must have other installations, such as a police post, works camp or a post office in addition to a trading store and market. Source: Malawi Government, Population Census, 1977, Preliminary Report, March 1978.  - 3 - 1.05 As striking as the growth of major urban areas, is the 11 percent per annum expansion of the smaller towns between 1966 and 1977. 1/ Most of these smaller towns had less than 1,000 inhabitants and only one had as many as 4,000 in 1966. Unfortunately the same level of detail is not yet available from the 1977 Census so direct comparisons cannot be made on a town-by-town basis. The number of persons living in small towns grew most dramatically in the southern region (13.1 percent per annum) where population density is the highest and land pressure an increasing problem. This growth was most striking in the southern region's Chikwawa District (21.5 percent per annum). In the northern region, the Karonga District experienced a very high rate of urban growth (23.6 percent per annum) as did the Nkota Kota District in the central region (22.1 percent per annum). 2/ Inter-Rural Migration 1.06 An important population flow not shown by census data is the seasonal movement of workers to agricultural estates. Malawi's estates draw upon three types of labor: permanent workers housed with their families on the estate; local labor which works on nearby estates on a permanent or seasonal basis; and migrant workers who travel between regions in significant numbers responding to seasonal employment opportunities. Table 2 shows an example of the typical pattern of employment on the tea and tobacco growing estates, with both using the greatest number of employees in the first quarter of the calendar year and the least in the third quarter, with employment in the peak quarter usually exceeding that in the trough quarter by more than one-third in both cases. Tea employment leads tobacco employment in its seasonal variation, reaching the highest employment levels in the fourth and first quarters while tobacco peaks in the first two quarters. The seasonality of rural employment is discussed more fully in Chapter IV, "The Rural and Urban Labor Market." 1/ The census defines "urban areas" as including all townships and town plan- ning areas, and all district centers. An urban area need not be an admini- strative center, but must have other installations such as a police post, a works camp or a post office in addition to trading stores and a market. See Government of Malawi, Malawi Population Census, 1966, p. ii. 2/ See Statistical Appendix, table 2.01.  - 4 - Table 2: NUMBER OF PAID EMPLOYEES ON TEA AND TOBACCO ESTATES BY QUARTER, 1976 ('000 persons) Quarter I II III IV Tea Growing 42.5 32.5 31.1 40.9 Tobacco Growing 36.8 28.6 25.1 31.9 Source: NSO, Reported Employment and Earnings Annual Report, 1976; Statistical Appendix, table 2.03. International Migration 1.07 Migration of Malawian workers to southern Africa dates prior to the First World War as economic growth, which took place primarily in the Republic of South Africa, drew temporary labor from neighboring countries. Malawi's international migrant workers are also employed in Zambia and Zimbabwe and to a lesser extent in other countries. Besides the mines, opportunities for employment abroad also exist in agriculture and services. The most distinctive feature of this migration is its temporary nature; workers are almost always employed abroad for less than two years at a time and generally for shorter periods. Economic conditions in Malawi, as in other sending countries, have traditionally provided strong motivation for migration. In particular, low incomes, especially from crop production, and the lack of domestic wage employment at wages comparable to those in South Africa are important factors which make migration attractive. In 1976, average wages for African workers in the South African manufacturing and construction sectors were six times those in Malawi. Table 3 contrasts Malawi's official minimum wage and the minimum underground mine wage (exclusive of free board, lodging, transportation, and medical services). By 1976, South African minimum wages were 10 times higher than the Malawian minimum for rural areas and 6 times higher than that for Blantyre.  - 5 - Table 3: STATUTORY MINIMJM WAGE FOR UNSKILLED LABOR AND SOUTH AFRICAN MINIMUM UNDERGROUND MINE WAGE, FOR 1972, 1974, AND 1976 (tambala/day) 1972 1974 1976 Malawi Blantyre/Limbe 38 40 40 Zomba, Mzuzu, Lilongwe 32 35 35 All Other Areas 23 25 25 South African Mine Wage a/ 75 198 262 a/ Minimum per shift; there are about 26 shifts per month. Source: Government of Malawi, Ministry of Labor; Republic of South Africa, Ministry of Labor; mission estimates. 1.08 Prior to 1974, a substantial proportion of Malawi's work force found employment abroad. Employment in South African mines peaked in 1972 and 1973 with about 124,000 under contract (Statistical Appendix, table 2.02). Time series data does not exist for total workers abroad but it is estimated that, including those under contract in the South African mines, at least 250,000 Malawians were working abroad in 1974; this number is approximately equal to total formal sector wage employment in that year and to 10 percent of the total estimated labor force. In terms of numbers, the impact of this migration was obviously significant, especially in rural areas suffering from population pressure. In the Lower Shire Valley, for example, it has been estimated that some 42 percent of all male migrants between 15-49 years old, or 11 percent of the total male labor force were employed abroad. 1/ In those areas with high pressure on the land due to a growing population, up to 27 percent of the male labor force worked abroad. Employment abroad was also important in terms of remittances. By 1974, some K 31 million was remitted by Malawian workers, mostly from South Africa (Statistical Appendix, table 2.04). 1/ D. R. Coleman and G. K. Garbett, The Labour Economy of a Peasant Community in Malawi, Second Report of the Socio-Economic Survey of the Lower Shire Valley (Manchester: 1976).  - 6 - 1.09 In 1974, the Government suspended recruitment of labor by special recruitment organizations operating in Malawi for South African and Zimbabwean mines, affecting some 155,000 mine workers. The rest of the migrant workers who made their own arrangements were allowed to continue to do so. After the suspension of organized recruitment, the migrant workers' contracts were allowed to lapse; as they expired the workers had no option but to return home. By the end of 1976, it was estimated that all but some 5,000 of the original 155,000 had returned. Remittances fell from a high of K 32.1 million in 1975 to K 4.3 million in 1976. However, the unfavorable male- female sex ratio in 1977 (table l)--which is even more pronounced when persons in working age groups are compared--strongly suggests that large numbers of Malawians (perhaps as many as 200,000) were still working abroad. Whether this indicates that the estimate of 250,000 working abroad in 1974 was an understate- ment or that many of the returnees after 1974 have re-emigrated to work in the mines, industries and plantations of various southern African countries cannot be clearly determined at this time. 1.10 What does appear clear is that the numbers working in the South African mines are much smaller than in the past. In June 1977, the Government allowed a special recruitment agency to start engaging Malawian workers again for contract work in South African mines. By 1978, 17,900 Malawians were under contract and working in South African mines. Characteristics of Migrants 1.11 Malawi is characterized by three different but interrelated types of migration: rural-urban, intra-rural and international. Most of this migration is temporary, but there is some evidence, as discussed below, that increasingly rural-urban migration is permanent. What are the character- istics of the migrants and what motivates their move? The importance of economic incentives in the decision to migrate has strong empirical support in numerous studies on internal migration. 1/ Migrants tend to move from places of lower economic opportunities to areas of higher potential opportunities. When asked their reasons for moving, migrants cite economic and job-related factors most frequently. 2/ Out-migration is thus related to low incomes and lack of opportunities in the areas of origin relative to the destination. In the decision to migrate, the individual takes not only the income differen- tials between the rural and urban places into account but also the probability of finding employment. 3/ The expected wage, that is, the going rate at the destination adjusted for the probability of being employed, is more important than the actual wage rate in the decision to migrate. 1.12 An important facet of migration in Malawi is the prevalence of circulatory migration in which the worker periodically leaves his village to find work, leaving his family behind to continue farming. These workers may 1/ See, for example, "Internal Migration in Less Developed Countries," World Bank Staff Working Paper, No. 215 (Washington, D.C.: September 1975). 2/ Ibid. 3/ Michael Todaro, "Income Expectations, Rural-Urban Migration and Employment in Africa," Employment in Africa, ILO (Geneva: 1973).  find work in the cities, on agricultural estates or abroad, but usually return to the rural areas after one or two years. Another form of circulatory migration is associated with workers who move between town and village on a seasonal basis, supplementing their rural incomes by finding wage employment during the slack agricultural seasons. Other families who see their wage employment in the city as their primary source of income, continue to cultivate a plot in the rural areas for subsistence food, the wife leaving the town on a seasonal basis to prepare and harvest the fields. 1.13 Traditionally rural-urban migrants tend to be young unmarried males, or married males who leave their families behind in the rural areas. This pattern has led to urban areas having a higher proportion of males than found in the rest of the population. There is some evidence, however, that more men are considering the city as a permanent home, sending for their families to join them. In 1966, there were 1,300 men for every 1,000 women in the major urban places. By 1977, this imbalance was less pronounced, with 1,200 males per 1,000 females (table 1). In the smaller towns, males and females were more balanced in 1977, with 985 males per 1,000 females, as compared with the 1966 ratio of 1,136 males per 1,000 females. 1/ II. THE LABOR FORCE AND EMPLOYMENT The Labor Force 2.01 Data on the size and composition of Malawi's labor force is scanty, but a crude estimate can be obtained by using the results of a Pilot Labour Force Survey conducted in 1977. 2/ This pilot test indicated that the Labor Force Participation Rate (LFPR) for the total population is 47.8 percent (table 4). This estimate compares favorably with the LFPR estimated by the International Labor Office (ILO) for Malawi (45.8 percent) based upon the experience of similar developing countries. 1/ The sex balance in 1977 for Malawi as a whole was 926 males per 1,000 females. 2/ NSO, Malawi, Labour Force Survey, Feasibility Report (including report on the 1977 pilot survey), October 1977.  - 8 - Table 4: LABOR FORCE PARTICIPATION RATES BY SEX AND AREA, 1977 (percent) ILO 1975 Urban Rural Total Estimate Population Aged Ten Years or Older 58.3 75.3 73.4 66.7 Male 75.1 72.8 72.7 85.1 Female 40.5 77.8 75.1 49.1 Total, All Population 37.5 48.7 47.8 45.8 Source: NSO, Malawi, Labour Force Survey, Feasibility Report (including report on the 1977 pilot test), October 1977. 2.02 Using the aggregate urban and rural LFPR from table 4, and assuming that the rates remained constant over time, 1/ it is possible to make rough estimates of the size of Malawi's labor force in 1968 and 1977 (table 5). On this basis, the total labor force grew from 2.06 million in 1968 to 2.66 million by 1977 or at the same rate as total population (2.9 percent per annum), adding about 66,400 persons per year to the labor force. While the rate of growth of formal sector wage employment has been substantial (8.3 percent per annum), formal sector expansion has provided only some 16,100 jobs a year leaving a residual 50,300 to be absorbed by the smallholder sector, the informal sector, the ranks of the migrant worker abroad, and among the unemployed. 2.03 Despite rapid expansion, formal sector jobs employed only about 12 percent of the 1977 labor force (as compared with 8 percent in 1968 (table 5)). Most of the remainder is in subsistence agriculture, although some would be found in the rural and urban informal sectors or among the unemployed. In 1977, about one-half of wage employment was provided by agriculture, fishing and forestry; employment in this sector--which consists mainly of agricultural estates--grew at about 11 percent per annum over the 9 year period. The growth of wage employment in the industrial and service sectors has been less rapid at 6.3 and 6.0 percent per annum, respectively. 1/ With rapid population growth rates such as those found in Malawi, we expect that the Labor Force Participation Rate will decrease over time as the pro- portion of the population under ten increases. Participation rates could also change due to increasing urbanization, shifts in the availability of paid employment, trends in school enrollment ratios, etc. It has not been possible to measure the changes in these factors or to analyze their effects on labor force participation over the period.  Table 5: LABOR FORCE AND EMPLOYMENT ESTIMATES Percent '000 Persons of Total 1968 1977 1968 1977 Total Labor Force a/ 2,059.9 2,657.3 100 100 Rural 1,976.0 2,480.9 96 93 Urban 83.9 176.4 4 7 Employment Estimates b/ 2,059.9 2,657.3 100 100 Agriculture, Forestry and Fishing 44.2 155.1 2 6 Private 40.8 132.8 2 5 Government 3.4 22.3 c/ - 1 Other Formal Sector Wage Employment 120.4 153.9 6 6 Industry d/ 34.5 59.8 2 2 Services e/ 55.9 94.1 3 4 Unallocated 30.0 0.0 1 0 Residual: Smallholder Agriculture, Rural and Unregistered Urban Informal, Seeking Work 1,895.4 2,348.3 92 88 a/ Based on Labor Force Participation Rates (table 4) applied against urban and rural population estimates derived from 1966 and 1977 population censuses. b/ "Agriculture, Forestry and Fishing" and "Other Formal Sector Wage Employment" figures are from NSO, Reported Employment and Earnings Annual Report. The 1977 figures are "New Series" estimates which cover all employees working in the formal sector regardless of the size of the establishment in which they work. Before 1977, only employees working in establishments with over 20 employees were counted. To allow comparison between 1968 and 1977 fig- ures, the 1968 figures as given in the Reported Employment and Earnings Annual Report were adjusted upwards. It was estimated that about 30,000 employees working in small establishments were not covered in the reported figures in 1968. These have been included as "Other Formal Sector Wage Employment, Unallocated." c/ In 1977, some employment categories were reclassified. In particular, government agricultural workers were reclassified from "Community, Social and Personal Services" to "Agriculture, Forestry and Fishing." For this reason, direct comparison of the number of government agri- cultural workers in 1977 with that in previous years is misleading. See Statistical Appendix, table 3.01. d/ Includes mining and quarrying; manufacturing; electricity and water; building and construction. e/ Includes wholesale/retail trade, hotels and restaurants; transport storage and communications; financing, insurance and building services; community, social and personal services. Source: Tables 1 and 4; Statistical Appendix, table 3.01; and mission estimates.  - 10 - Structure and Expansion of Wage Employment 2.04 In 1978, some 339,500 persons were engaged in formal sector wage employment. Of these, 80 percent were employed by the private sector (includ- ing statutory bodies). As shown in table 6, agriculture now accounts for 50 percent of all formal sector employment, with tea and tobacco estate workers amounting to three-quarters of this figure (and the remainder being employed by the sugar estates, forestry and fishing industries, or as government agricul- tural employees, mainly in extension and other technical work). Table 6: DETAILS OF WAGE EKPLOYMENT,a/ FOR 1968, 1973, 1976, 1978 AND 1979 Employment Percentage of ('000 Persouis) Total E ployment 1968 1973 1976 b/ 1978 h/ 1979 b/ 1968 1973 1976 b/ 1978 b/ 1979 b/ Agriculture, Forestry and Fishing 44.2 76.3 103.9 169.3 185.0 32.9 35.4 39.3 49.9 50.1 Mining and Quarrying 0.5 0.7 1.1 0.6 0.6 0.4 3.2 0.3 -- 0.2 Manufacturing 17.2 25.7 36.0 36.2 36.4 12.8 11.9 13.6 10.7 9.9 Electricity and Water 1.5 2.9 3.0 2.9 3.5 1.1 1.3 1.3 0.8 0.9 duilding and Construction 15.3 21.1 21.1 31.5 37.5, 11.4 9.8 8.0 9.3 10.2 Wholesale/Retail Trade, Hotels and Restaurants 9.4 18.4 20.7 27.5 29.8 7.0 8.5 8.5 8.1 8.1 Transport, Storage and Cenmunications 8.2 1C.4 12.9 17.8 20.7 6.1 4.8 4.8 5.2 5.6 Financial, Insurance and Building Services 0.9 1.9 3.4 6.8 7.9 0.7 0.9 0.9 2.0 2.1 Commuunity, Social and Personal Services 37.4 57.9 61.9 47.4 47.7 27.8 24.1 23.4 14.0 12.9 Total, of which 134.5 215.3 264.1 339.5 369.1 100.0 100.0 100.0 100.0 100.0 Private 89.6 150.1 194.0 271.2 -- 66.6 69.7 73.5 79.9 - Government 44.9 65.2 70.1 68.3 -- 33.4 30.3 26.5 20.1 -- s/ Figures for 1968, 1973 and 1976 apply to euployment in establishments with more than 20 employees. Figures for 1978 and 1979 include wage employment in establishments with less than 20 employees. b/ Employment data after 1976 cannot be directly compared with those from previous years as some industrial categories were reclassified between 1976 and 1977. In particular, Government agri- cultural extension workers were reclassified from "Co=unity. Social and Personal Services" to "Agriculture, Forestry and Fishing."  - 11 - 2.05 Through wage policies (as well as through investments tailored to Malawi's factor and resource endowments), the Government has actively sought to create a favorable environment for the expansion of employment. The results show that it has succeeded. Formal sector wage employment grew at an average rate of 8.3 percent per annum 1968-77 (table 7), a very respectable rate when compared with the growth rates of total real GDP or GDP generated in the monetary sectors. Employment opportunities expanded most rapidly from 1968 to 1973; following that, employment expansion slowed to a still satisfac- tory 7.6 percent average rate. Private sector employment (including statutory bodies) has grown at a much faster rate than that of government, a tendency that has become more pronounced after 1973 when government employment expansion declined to 1.2 percent per annum. The increasing share of private sector in total employment is the result of the Government's explicit policy of encourag- ing the private sector to take the lead in economic development. The expansion of employment opportunities has been most marked in agriculture, with wage employment growing by about 11 percent per annum 1968-77. Agriculture, and financial services, are the only sectors whose growth rates were higher than average and as a consequence, their shares in total employment increased over the period (table 6). Despite the impressive employment growth recorded in all other sectors (with the possible exception of construction), their shares in total employment declined. Between 1977-79, led by agriculture, utilities, construction and transport, employment growth again accelerated reaching 9.3 percent per annum.  - 12 - Table 7: GROWTH OF WAGE EMPLOYMENT (percent per annum) 1968-73- 1973-77- 1968-77- 1977-79-/ Agriculture, Forestry and Fishing 11.5 10.8 b/ 11.3 b/ 9.2 Manufacturing, Mining and Quarrying c/ 8.3 4.5 6.5 3.9 Electricity and Water 14.1 -0.9 7.2 11.8 Building and Construction 6.6 1.4 4.3 27.1 Wholesale/Retail Trade, Hotels and Restaurants 14.4 -0.1 7.7 8.7 Transport, Storage and Communications 4.9 10.8 7.5 11.7 Financial, Insurance and Building Services 16.1 33.3 23.5 8.6 Community, Social and Personal Services 9.1 2.3 b/ 6.5 b/ 2.3 Total, of which 9.9 7.6 8.3 9.3 Private 10.9 8.4 9.8 - Government 7.7 1.2 4.8 a/ Old series data. b/ Average annual increase 1973-76, and 1968-76. c/ Manufacturing, mining and quarrying are grouped together to conform with the National Accounts industrial classification. On its own, manufacturing employment increased by 8.4 percent per annum between 1968-73, 5.1 percent per annum between 1973-77 and 6.9 percent per annum between 1968-77. d/ New series data. Source: Statistical Appendix, table 3.01 and mission estimates. 2.06 The rapid expansion of employment for the period 1968-77 is reflected in overall and sectoral employment elasticities--the ratios of the growth rates of sectoral employment and sectoral real value added (table 8). All of the elasticities (except community, social and personal services) lie in the  - 13 - range zero to one, which is similar to the experience of many developing countries. l/ If anything, however, the elasticities for Malawi tend to fall in the upper end of the range closer to unity (especially those for manufactur- ing, wholesale and retail trade, and electricity and water), reflecting the country's low-wage, more labor-intensive approach to development. Table 8: FORMAL SECTOR EMPLOYMENT ELASTICITIES, 1968-77 a/ Elasticities Manufacturing, Mining and Quarrying 0.98 Electricity and Water 0.83 Building and Construction 0.41 Wholesale/Retail Trade, Hotels and Restaurants 0.87 Transport, Storage, and Communications 0.70 Financial, Insurance and Real Estate 0.78 Community, Social and Personal Services 1.72 b/ Total: Employment Elasticity for Non-Agricultural Sectors 0.76 a/ Elasticities have been computed by taking averages for sectoral real value added and for employment for the years 1968-70 and 1975-77 and then calcu- lating the growth rate of the period averages for each. The elasticity is the ratio of the employment growth rate to the value added growth rate. b/ Elasticity is for the period 1968-76. Source: Statistical Appendix, table 3.01 and mission estimates. 1/ In the absence of National Accounts series for value added by estates and government in agriculture (the present series including formal sector marketings by smallholders), an elasticity for formal sector agriculture cannot be computed in the usual fashion. Taking the ratio of sector employ- ment growth to real output growth of estate production of tobacco, tea, and sugar yields an elasticity of 0.7.  - 14 - Malawianization of Employment 2.07 Government policy on Malawianization has always been guided by practical considerations; while the phasing out of reliance on expatriates is encouraged, reasonable standards of efficiency are also to be maintained. While this policy has meant that localization could proceed quite rapidly in a wide range of occupations in the private and public sectors, shortages have persisted in the middle and upper levels of technical and managerial staff and the hiring of expatriates has continued, even expanding in some instances. The number of non-Africans employed by the private sector declined from 4,000 to 2,800 over the period 1970-76, with reductions occurring in all sectors except manufacturing (Statistical Appendix, table 3.03). (The largest declines were registered in wholesale and retail trade and, most particularly, in community, social and personal services.) As a consequence the share of non-African paid workers in the private sector fell from 3.6 to 1.4 percent between 1970 and 1976. In 7 out of the 9 industrial sectors, Africans already constituted over 90 percent of employees in 1970. In the remaining two, the pace of localization has been particularly rapid: in finance, the share of Africans employed rose from 74 to 93 percent between 1970 and 1976 and in community, social and personal services, from 88 to 96 percent. By 1976, Africans constituted over 95 percent of the private employed labor force in all sectors but one. In the government sector, on the other hand, engagement of non-Africans actually increased, from just over 1,000 to 2,300 during the period, due mainly to the need to recruit expatriates in the face of a shortage of skilled and experienced work force. Taking private and government employ- ment together, the number of non-Africans has remained roughly over the period at 4,000 persons.  - 15 - Table 9: EMPLOYMENT BY RACE, 1970 AND 1976 (percent of total) 1970 1976 African European Other Total African European Other Total Government Sector 97.9 2.0 0.1 100.0 96.7 3.2 0.1 100.0 Private Sector 96.4 2.6 1.0 100.0 98.6 0.9 0.5 100.0 Source: Statistical Appendix, table 3.03. 2.08 The shortage of trained Africans at the upper skill levels is illustrated by the Blantyre Labor Market Report for 1972 (table 10). This study revealed a three-tiered occupational structure of high, intermediate and low income occupations. Together, Europeans and Asians held about half of the high income positions, mainly as government administrators, managers and other professionals. In contrast intermediate income (such as foremen, supervisors, technicians, primary schoolteachers, clerical workers, metal workers and drivers) and low income jobs (sales, service, agriculture, construction and other semi- and unskilled workers) were largely held by Africans.  - 16 - Table 10: DETAILS OF BLANTYRE'S WORK FORCE, 1972: RACE BY OCCUPATION GROUP (percent in each occupation group) Other/ Percent of Total Not Workers in Each Occupation a/ African Asian European Stated Total b/ Occupation Group High Income 50.3 10.9 38.6 0.2 100.0 5.3 Intermediate Income 91.6 3.2 4.9 0.2 100.0 30.8 Low Income 97.4 1.7 0.7 0.2 100.0 59.6 Not Stated 87.6 8.4 3.8 0.3 100.0 4.3 All Workers 92.7 2.9 4.1 0.2 100.0 100.0 a/ The median annual income for High Income Occupations ranged from K 1,200-2,400 to K 2,400-4,800; for Intermediate Income Occupations, K 250-480 to K 500-720; for Low Income Occupations, K 12-120 to K 130-240. b/ Totals may not add up due to rounding. Source: Ministry of Labor, The Blantyre Labour Market, 1972, A Report on the Blantyre Population Sample Census September/October 1972; Statistical Appendix, table 3.13. Employment of Women 2.09 While the number of women has doubled and the share of women in formal sector employment has increased from 7.7 to 10.3 percent between 1971 and 1976, it is evident that women are underrepresented (table 11). In no sector did they constitute more than 15 percent of the labor force in 1976. Given the high female labor force participation rates in Malawi in the urban and (most particularly) the rural areas (para. 2.01), such low shares imply that most women are engaged in subsistence agriculture and in rural and urban informal sectors.  - 17 - Table 11: FEMALE EMPLOYEES AS A PERCENT OF TOTAL PAID EMPLOYEES, 1971 and 1976 1971 1976 Agriculture, Forestry and Fishing 11.9 14.7 Mining and Quarrying 0.7 0.3 Manufacturing 2.4 4.5 Electricity and Water 2.2 6.7 Construction 0.2 0.6 Wholesale/Retail Trade, Hotels and Restaurants 4.7 12.0 Transport, Storage and Communications 2.1 3.0 Financial, Insurance and Business Services 18.2 13.3 Community, Social and Personal Services 10.0 10.4 Total, of which 7.7 10.3 Private 8.1 11.1 Government 6.8 7.8 Source: Statistical Appendix, table 3.04. Unemployment 2.10 There are no comprehensive data on unemployment in Malawi. Available information, however, suggests that open unemployment is not a serious problem. 2.11 A sample population census taken in Blantyre in September/Octo- ber 1972 indicates that 3.7 percent of the Blantyre labor force was unemployed. 1/ 1/ The sample census defines an unemployed person as a "Job seeker" who had at most three days of work during the week prior to the interview and who had been looking for work during the past month.  - 18 - Africans constituted 97 percent of the unemployed (compared with their 94 percent share in Blantyre's population). Unemployment rates tended to be higher among women, the young and the relatively less educated. Except for the last, these findings are consistent with the experience of many other LDCs. 1/ 2.12 As compared with 3 percent of males, 8.2 percent of females were unemployed. Of the population ages 10 to 14 and 15 to 19 actually in the labor force, the unemployment rates were 13 and 28 percent, respectively (table 12). It is likely that many of these youths were recent school leavers who had not yet found employment. Unemployment rates fell off dramatically among the older work force. 1/ See Lyn Squire, Labor Force, Employment and Labor Markets in the Course of Economic Development, World Bank Staff Working Paper, No. 336, pp. 33-36.  - 19 - Table 12: BLANTYRE-UNEMPLOYMENT BY AGE (percent) Percent of Unemployment Age Group Unemployed Rate a/ 10 - 14 10.7 12.8 15 - 19 52.4 28.7 20 - 24 26.7 5.3 25 - 29 5.8 1.0 30 - 34 1.2 0.3 35 - 39 0.3 0.1 40 - 44 0.6 0.3 45 - 49 0.3 0.0 50 - 54 0.3 0.2 55 - 59 0.0 0.0 60 - 64 0.6 1.6 65 + 0.0 0.0 Not Stated 1.2 27.3 Total 100.0 3.7 b/ a/ Unemployment Rate is defined as the number of unemployed divided by the total labor force, multiplied by 100. b/ Unemployment rate for population over 10 years of age. Source: Ministry of Labor, The Blantyre Labour Market, 1972, A Report on the Blantyre Population Sample Census, September/October 1972. 2.13 Contrary to the experience of many other LDCs, the unemployment rate was highest among the least-educated segment of Blantyre's work force and dropped off steadily as educational achievement increased (table 13). Of those who had never attended school, 6.8 percent were unemployed. Only 1.8 percent of those who had reached Forms III-V were unemployed and there was no unemployment among those who had reached Form VI. A World Bank study of employment in a cross section of LDCs has shown that, with exceptions in some countries, unemployment rates are lower for illiterates and those with post- secondary educations than for those with primary or secondary educations. 1/ 1/ Ibid.  - 20 - Malawi's unemployment rates for educated labor are much lower than those reported for most other countries and fall steadily with the level of educational attainment. These results undoubtedly reflect Malawi's severe shortages of educated workers. Table 13: BLANTYRE--UNEMPLOYMENT BY EDUCATION a/ (percent) Educational Percent of Unemployment Attainment Unemployed Rate b/ Never Attended School 30.1 6.8 Standards 1-4 27.1 4.2 Standards 5-8 31.1 3.4 Forms I-II 6.6 2.8 Forms III-V 4.3 1.8 Form VI 0.0 0.0 Higher Education 0.3 0.4 Not Stated 0.6 4.1 Total 100.0 3.7 a/ All figures refer to population aged 10 and over. b/ Unemployment rate is defined as the number of unemployed in each educational attainment group divided by the total labor force in each educational attainment group, multiplied by 100. Source: Ministry of Labor, The Blantyre Labour Market, 1972, A Report on the Blantyre Population Sample Census, September/ October 1972. 2.14 While its statistical results must be treated with some caution because of small sample size, the 1977 Pilot Labor Force Survey gives a more recent indication of unemployment rates in both rural and urban areas. In that survey, persons aged 10 years or over who did not work in the week prior to the survey, and who wanted and were available to work in that week were considered to be "unemployed." The survey indicated that the overall unemploy- ment rate in Malawi was 5.3 percent, with men having lower unemployment rates than women in both rural and urban areas (table 14). Unemployment was particularly high among urban women (18.2 percent).  - 21 - Table 14: UNEMPLOYMENT RATES BY SEX AND AREA, 1977 a/ (percent) Urban Rural Total Male 3.3 4.4 4.3 Female 18.2 5.8 6.4 Total 8.3 5.1 5.3 a/ Refers to persons aged 10 years or older. Source: NSO, Malawi Labour Force Survey Feasibility Report (including results of the 1977 pilot test), October 1977. III. WAGE POLICY AND THE WAGE EXPERIENCE Wage PolicY 3.01 Malawi's National Wages and Salaries Policy, introduced in 1969, represented the Government's response to the problems it faced, in the years immediately following independence, which stemmed from low standards of living, a growing population and limited natural resources. Low agricultural productivity, and poorly developed industrial and infrastructural sectors placed severe constraints on development. Malawi was endowed with a large labor force, but lacked educated and skilled workers and managerial talent. Under these circumstances, and given its strong commitment to growth-oriented development fueled by the private sector, the Government introduced an incomes policy aimed at: (a) containing wages, especially those of unskilled and semi- skilled workers, in order to expand employment opportunities by encouraging the establishment of labor-absorbing manufac- turing firms and agricultural estates; and (b) restraining domestic inflation through strict wage controls in order to maintain Malawi's competitiveness in interna- tional markets. 1/ 1/ Government of Malawi, "A National Wages and Salaries Policy for Malawi," September 19, 1969 (Mimeo), p. 1.  - 22 - 3.02 Beyond the desire to. promote growth and employment, the wages and salaries policy reflected the Government's concern over the widening gap between the modern wage earning sector, which was concentrated in the cities, and the poorer rural sector. The Government's policy is aimed at narrowing the income gap by restraining urban wages while at the same time promoting rural development along with expanding employment opportunities on agricultural estates. Through these policies the Government hoped to discourage the flow of job seekers to the towns, thereby avoiding the social and political problems associated with rapid urbanization as well as the financial burden of providing services to meet the demands of a rapidly expanding urban population. The National Wages and Salaries Policy 3.03 In 1969, the Government outlined the following procedures in the implementation of the National Wages and Salaries Policy: (a) the Government would set an example to other employers in stabilizing wage costs; furthermore, instead of making general wage and salary awards, the Government would adjust pay rates selectively so as to attract scarce skills, encourage the acquisition of experience by continuity of service and re- ward industry and effort; (b) the Government would actively encourage private employers to follow the same policy; and (c) minimum wages would be maintained at present (1969) levels as an incentive to employers to increase the volume of paid employment through the adoption of labor-intensive techniques. 3.04 The Government has continued active encouragement of private industry to follow wage restraint. In practice, this has meant that any employer who wishes to increase the general level of wages by more than 5 percent a year must apply to the Wages and Salary Restraint Committee for approval. This committee is chaired by the Secretary to the President and Cabinet and includes representatives of the Ministry of Labor; Ministry of Trade, Industry and Tourism; Treasury; and the Office of Planning and Development. The applying employer must demonstrate that the wage increase is matched by increases in productivity, thereby showing that higher wages will not lead to higher prices. The Committee also examines the application: (a) to determine whether wage increases in that particular industry will lead to the substitution of capital for labor and conse- quent decrease in employment; (b) to determine whether an increase is needed to attract scarce skills to expanding sectors of the economy; and (c) to compare the prevailing wages paid to comparable govern- ment employees with similar terms and conditions of service.  - 23 - The Role of Statutory Minimum Wages 3.05 The goals of the National Wages and Salaries Policy are supported by Malawi's minimum wage statutes. The Regulation of Minimum Wages and Conditions of Employment Ordinance provides for the statutory control of minimum wages for both unskilled and semi-skilled workers. In addition the ordinance provides for the regulation of conditions of employment such as hours of work, overtime, sick pay, gratuities and pensions, housing and food allowances and authorized compulsory wage deductions. The minimum wage is supposed to act as a "floor" to wages but in practice the Government has used it as the offered wage rate for its unskilled employees and encouraged the private sector to follow suit. As discussed in para. 3.18 below, it is only in recent years the the supply price of labor has risen above the minimum wage and market forces have made the statutory minimums largely irrelevant. 3.06 A National Wages Commission rules on all proposals for changes in the minimum wage or conditions of service after considering these in light of government economic policy. This Commission is chaired by the Minister of Labor and is composed of the Secretaries of the Treasury and Establishments (or their representatives) and one representative of employers and employees each. Proposals are prepared by the Wages Advisory Board, which is responsible for looking into minimum wage levels for unskilled workers in general, or by wages advisory councils which are concerned with minimum wages for skilled and semi-skilled workers in specific industries. 3.07 The Wages Advisory Board is a tripartite organization which consists of representatives of employers, labor and three independent members, appointed by the Government, one of whom chairs it. This Board is empowered to make en- quiries and recommendations for changes in the general minimum wage of condi- tions of service on their own volition or upon request from the Minister of Labor. The number of times which the Board has recommended changing the minimum wage is not known. However, the minimum wage for unskilled workers has only been increased twice since 1965 (para. 3.19). 3.08 In addition to the Wages Advisory Board, certain industries are represented by a wages advisory council whose composition and function are similar to the former. Wages advisory councils have been established for the tea, tobacco handling, wholesale and retail distributive trade, agriculture, road transport and motor engineering, and hotel and catering industries. Unlike the Wages Advisory Board which is responsible only for minimum wages for unskilled workers, the wages advisory councils also recommend minimum wages for semi-skilled and skilled workers in their respective industries. The Role of Trade Unions 3.09 Trade unionism in Malawi is industrial only; there are no craft unions. Malawi's trade unions are weak and their role is limited to nominal involvement in wage negotiations and in the settlement of disputes over conditions of service. In fact, the unions are ineffective in wage negotia- tions and the Government relies on and encourages the employers' associations  - 24 - to make a case for wage increases. The weakness of the trade unions, which is in part due to its weak and inexperienced leadership, 1/ has in large measure allowed the Government to carry out the National Wages and Salaries Policy with some degree of success, succeeding in restraining wages even in the face of persistent price inflation. Labor representatives do participate to some extent in the decisionmaking process. As mentioned earlier, employee represent- atives sit on the National Wages Commission and the Wages Advisory Board and councils. It is clear, however, that the Government feels that "employers in the private sector have a special responsibility for implementing the new wage policy since it is they rather than the trade union officials who possess the factual knowledge necessary to initiate and undertake a review of wage struc- tures and levels which is needed to give effect to the principles on which the policy is based. The understanding cooperation of the trade union leaders is also essential." 2/ The Wage Experience 3.10 The structure of value added per worker and earnings per worker across industrial sectors have remained very stable over the past decade. The sectors with the highest labor productivity pay the highest wages and conversely. Value added per worker (in 1977) ranges from a high of K 6,783 in financial services and real estate to a low of K 1,179 in building and construction (table 15); similarly, the range for average sectoral earnings per annum, for which the same two sectors form the upper and lower bounds, is from K 1,053 to K 431. 3/ With the exception of finance, average wages in all sectors clustered within the range of K 400-750 per annum, about 3.0 to 5.5 times per capita GDP. The high correlation between wages paid and value added per worker across sectors strongly suggests that labor productivity has a strong influence on wage determination. 4/ 1/ C. Chipeta, Role of Trade Unions and Employer's Associations in Economic Development and Employment Creation in Malawi, International Institute for Labour Studies, 1976. 2/ Government of Malawi, "A National Wages and Salaries Policy for Malawi," September 19, 1969 (Mimeo), p. 6. 3/ Agriculture has been excluded from these comparisons because of the lack of time series data for value added generated by estates and forestry and fishing. However, data does exist for value added by estates and government in agriculture for a few recent years. Dividing the 1977 figure by the total private and public wage employment in agriculture gives a value added per worker figure of K 184, about 24 percent above the average earnings per worker for that year. Value added per worker figures for 1978 and 1979 are K 178 and K 183, respectively. 4/ Based on table 15, the Spearman's Rank Correlation Coefficient was 0.82, with a 95 percent level of confidence.  - 25 - Table 15: VALUE ADDED AND AVERAGE EARNINGS PER WORKER, 1977 Value Added Earnings per Rank per Worker Worker Value Added Earnings per (Kwacha) (Kwacha/Year) per Worker Worker Financial Services and 6,783 1,053 1 1 Real Estate Wholesale/Retail Trade 4,743 663 2 4 Electricity and Water 3,607 708 3 3 Transport, Storage and 2,376 744 4 2 Communication Manufacturing, Mining and 2,371 537 5 6 Quarrying Community, Social and 2,298 541 6 5 Personal Services Building and Construction 1,179 431 7 7 Source: Statistical Appendix, tables 3.05 and 3.07. 3.11 Some indications of the long-term behavior of nominal and real wages may be obtained by examination of the time series of average earnings by productive sector (Statistical Appendix, tables 3.05 and 3.06). Interpretations of such data, however, must be made with considerable caution. In each case, the figures are sector averages across skills, occupations, races and sexes. Hence averages will change over time not only because wages paid are changing, but also because the occupational, racial and sex composition of the labor force is changing as well. In particular, in Malawi over the past decade three forces have been at work which would tend to limit the rise in average wages: (a) the bulk of additional employment has been generated at the lower end of the wage scale; (b) the proportion of Africans in wage employment has increased; and (c) the proportion of female wage workers has also increased. 3.12 Between 1969 and 1977 average nominal earnings (across all sectors, in public and private employment) grew at 2.2 percent per annum, 3.1 percent in the private sector and 1.0 percent per annum in the government sector (table 16). Wages in many sectors (e.g., agriculture, mining and manufacturing, and construction) grew at about 5 percent per annum or more. However, in finance the growth of average wages actually was negative and in community, social and personal services (dominated by government employment) wages only expanded by 1.5 percent per annum; the former undoubtedly reflects the rapid Malawianiza- tion of employment that took place in the sector while the latter reflects  - 26 - restraint in government wages increases as well as a considerable expansion of exployment at the lower end of the civil service salary scale (para. 3.16). 3.13 By the end of 1977, it was apparent that considerable adjustments in wages were called for. Labor markets were tight, a situation that persisted at least through the end of 1979. Numerous reports were made of labor shortages on tobacco and tea estates, especially in the peak seasons. Businessmen, interviewed by our mission, complained of difficulties in obtaining labor, especially with middle- and upper-level work skills. In addition, the civil service salary scale--which, between 1970-77 had been adjusted only once, by 6 Table 16: GROWTH OF NOMINAL AND REAL EARNINGS, 1969-79 a/ (percent per annum) Nominal Real b/ 1969-77 1977-78 1978-79 c/ 1969-77 1977-78 1978-79 c/ Agriculture, Forestry and Fishing 4.9 16.9 -1.2 -3.4 7.6 -9.4 Mining and Quarrying 8.4 9.9 6.6 0.0 1.9 -3.0 Manufacturing 6.3 8.5 0.3 -2.1 0.0 -8.4 Electricity and Water 5.0 -7.1 13.8 -3.3 -14.5 4.0 Construction 4.9 7.4 -0.6 -3.6 -0.9 -9.6 Wholesale/Retail Trade, Hotels and Restaurants 5.0 15.6 8.5 -3.2 6.7 -0.9 Transport, Storage and Communications 3.6 7.5 13.5 -4.6 -0.8 3.6 Financial, Insurance and Business Services -4.2 24.8 10.1 -11.7 15.1 0.4 Community, Social and Personal Services 1.5 35.0 5.0 -6.5 24.5 -4.2 Total, of which 2.2 17.0 4.0 -5.9 8.2 -5.2 Private 3.1 9.7 - -5.0 1.1 - Government 1.0 42.8 - -7.0 31.6 - a/ Growth rates for 1969-77 calculated using the least squares method. b/ The Blantyre Low Income Retail Price Index used to calculate real wages. c/ Provisional data. Source: Statistical Appendix, tables 3.05 and 3.06.  - 27 - percent in 1974--had gotten out of line with salaries in the private sector; the Government was finding it difficult to attract and retain qualified staff. 3.14 In 1978, average wages increased sharply. Businessmen bid up private sector wages in competition for labor. The Government drastically revised the civil service wage scale upwards by between 32 and 75 percent, depending upon the skill classification (para. 3.22). On balance, average wages rose by 17 percent, 9.7 percent in the private sector and 42.8 percent in the public sector. Wages rose dramatically in all sectors, ranging from lows of 7.1 percent in electricity and water to highs in excess of 15 percent in wholesale/retail trade, agriculture, finance and community, social and personal services (table 16). 3.15 Between 1969 and 1977 average earnings in real terms fell by 5.9 percent per annum, reflecting declines in all sectors (except mining and quarrying). 1/ By the end of 1977, the averages in real terms (across all sectors, public and private) had declined by 38 percent. The total declines over the eight-year period clustered in the range 20-30 percent in most sectors, but reached as much as 40 percent in community, social and personal services and 60 percent in finance. Part of these declines were recouped by the large real increase in average wages in 1978 which averaged 8.2 percent, 1.1 percent for the private sector and 31.6 percent for government. Nonetheless, average wages in real terms for 1978 were considerably below those of 1969. 3.16 For reasons that were outlined in para. 3.11 above, it would not be advisable to use the behavior of average real earnings as an indicator of worker real income (or welfare) over the period. The observed behavior is a product of changes in the structure of real wages across a variety of skills and occupations as well as changes in the structure of employment. While worker real incomes appear to have declined, there is evidence which suggests that the decline is less than recorded in the averages, and that in many cases there has been an increase rather than a decline (e.g., civil servants). Firstly, although nominal wages have been rising across the wage struc- ture, the rapid expansion of job opportunities at the lower end of the pay scale in both the private and government sectors have held down the increase in average nominal wages. For example, according to mission estimates, out of the 94 thousand additional private-sector jobs created between 1969 and 1976 over 75 percent were at wage levels below the average wage for 1969; similarly, over 57 percent of the additional government sector jobs were at wage levels below the 1969 average paid by Government. 2/ Additional employment at wages below the averages paid in 1969 would have exerted a considerable drag on average wages in the succeeding years. Secondly, in contrast to the fact 1/ Over the period, the low-income consumer price index rose by 87 percent. 2/ The mission estimates are based on data on wage employment by income classes in NSO, Reported Employment and Earnings Annual Report, 1976 (December 1978). 1976 is the last year for which figures are avail- able to make such an estimate.  - 28 - that table 16 shows average real earnings for government employees declining over the period, it is possible to show that the real income of a typical established civil servant would have been somewhat higher in 1978 than in 1970. Over the period, he would have received annual merit increases of 4.4 percent (reflecting increased seniority and ability to perform one's job) and general salary increases of 6 percent in 1974 and 32 percent (at a minimum) in 1978. Taken together, these increases total 97.5 percent as compared with the 85 percent increase in the low-income consumer price index over the period. Those civil servants who received increases of 50 to 75 percent in 1978 would have ended up quite far ahead in real terms. Thus, it appears that the slow rise in average earnings of government employees is due to a significant shift in the composition of government employment toward lower-income employees; in fact, it can be shown that if the composition of civil service employment had been the same in 1978 as in 1970, 1978 average wages would have been 20 percent higher than they were. Nonetheless, it is also clear that prior to the 1978 increase civil service salaries had lagged quite far behind inflation (as well as behind salaries in the private sector). 1/ Productivity and Labor Costs 3.17 The slow rise in average nominal earnings combined with greater labor productivity have led to moderate increases in unit labor costs over the period. As shown in table 17, the productivity of all non-agricultural labor rose at an annual average rate of 1.7 percent per annum and labor productivity has been increasing in all sectors (except community and social services), from relatively modest amounts in manufacturing and finance to fairly rapid rates in transport and in construction. 1/ Since 1970, civil service salaries have continually lagged behind inflation. At first, the lag was quite small but with more rapid inflation beginning in 1974-75 it became substantial. Generally, during 1975-77, the typical civil service salary would have been 17-20 percent lower than 1970 in real terms. The 1978 increase more than corrected this decline.  - 29 - Table 17: GROWTH IN LABOR PRODUCTIVITY, 1969-76 a/ (percent per annum) Manufacturing, Mining and Quarrying 0.5 Construction 4.5 Electricity and Water 1.3 Wholesale/Retail Trade 1.2 Transport, Communication and Storage 2.9 Finance and Real Estate 0.6 Community, Social and Personal Services -2.5 Total--All Non-Agricultural Employees 1.7 a/ Measured as the implied annual rate of expansion in real value added per worker between the years 1968-70 and 1975-77. Source: Mission estimates. These rates of productivity expansion are quite respectable by the standards of other African LDCs. However, they have not been sufficient to offset even the rather modest increase in average nominal wages that has occurred over the period. Consequently, unit labor costs increased between 1969-77, but by less than 30 percent in all sectors except for manufacturing (table 18). However, as will be shown in paras. 3.25 and 3.26 below, these increases are very modest compared to what has happened to wages in other African countries or to the prices Malawi pays for imported final goods or intermediate and capital goods. It is, therefore, unlikely that the increase in unit labor costs has had any harmful effects on Malawi's international competitiveness. Quite the contrary, on the basis of labor costs, Malawi's competitive position appears to have improved over the period.  - 30 - Table 18: LABOR PRODUCTIVITY AND COSTS, 1969-77 (Index: 1969 = 100) 1969 1971 1974 1977 Real Value Added per Worker (1) Manufacturing, Mining and Quarrying 100 94 99 110 Construction 100 116 108 129 Electricity and Water 100 85 94 112 Wholesale/Retail Trade 100 116 92 119 Transport, Storage and Communications 100 120 125 104 Financial Services and Real Estate 100 80 151 74 Community, Social and Personal Services 100 84 74 86 a/ Wages per Worker (2) Manufacturing, Mining and Quarrying 100 107 137 164 Construction 100 104 124 147 Electricity and Water 100 81 97 145 Wholesale/Retail Trade 100 99 106 154 Transport, Storage and Communications 100 110 125 132 Financial Services and Real Estate 100 98 89 68 Community, Social and Personal Services 100 99 102 111 a/ Labor Costs per Unit of Value Added (2) (1) Manufacturing, Mining and Quarrying 100 114 138 149 Construction 100 90 115 114 Electricity and Water 100 95 103 129 Wholesale/Retail Trade 100 85 115 130 Transport, Storage and Communications 100 92 99 127 Financial Services and Real Estate 100 123 59 92 Community, Social and Personal Services 100 118 138 129 a/ a/ 1976 figure. Source: Statistical Appendix, table 3.12. Wage Structure: Minimum Wages 3.18 The Government sets minimum wages for both unskilled and semi-skilled workers. While these wage levels are in principle meant to act as a "floors," in practice, the Government, in keeping with the premises of the National Wage and Salaries Policy, has considered these (and encouraged the private sector to view them as) a controlled wage. However, conversations by the mission with government officials as well as with private sector business people indicate that since the mid-1970s it has become increasingly difficult to recruit and retain workers at these rates; as a consequence of the tightening labor  - 31 - market, market wages are from 20 to 100 percent above the statutory minimums for the various skill categories (para. 3.21). This disparity is even greater during peak agricultural periods when the tea and tobacco estates compete for laborers who have the alternative of working on their own smallholdings (paras. 4.14 - 4.22). 3.19 Minimum wages for unskilled workers have only increased twice since 1965, and are presently 14-19 percent above 1965 levels, depending on the location of employment (table 19). Over the period, the minimum wage has fallen relative to per capita incomes; whereas, in 1967 the minimum wage was higher than per capita GDP by 70 percent, by 1978 it was just two-thirds of per capita GDP. Moreover, with prices more than doubling over the period, minimum wages have fallen in real terms as well. The minimums are differenti- ated by location in an effort to adjust for cost-of-living differences in the major cities and rural areas. The types of jobs which an unskilled worker might obtain include, for example, day laborer, messenger, shop attendant, sanitary assistant; weeder, loader, plucker, pruner or watchman in the tea industry; kitchen or bar hand, porter, laundry hand, cleaner, assistant or trainee waiter, or ground garden hand in the hotel industry. Table 19: STATUTORY MINIMUM WAGES FOR UNSKILLED WORKERS (tambala/day) 1965 1966-72 1973-79 Blantyre/Limbe 35 38 40 Zomba, Mzuzu, Lilongwe 30 32 35 All Other Areas 21 23 25 Source: Statistical Appendix, table 3.09. 3.20 Minimum wages for semi-skilled and skilled workers have also been set for a number of industries, including the road transport, building, retail, tobacco handling, tea handling, and hotel and catering industries (Statistical Appendix, table 3.10). 1/ The statutory minimum wage for workers in these 1/ Government of Malawi, Laws of Malawi, Regulations of Minimum Wages and Conditions of Employment.  - 32 - industries depends on one or more of the following criteria: (a) job diffi- culty; (b) worker's skill level; (c) worker-s education level; and (d) location of the job. Thus a truck driver's minimum wage depends upon the vehicles carrying capacity, with drivers on larger vehicles getting higher pay. The skill of the worker also influences his wage. For example, the minimum wage for a tradesman in the building industry depends upon their grade level as certified by his National Trade Test Certificate. 1/ The minimum wage for a Grade I tradesman is double that for a Grade III tradesman. Education attainment similarly affects the offered minimum wage. For example, a clerk, shopkeeper or telephone exchange operator in the tobacco handling industry who has not passed Standard 8 receives a minimum wage which is only 2-3 tambala/day over that for unskilled workers (table 20). The minimum wage is increased by 44 percent if the worker passes Standard 8 (e.g., is a primary school graduate) and increases further depending upon the level of secondary education recieved. Thus, assuming fulltime employment, a clerk in Blantyre who has not passed Standard 8 earns at least K 134 per year; with a Standard 8 degree, he would earn at least K 193 per year and with a Form IV degree, K 346 per year. Finally, in some industries the minimum wage is differentiated by location in more or less the same manner as that for unskilled workers. 1/ To obtain the National Trade Test Certificate the worker must pass a skill test given by the Government. This certificate verifies a tradesman's grade level; a worker can, after acquiring more experience, retake the test and upgrade his standing. Tests are given in the following skills: tinsmith, bricklayer, carpenter, electrician, fitter, joiner, mechanic, painter, plasterer, plumber and pipe fitter, stonemason, wall tiler, welder or wood working machinist.  - 33 - Table 20: STATUTORY MINIMUM WAGE FOR CLERKS IN THE TOBACCO HANDLING INDUSTRY (tambala/day) Lilongwe, Zomba and All Other Blantyre Mzuzu Areas Employees Who Have Not Passed Standard 8 43 37 27 Employees Who Have Passed Standard 8 62 62 62 Form II 83 83 83 Form IV 111 111 111 Source: Statistical Appendix, table 3.10. 3.21 The statutory minimum wages are of interest because they indicate the relative pay differentials between occupations--at least at one point in time. However, in many instances, actual market wage rates have risen substan- tially above the statutory minimum (para. 3.17). Since the mid-1970s, there is evidence of farm workers receiving wages considerably in excess of statutory minimums (tables 30, 31 and 32). Moreover, average wages for field laborers on tea and tobacco estates were at least 60 percent over the minimum wage for unskilled workers by 1975 and 1976 (tables 33 and 34); evidence on average earnings of wage labor in the agricultural sector suggests that such wages continued to rise rapidly during 1977 and 1978. In addition, prior to the civil service pay increases of 1978, the Government was having difficulty attracting workers at all skill levels, even the least skilled. For example, from 1974/75 to 1977/78, the lowest Industrial Class Daily Worker (Classified Worker III) was paid 48 tambala/day, 20 percent above the minimum wage; in 1978 these wages were increased 50 percent to 72 tambala/day. Similarly, prior to the 1978 increase, tradesmen in the government pay scale were remuner- ated at about the same rate the minimum wages allowed for tradesmen in the building industry (table 21). Again, 50 percent pay increases were granted in 1978. It is apparent that such large increases were necessary to maintain competitive wages with the private sector.  - 34 - Table 21: COMPARISON OF STATUTORY MINIMUM WAGE FOR TRADESMEN IN THE BUILDING INDUSTRY WITH OFFICIAL CIVIL SERVICE WAGE FOR TRADESMEN (tambala/hour) Statutory Civil Service Wage Minimum a/ 1974/75-1977/78 1978/79 Tradesman I 24-31 32 48 Tradesman II 19-21 21 32 Tradesman III 13-15 16 24 a/ Hourly wage increases by 2 tambala for each year of service. Source: Statistical Appendix, tables 3.10 and 3.11. Wage Structure: Civil Service Salary Scale 3.22 The behavior of the civil service salary scale is of interest not only because it reveals the structure of pay across occupations but also because it shows how well pay of civil servants has fared relative to the rate of inflation. Moreover, to the extent that government salaries are competitive with those in the private sector--and, with some allowance for lags in adjust- ment, this is reasonably so in Malawi--the civil service scale is the only existing indicator of the structure of pay in the private sector. Statistical Appendix, table 3.11 shows the civil service salaries for a representative sample of skills for the period 1970/71 through the present. During the period, there have been two major salary increases--the 6 percent across the board increase of 1974/75 and the multi-rate substantial increase of 1978/79; the latter increased salaries by 32 to 50 for most skill levels but by more than 100 percent in some. Together with the annual step increases (estimated at 4.4 percent per annum), these increases made the remuneration to most occupational classes in the civil service higher in real terms in 1978 than in 1970. 1/ For example, the pay for those positions which received a 32 percent salary increase in 1978/79 (together with the 1974/75 salary increase and annual step 1/ The exceptions to this statement are some super-scale posts and some industrial class posts which did not have provision for annual step increases (the 1978/79 salary scale allowed step increases for super- scale posts for the first time).  - 35 - increases) would have been 7 percent better off in real terms than in 1970; those with a 50 percent increase would have been 21 percent higher. 1/ 3.23 With respect to the overall civil service salary structure, there has been no noticable widening in the gap between the very top and bottom over the period. The bottom class (Industrial Class Worker III and Subordinate Class (F4)) received K 225 per annum in 1978, about 40 percent above per capita GDP. The highest paid civil servants in the administrative and profes- sional, and super-scale groups received incomes of K 4,053 and K 9,648, respectively, 18 and 43 times the level of bottom groups; these ratios are virtually unchanged over the period. Between the two extremes, there have been some shifts in relative positions; however, it is not possible to make a generalization that high income occupations gained relative to low income occupations or vice versa. Some of the groups who gained relative to their fellow workers were already highly paid (e.g., the administrative and profes- sional class together with the upper ranks of the secretarial, nursing and teaching staffs); other gainers, however, included relatively low paid workers (e.g., the subordinate and industrial class workers together with the lowest ranks of secretarial workers). Groups that lost ground relatively were also mixed including the executive, technical and clerical officer classes together with all ranks of the police and prison service and the lower ranks of the nursing and teaching professions. In general, the results seem indicative of the Government's continual attempt to maintain competitivness with the private and public enterprise sectors by offering the largest increases to the skills in shortest supply. An Assessment of Wage Policy 3.24 As stated above (paras. 3.01 and 3.02), national wage policy has aimed at restraining wage increases in order to provide incentives for employ- ment generation, to moderate wage push inflation and maintain Malawi's com- petitiveness in international markets, and to limit the size of the urban- rural gap. By all indications, this policy has been quite successful. Wage increases have been moderate compared to the experiences of LDCs or the rate of world inflation. Moreover, employment expansion has been very rapid: growth has far exceeded 5 percent per annum in most sectors and the high overall and sectoral employment elasticities (averaging 0.8) are an indication that pro- duction methods are relatively labor intensive. Further, the economy has been very successful in generating jobs at the low income end of the wage scale; since 1969, most of the additional jobs created in the private and government 1/ By the same token, many of this skill levels where annual step increases were not provided for would have been worse off in real terms. For example, the highest civil service post--the super-scale level Sl/Pl--received pay increases of 6 and 62.5 percent which would have meant an overall real decline of 7 percent between 1970 and 1978; similarly the 6 and 60 percent wage increase received by a Industrial Class III worker would have re- sulted in a 14 percent decline.  - 36 - -.- ors have been at wage levels below the 1969 averages. While there is no clear evidence on what has happened to the rural-urban income gap over the period, the gap remains wide and the populations of cities, large and small, have been expanding rapidly. Nonetheless, urbanites remain a relatively small proportion of the total population, urban unemployment is quite low (except for females and the relatively less educated), and the incidence of poverty and extreme deprivation is still quite rare. In addition, it is possible to show that increases in earnings and in unit labor costs have been relatively moderate compared to price increases for other factors of production and that Malawian labor is less expensive than in many other African nations. 3.25 While average earnings have been rising both absolutely and relative to labor productivity, it is clear that on average neither earnings nor unit labor costs have kept pace with the rise in prices generally in the economy. In table 22, indexes of average earnings and labor costs per unit of output in manufacturing, mining and quarrying are compared with three other types of indexes: (a) the World Bank's index of international prices; (b) the Blantyre low-income and high-income consumer price indexes; and (c) the unit value indexes for imported intermediate and capital goods. Increases in prices in Malawi's imported inputs of capital and intermediate goods have been closely related to increases for exported manufactures from the industrialized countries (as reflected in the World Bank's Index of International Prices); these indexes for imports have registered faster inflation than consumer prices in Malawi (except for high-income index which has a more substantial imported component) which in turn have risen more rapidly than the indexes for average earnings or unit labor costs. This data provides support for two general conclusions (the points made here for manufacturing would apply as well to other sectors). First, over the period, labor has become cheaper relative to other factors of production; the smaller increase in average earnings relative to capital goods and intermediate inputs may help to explain the rapid expansion in demand for labor and in employment and the relatively high employment elasticities found in Malawi. 1/ Secondly, it is unlikely that wage increases have provided much (if any) fuel for inflation. The increases in average earnings, especially if increases in productivity are also taken into account, have been substantially less than price increases over the period considered (this is even more pronounced in other sectors than manufacturing 2/). More importantly, it is likely that wages are being pulled up by demand factors than pushed up by institutional forces. Forces which would push up wages in defiance of market conditions seem weak or inoperative in Malawi: trade unions are not aggressive; the government sector does not exercise wage leadership but rather tries to maintain reasonable competitiveness with private sector salary scales. In all, the suggestion is strong that market forces play an overriding role in wage determination. 1/ The increase in the cost of capital relative to labor has also been accelerated by increases in duties on capital goods during the past two years. 2/ See table 18.  Table 22: INDEXES OF EARNINGS, LABOR COSTS, AND GOODS PRICES (1970 = 100) 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979a/ Indexes of: Earnings in Manufacturing, Mining and Quarrying 100.0 104.5 115.0 114.2 133.9 138.8 141.5 160.1 169.0 167.9 Labor Costs per Unit of Output in Manufacturing, Mining and Quarrying 100.0 115.8 112.3 120.5 139.9 146.7 177.2 151.4 n.a. n.a. Low-Income Consumer Price Index (Blantyre) 100.0 108.2 112.1 117.8 135.9 157.0 163.8 170.7 185.2 203.5 High-Income Consumer Price Index (Blantyre) 100.0 108.3 112.5 118.9 140.0 167.5 187.7 212.0 246.4 286.1 Indexes for Imported Goods: Machinery and Transport Means 100.0 103.0 107.3 127.1 151.4 199.6 226.1 236.0 247.8 282.0 W Building Materials 100.0 105.2 110.7 142.1 172.2 186.8 244.8 280.2 272.3 290.6 ' Other Industrial Inputs 100.0 108.5 113.9 132.5 197.7 231.0 253.7 283.9 266.4 299.8 Index of International Prices b/ 100.0 107.9 116.0 141.7 181.4 214.8 231.1 246.6 267.2 292.8 a/ 1979 figures are privisional. b/ This index is recorded in US dollars. For comparability with the kwacha prices of Malawi's imports, changes in the index year-to-year have been corrected for changes in the exchange rate between US dollars and the kwacha. Source: Derived from Statistical Appendix, table 3.12, and Economic Planning Division, Economic Report 1980, tables 4.6 and 8.5.  - 38 - 3.26 A number of studies have suggested that East African countries have difficulty competing in international trade because, among other things, wages are too high. 1/ Following independence, the argument goes, the continued employment of large number of expatriates, the desire to reduce the gap between African and expatriate salaries, the presence of parastatals which are less subject to market forces, and the willingness to use tariffs/quotas to reduce foreign competition have combined to allow rising labor costs to price African goods out of the international market. From the foregoing, it should be clear that Malawi has resisted these temptations. In fact crude comparisons suggest that average wages in Malawi are significantly below those of a number of other nearby African countries and that on this basis Malawi would have a considerable advantage in international competition. 2/ Table 23 compares average earnings in manufacturing and construction in Malawi and six other African countries (with Malawian average earnings set equal to 100). In no other country are earnings in manufacturing or construction within 50 percent of the Malawian level (the apparent exception of Swaziland is explained by the fact that the Swazi figures are for unskilled workers only; the earnings of semi-skilled and skilled workers in Swaziland are 2 to 6 times those of unskilled workers). As compared with average earnings in manufacturing and construction in Malawi, those of the other countries are higher in the following proportions: Tanzania--50-100 percent more; Kenya--double; Zambia and Zimbabwe-- three to four times; and South Africa--five to six times. Just comparing Malawian earnings with those of African employees in Zambia and Zimbabwe would lower the ratios to 2-3:1. Unless these wage differentials are offset by large differences in labor productivity (and on this there is no evidence), labor costs alone would make Malawian manufactures competitive with those of its neighbors in international trade. 3/ 1/ For a summary of these arguments see S. Acharya, "Perspectives and Problems of Development in Low Income, Sub-Saharan Africa" in Two Studies of Develop- ment in Sub-Saharan Africa, IBRD Staff Working Paper No. 300 (Washington, D.C.: October 1978). 2/ Such comparisons are necessarily crude because of differences in industrial mixes and in skill, racial, and sex composition of the labor forces in addition to differences in labor costs in specific manufacturing tasks. To measure differences in labor costs between countries accurately, it would be necessary to have data on wages and on labor productivity for specific tasks. Such data is not readily obtainable in most countries. 3/ Of course, a large number of additional factors determine the competitiveness of manufactures in international trade--e.g., transport costs, the quality of the product, marketing ability and the reliability of delivery.  Table 23: COMPARISONS OF AVERAGE MONTHLY EARNINGS IN MANUFACTURING AND CONSTRUCTION IN SELECTED AFRICAN COUNTRIES, 1970-77 (Malawi - 100) Zambiab/ Zimbabwe-/ .!/mpoeeami Afia mpoes IKna/' Tan d/ aI Malawi- African Employees All Employees African Employees All Employees Kenya- Tanzaniea- Swaziland-/ South Africa-/ - - - - - - - - - - - - - - - - - - - - - - -- M a n u f a c t u r i n g - - - - - - - 1970 100.0 276.9 397.4 194.1 384.1 265.0 152.5 n.a. 477.3 1971 100.0 310.3 447.2 189.2 382.0 244.3 151.5 n.a. 495.9 1972 100.0 294.1 332.5 177.3 357.8 218.6 136.7 108.9 433.8 1973 100.0 346.9 465.7 195.8 393.3 247.7 160.2 124.7 551.9 1974 100.0 308.5 405.5 189.9 378.6 226.8 191.8 134.3 565.8 1975 100.0 339.6 419.0 217.,' 428.2 251.7 n.a. 130.1 610.2 1976 100.0 454.5 462.8 251.1 483.5 242.5 n.a. 118.8 609.6 W 1977 100.0 312.8 382.6 n.a. n.a. n.a. n.a. n.a. 596.7 - - - - - - - - - - - - - - - - - - - - - - - - - C o n s t r u c t i.o n - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 1970 100.0 209.5 287.9 156.2 280.6 2i5.1 95.3 n.a. 422.1 1971 100.0 252.5 342.6 201.6 359.9 246.4 112.8 n.a. 497.2 1972 100.0 255.8 331.6 206.2 341.9 241.0 107.9 101.5 477.1 1973 100.0 286.4 364.3 194.0 342.2 252.1 108.4 93.4 590.6 1974 100.0 256.6 336.6 199.8 290.6 226.1 176.7 110.0 614.5 1975 100.0 255.2 328.5 218.8 379.6 250.9 n.a. 109.3 607.5 1976 100.0 281.5 343.5 240.6 426.3 247.5 n.a. 159.1 579.3 1977 100.0 235.3 290.3 n.a. n.a. n.a. n.a. n.a. 609.0 a/ Average earnings of all workers. b/ Average earnings of all workers as classified. c/ Average earnings of adult male workers. d/ Average earnings of unskilled workers only. Average earnings of semi-skilled workers are approximately double of skilled workers approximately six times those of unskilled workers. Source: ILO, Yearbook of Labour Statistics, 1978; IBRD, Zambia, Basic Economic Report (Report No. 1586-ZA; October 1977) and UN Zimbabwe--Towards a New Order, 1980.  - 40 - 3.27 In view of the apparent success of past wage policy in providing incentives for employment generation and skill development, maintaining Malawi's international competitiveness, and moderating the size of the rural- urban gap, few changes in future policy seem necessary or desirable. What suggestions might be made are aimed at making government policy more flexible in an inflationary environment and are consistent with the objectives of past policy. In the future, price increases of 6-10 percent per annum (and perhaps sometimes higher) are likely to be the rule rather than the exception. The origins of this inflation are likely to be largely foreign--arising from rising prices of imported manufactured goods, petroleum, etc., perhaps aggra- vated at times by periodic transport difficulties. Under such circumstances, more frequent, say annual, and moderate wage adjustment would be desirable (this is particularly so for the civil service where past wage changes have tended to be infrequent and large). The role of wage reviews should not be to keep wages from rising: wages should increase and ordinarily--given the size of likely price increases--by amounts in excess of the gains in labor produc- tivity (which have averaged less than 2 percent per annum in most sectors in the past); to limit wage increases to arbitrary limits (such as 5 percent or less) or to the size of labor productivity increases would result in falling real incomes for workers. By using the prices of imported goods and the prices of domestic consumer goods as guidelines, the Government's wage reviews would attempt to determine whether proposed increases were consistent with its objectives of promoting employment, maintaining international competi- tiveness, providing incentives for the development of scarce skills, and controlling the size of the rural-urban gap. Guided by the former, the Government would attempt to keep wage increases in line with price increases for imported goods (including capital goods), thus helping to maintain Malawi's international competitiveness and incentives for employment. Guided by the latter, the Government would review the effects of wage-price changes on real incomes, hence on incentives for skill development and on the rural-urban gap. 1/ The use of such guidelines would provide only loose boundaries for wage decisions; the actual outcomes in any case would depend on the relative values the Government places upon its various goals--providing incentives for employment generation or for skill development, maintaining international competitiveness and insuring balance between rural and urban welfare. 2/ 1/ It would also seem desirable for the Government to monitor wage developments in other African countries which might be competitive in export markets or actual or potential sources of imported manufactures. Such monitoring would have to have the long view in mind, however, since wage data in most African countries is published with a considerable lag. 2/ Malawian officials have sometimes argued that if the external terms of trade turn unfavorable, wage restraint should be used to reduce real incomes and hence aggregate demand. With the possible exception of civil service salaries, the advantages of wage policy over fiscal policy in this situation are not clear. An income tax increase would be faster, have broader coverage (of both wages and profits), and could be more finely tuned to ensure an equitable sharing of the burdens. Modern sector wage and profit income appears to be quite well covered by income taxation in Malawi.  - 41 - IV. THE RURAL AND URBAN LABOR MARKET Introduction 4.01 This chapter describes the employment opportunities in rural and urban labor markets, with particular emphasis on labor supply and demand and the determinants of wages. The discussion pays particular attention to the relationship between the rural labor market and unskilled and semi-skilled worker who makes up the vast majority of Malawi's labor force. The evidence presented suggests that the labor markets work quite well and that wages respond to changes in supply and demand conditions. The Rural Labor Market 4.02 The smallholder householder faces a number of alternatives in the allocation of labor between different crop and farm operations as well as between agricultural and non-agricultural enterprises such as handicrafts, carpentry, local wage employment and migration. The rural worker's decision to allocate his or her time between these alternatives is a function of the relative returns to each, the way these activities complement each other because of seasonal factors, as well as of the worker's value of leisure and cultural activities relative to material goods. Most rural workers are self-employed on smallholdings and do not receive the returns to their labor in the form of wages. Instead, subsistence agriculture remains the main source of income with cash agriculture an increasingly important income source. Despite the fact that most of the rural population is self-employed, however, many workers also participate in the local wage economy during part of the year either as employer, employee or both. Wage employment in agriculture takes place primarily during the peak planting and harvesting seasons, with non-agricultural employment opportunities sought in the off season. 4.03 There are no comprehensive studies of the structure and organization of Malawi's rural labor market. However, several surveys of smallholders in various areas of the country do contribute to our understanding of this market, in particular, a socioeconomic survey of the Lower Shire Valley conducted in 1972/73 1/ and several farm management surveys of smallholders conducted by the Agro-Economic Survey Unit (AES) of the Ministry of Agriculture and Natural Resources. Opportunities for Local Farm Employment 4.04 There are three types of labor which the smallholder can use to supplement family labor during peak seasons: communal, daily paid labor and permanent paid labor. Communal labor has traditionally played the most important role in providing the extra labor needed during the peak planting 1/ D. R. Coleman and G. K. Garbett, Labour Economy of a Peasant Community in Malawi Second Report of the Socio-Economic Survey of the Lower Shire Valley (Manchester: 1976).  - 42 - and harvesting seasons. The grower arranges a day during which members of the extended family and often other members of the local community work in his garden. The grower provides food and beer for the workers, and is expected to reciprocate by contributing his labor to others who call for a communal work session. Ganya, or daily paid labor, is also used to supplement family labor. The worker is paid a prearranged fee, mainly in cash, but often partly in kind. Regular hired labor may be hired on a more permanent basis, often for an entire year and generally for over a month at a time. These workers usually live with the farm family, receiving part of their payment in food. Table 24: EMPLOYMENT OF HIRED LABOR BY SMALLHOLDERS a/ Cash Expenditure on Average Annual Percent of Hired Labor as a Payment to Hired Households Percentage of Total Labor by Household Hiring Labor Cash Farm Expenditure Hiring Labor Survey Area (%) (%) (Kwacha) Zomba West b/ 51 50 8.55 Dedza North c/ 31 7 3.06 South West Mzimba d/ 61 26 10.40 Thiwi-Lifidzi d/ 49 45 4.18 Bwanje Valley e/ 97 61 6.32 a/ Includes communal labor for which some type of renumeration was given (cash or kind), permanent and casual labor. b/ Survey conducted in 1977/78. c/ Survey conducted in 1976/77. d/ Survey conducted in 1975/76. e/ Survey conducted in 1972/73. Source: Agro-Economic Survey Unit, Ministry of Agriculture and Natural Resources. 4.05 Table 24 shows the extent of use of hired labor by smallholders in several areas. In most of the areas surveyed, over 50 percent of the households used hired labor to supplement family labor. Except for the Bwanje Valley and Thiwi-Lifidzi areas, the relative importance of communal, permanent and casual labor is not known. About 97 percent of all smallholders in the Bwanje Valley used hired labor. This high proportion of households hiring labor may be explained by the fact that 93 percent of the households surveyed cultivated tobacco. Hired labor was mainly used during the garden preparation stage of the planting cycle. In the Bwanje Valley it is estimated that 20 percent of  - 43 - the hired labor is permanent, 74 percent casual and only 6 percent communal. 1/ A similar pattern is found in Thiwi-Lifidzi (table 25) 2/ where the most common type was day labor (83.2 percent), then permanent (15.3 percent), with communal labor playing a relatively minor role (1.5 percent). Of the 49 percent of households in Thiwi-Lifidzi which employed labor during the survey period, 26 percent used hired labor for one month or less, 16 percent for 2 to 3 months, and 7 percent for 4 months or more. The relationship between the season and the use of hired labor is shown by data from the Bwanje Valley. About 6 percent of the total hours devoted to agricultural activities were performed by hired labor. This use of hired labor was related to the agricul- tural calendar with the number of hours of labor hired per month peaking during the garden preparation season (December to January) and during harvesting (May through June). 4.06 In Thiwi-Lifidzi, the households use of hired labor increased with holding size. Only 14 percent of households with half a hectare or less hired help while 91 percent of those with more than 3 hectares did. Furthermore, as the holding size increased, smallholders tended to use hired labor for longer periods (table 25). 1/ Agro-Economic Survey, Bwanle Valley, Report No. 25, September 1978. 2/ Agro-Economic Survey, Thiwi-Lifidzi, Report No. 24, February 1978.  - 44 - Table 25: PERCENT OF HOUSEHOLDS IN EACH HOLDING SIZE GROUP EMPLOYING HIRED LABOR, THIWI-LIFIDZI, 1975/76 Percent Hiring for Holding Percent of None 1 2-3 4+ All Size Households Hired Month Months Months Households 0.0-0.5 7.1 86 14 0 0 100 0.5-1.0 24.1 59 28 11 1 100 1.0-1.5 22.8 61 16 22 0 100 1.5-2.0 20.8 50 39 8 3 100 2.0-3.0 18.4 33 22 26 19 100 3.0-4.0 3.3 9 30 30 30 100 4.0+ 3.4 9 29 21 41 100 Total a/ 100.0 51 26 16 7 100 a/ Totals may not add up to 100 due to rounding errors. Source: Agro-Economic Survey Unit, Thiwi-Lifidzi, Report No. 24. Employment on Agricultural Estates 4.07 The expansion of estate agriculture and the resultant growth of employment opportunities since independence has added an important dimension to the rural economy. In 1970 there were 220 estates occupying 2 percent of the cultivable land. By 1978, the number of estates totalled 1,107 occupying 13 percent of cultivable acreage. Of these, 524 were flue-cured tobacco, 556 burley-cured tobacco, 26 tea and one sugar estate. The average number of employees engaged by commercial agriculture has similarly expanded, from 42,600 in 1969 to 148,300 by 1978, an average annual growth of 15 percent per annum (table 26).  - 45 - Table 26: EMPLOYMENT IN COMMERCIAL AGRICULTURE ('000 persons) Other Private Commercial Year Tea Estates Tobacco Estates Agriculture Total 1969 30.1 8.1 4.5 42.6 1970 30.7 13.1 4.8 48.6 1971 32.6 15.9 5.2 53.7 1972 32.5 20.2 6.8 59.5 1973 35.2 24.6 11.5 71.4 1974 35.2 22.5 17.1 74.8 1975 36.8 20.5 28.8 86.1 1976 36.7 30.6 28.5 95.8 1977 39.6 71.7 a/ 21.5 132.8 1978 39.0 87.5 21.8 148.3 a/ Before 1977, only firms employing over 20 employees were included. After 1976, all firms are included. Figures for 1977 and 1978 include about 18,300 workers not previously counted. Source: NSO, Reported Employment and Earnings Annual Report, various years, and official sources. 4.08 All of the tea estates, the larger tobacco estates, and the sugar estate are run by professional and experienced managers, often expatriates. The smaller tobacco estates (100 acres or less) are generally run by Malawians. Flue-cured tobacco estates are run by the estate owner or manager whose labor force is paid on a piece-work basis. Most burley estates, on the other hand, are farmed by tenants who are allocated two-acre plots. These tenants sell their produce to the estate owner at a guaranteed price. In 1978, there were 11,918 tenants working in Malawi's burley estates.  - 46 - 4.09 The sociodemographic characteristics of the estate worker have been analyzed as part of the study of the local economy of the Lower Shire Valley. 1/ This study surveyed 200 randomly selected workers at the SUCOMA sugar estate, which is located in the Chikwawa District of the Lower Shire Valley, in 1973. The study identified three types of estate workers. The first type, which characterizes those who come from the southern region, and in particular those originating from districts closest to the estate, maintains a family farm and supplements his income with wages from estate employment. His farm is managed by his wife in his absence. This pattern is reinforced by the seasonality of employment at SUCOMA. The workers have a long period of leave which coincides with the onset of the rainy season. This allows the people with nearby farms to assist with the preparation and planting of their fields. The second type of characteristic of migrants whose rural origins are farthest from the estate. The worker is older and more likely to be accompanied by a spouse. The household does not participate in cash cropping and the family derives its income almost exclusively from the estate earnings. A third type is a young, unmarried man who may contribute to the family farm but who has not yet set up independent farming. This last group has the highest turnover rate, tending to work at SUCOMA for only one season. 4.10 Almost 72 percent of the estate's labor force came from the southern region and 45 percent originated from the area immediately surrounding the estate, the Lower Shire Valley (table 27). In general, those districts farthest from the estate contributed the fewest workers. This distance effect is not surprising and is consistent with the evidence from other studies on labor migration. Factors such as intervening opportunities for wage employment, and the cost and ease of transportation as well as the availability of informa- tion about jobs are all related to distance between the potential worker and job opportunity. 2/ 1/ Coleman and Garbett, op. cit. 2/ "Internal Migration in Less Developed Countries," World Bank Staff Working Paper, No. 215, September 1975.  - 47 - Table 27: SUCOMA WORK FORCE BY ORIGIN Percentage of Percentage Workers Originating Median Percentage Accompanied in Each Region Age Unmarried by a Spouse Region of Origin (%) (years) (%) (%) Northern 10.0 42.0 5.0 75.0 Central 18.5 33.7 10.8 64.9 Southern 71.5 29.7 18.9 37.1 Lower Shire Valley 45.0 27.7 25.6 25.6 Rest of Region 26.5 33.0 7.6 56.6 Total 100.0 31.6 16.0 46.0 Source: Coleman and Garbett, Labour Economy of a Peasant Community in Malawi, Second Report of the Socio-Economic Survey of the Lower Shire Valley (Manchester: 1976). 4.11 The opportunity for cash cropping and population pressure on land are also important factors. Within the Lower Shire Valley itself, those areas with increasing population pressure on the land contributed more workers than some areas that were closer to the estate. Table 28 gives the workers' reasons for seeking estate employment. The workers from the Chikwawa District cite the estates nearness to home which allows them to grow cash and subsistence crops. Nearness to home is less important than the opportunity to find employment, for those from Nsanje District, where opportunities for cash cropping are more limited. For those not from the two districts closest to the estate (Chikwawa and Nsanje), the opportunity to find wage employment is the primary reason for joining SUCOMA's labor force.  - 48 - Table 28: REASONS FOR CHOOSING WORK AT SUCOMA (percent) Reasons Given by District of Origin Workers for Choosing All to Work at SUCOMA Chikwawa Nsanje Elsewhere Districts Near Home 34.4 24.1 9.9 19.4 Possible to Work at SUCOMA and Still Grow Crops at Home Village 19.7 - 5.4 9.0 Possible to Grow Subsistence Crops at SUCOMA 6.6 3.4 4.5 5.0 Nowhere Else to Work 23.0 48.3 43.2 37.8 To Earn Money 3.3 10.3 6.3 6.0 To Reach a Target (such as to Purchase Clothes) - 3.4 8.1 5.0 Good Pay and Conditions 8.2 10.3 5.4 7.0 Transferred a/ - - 9.9 5.5 Interesting Work b/ 4.9 - 7.2 5.5 Total c/ 100.0 100.0 100.0 100.0 a/ Men who transferred from the Lonhro Sugar Estate in Rhodesia. b/ Response from supervisors and foremen only. c/ Totals may not added up due to rounding. Source: Coleman and Garbett, Labour Economy of a Peasant Community in Malawi, Second Report of the Socio-Economic Survey of the Lower Shire Valley (Manchester: 1976). Opportunities for Non-Agricultural Employment in Rural Areas 4.12 Very little information is available on the extent to which the rural population engages in non-agricultural employment. The Government considers rural trades a potentially important source of employment and income for the rural population and supports a number of trade training centers which offer courses which provide skills in building trades, metal works, brickwork, auto mechanics and other mechanical and electrical trades. 1/ The only information on rural non-farm employment comes from the Lower Shire Valley. Caution should be taken, however, in generalizing on the basis of this data as the Lower Shire Valley is an area with high population pressure on the land 1/ Malawi, Education Sector Survey, Report No. 1781-MAI (Washington, D.C.: World Bank, 1978).  - 49 - which could force greater numbers toward non-agricultural employment as an alternative to farming. Data from the Lower Shire Valley, 1/ indicates that 13.7 percent of the male population but only 1.3 percent of the female popula- tion between the ages of 15-49 participate in the local wage economy in some form. The differential between participation by men and women is explained by the fact that women are responsible for most of subsistence farming and therefore are not free to pursue alternative employment. Rural crafts are an important source of employment for men and even more so for women. Rural craftspeople produce a variety of goods, ranging from mats and pots, charcoal burners to beer. Fish and cattle trading is also an important source of self-employment in the area. About 15 percent of employed males ages 15-49 are engaged in the service trades as builders, carpenters, painters, tailors, shoe makers, watch and radio repairers, etc. For the most part, all of these are forms of self-employment (table 29). 1/ Coleman and Garbett, op. cit.  - 50 - Table 29: LOCAL EMPLOYMENT BY OCCUPATIONAL CATEGORY, LOWER SHIRE VALLEY, 1972 (percentage employed in each category) Males Females Occupational Category >14 15-49 50+ >14 15-49 50+ Rural Crafts 26 21 42 77 73 88 Farm Labor 13 15 7 9 11 - Labor at SUCOMA a/ 1 1 - - - - Other Labor 5 5 5 - - - Business 2 - 5 1 - 5 Fish/Cattle Trading 25 25 25 1 - 4 Shop Assistants 2 2 1 1 1 - Service Trades 13 15 9 - - - Local Government b/ 6 7 4 7 8 4 Cooks/Domestics 5 6 2 5 7 - Other 3 3 1 - - _ Total 100 100 100 100 100 100 Percentage of de jure Population (%) 13.7 1.3 a/ Most workers from Lower Shire Valley who work at SUCOMA are classified as labor migrants and therefore are not included here. b/ Includes those working at the Shire Valley Agricultural Development Programme in agricultural extension service and those employed by the district councils. Source: D. R. Coleman and G. K. Garbett, Labour Economy of a Peasant Community in Malawi, Second Report of the Socio-Economic Survey of the Lower Shire Valley (Manchester: 1976). Agricultural Wages: Smallholders 4.13 Comprehensive data on rural wage rates are not available, and the data which has been collected refer to different geographical areas for different time periods. As a result, no firm conclusions can be reached as to the movement of wages over time or as to regional differences. The data does suggest, however, that agricultural wages have risen both in the small- holder sector and on agricultural estates in recent years. 4.14 The available evidence on agricultural wages paid by smallholders to hired labor suggests that market forces are important in determining wage levels: wages vary by age and sex of the worker, by the type of contract  - 51 - (permanent or daily), by season and by the difficulty of the task. Table 30 shows the variation in wage rates in the Lower Shire Valley (1972/73) by age, sex and type of contract. 1/ With the exception of the under 15 age group, men are paid more than women regardless of season or age. For both males and females, workers over 25 years older receive a higher wage than younger workers. The differentials by age appear more marked for males than females. The wage rate also differs by type of contract, with non-permanent labor receiving higher wages than permanent workers. This differential reflects the fact that permanent workers receive fairly large amounts of wage payments in kind (most importantly food and housing). A survey of smallholders in the Bwanje Valley (1972/73) also indicates that males are paid more than females and adults more than children (table 31). Table 30: AVERAGE DAILY CASH WAGES IN LOWER SHIRE VALLEY FOR ALL CROP TASKS, 1972/73 a/ (tambala/day) Males Females (years) (years) 14 15-24 25-44 44+ 14 15-24 25-44 44+ Non-Permanent Labor September-February 6.3 19.4 74.5 34.2 14.5 20.0 17.8 20.3 March-July 6.6 13.6 25.9 25.4 9.5 11.5 14.0 14.3 Permanent Labor a/ September-February - 14.3 16.4 16.1 - - - 10.0 March-July - 21.3 23.7 19.9 - 9.6 - 19.2 a/ Permanent labor also receives payment in the form of food and shelter which is not recorded here. Source: D. R. Coleman and G. K. Garbett, Labour Economy of a Peasant Community in Malawi, Second Report of the Socio-Economic Survey of the Lower Shire Valley (Manchester: 1976), and Statistical Appendix, table 4.05. 1/ The data does not show clear seasonal variation because it was not reported in a way by which the two peak agricultural seasons (December to January and May to June) could be isolated from the slack periods for comparison.  - 52 - 4.15 The seasonal pattern of wages in indicated by data from a 1973/74 survey of smallholders in Namwera (table 29). The survey revealed that 70 percent of hired labor was employed in November through May. During this period wages were fairly constant with the exception of November. Wages paid in November were about twice as high as those paid in December through May, reflecting the high demand for labor during the preparation stage of the cropping cycle. The higher payment rates paid during the slack agricultural period (June through October) represent the cost of skilled assistance in house and farm building and maintenance which is mainly carried out during the slack months of July through August. Table 31: AVERAGE DAILY WAGES IN BWANJE VALLEY, 1972/73 AND NAMWERA, 1973/74 (tambala/day) a/ Males Females (6-14 years) Total Bwanje Valley 27.6 25.2 16.2 25.2 Namwera - - - 45.6 November - - - 98.4 December-May - - - 36.0 June-October - - - 60.6 a/ Based on a six hour day. Source: Agro-Economic Survey, Bwanje Valley, Report No. 25, and Agro-Economic Survey Unit, Namwera, Report No. 31. 4.16 Wage rates also vary by task (table 32). Activities such as weeding, clearing, harvesting and hoeing, which are for the most part physically demanding and (with the exception of clearing) require skills, are more highly paid than cotton grading, a skilled task usually performed sitting in the shade. Males are paid more than women in all tasks except cotton picking. These differentials appear to reflect in part real or perceived differences in productivity between men and women. In addition, the supply price of male labor is probably higher as males are more mobile than women and have the option of migrating to areas with more competitive wage rates; women tend to stay in the rural areas raising the children and. tending family fields.  - 53 - Table 32: AVERAGE DAILY WAGE RATES BY CROP TASK IN THE LOWER SHIRE VALLEY, 1972/73 (tambala/day) Male Female Weeding 29.0 22.9 Post-Harvest Clearing 27.8 23.1 Harvesting 27.4 19.4 Hoeing 24.0 22.7 Transport from Fields 17.4 10.8 Cotton Picking 16.1 17.2 Cotton Grading 13.2 13.1 Source: D. R. Coleman and G. K. Garbett, Labour Economy of a Peasant Community in Malawi, Second Report of the Socio-Economic Survey of the Lower Shire Valley (Manchester: 1976). 4.17 The data from these surveys shows that the agricultural wage for adult males and in some cases for adult women appears to have, by 1972, exceeded the statutory minimum (23 tambala/day in 1972 and 25 tambala/day 1973 onward). The figures for Namwera (1973/74) indicate that during the peak month of November the wage rate for agricultural labor was almost four times higher than the statutory minimum. Agricultural Wages: Estate Laborers 4.18 Data on average earnings for wage employees in private sector agriculture (table 3.05) strongly suggests that wages exceed the statutory minimum (25 t/day). The K 142 per annum figure for 1978 would work out to 46 t/day for a six day per week 52 weeks per year. This evidence is corroborated by additional data on earning on tea and tobacco estimates (tables 33 and 34). It appears that estate wages have been pulled upwards in response to a tightening of the labor market. Additional evidence in the form of conversations with government officials and business people indicate that the trend towards rising agricultural wages dates to the mid-1970s.  - 54 - 4.19 The Tea Association reports that on average the field laborers wage rate, including non-cash benefits, was 46.9 t/day in 1975 and 48.1 t/day in 1976 (table 33). In 1976, average cash payments were 40.5 t/day or 62 percent greater than the statutory minimum wage. These figures are not available for 1977/78, but data on average monthly earnings (derived by dividing the total wage bill by the total number of employees) indicates that wages continued to rise, albeit, at a pace slower than inflation. Average monthly earnings on Table 33: TEA ESTATE EMPLOYMENT 1975 1976 Average Average Number Annual Number Annual Employed Earning a/ Employed Earning a/ Management & Admini- stration b/ Malawians 189 K 5,988 207 Europeans 106 100 Others 45 37 Total 340 344 K 6,514 Junior Staff c/ N.A. 620 N.A. 633 Other Employees d/ 36,248 t/workday 34,286 t/workday Men 25,937 26,109 Women & Juveniles 10,311 46.9 8,177 48.1 a/ Includes non-cash benefits such as housing and food. In 1976, non-cash benefits amounted to 35.7 percent of management compensation, 9.9 percent of junior staff compensation, and 15.9 percent of other employees compensation. b/ Defined as persons earning over K 720 per year. c/ Defined as persons earning between K 480 and K 720 per year. d/ Depends on the time of year--figures listed are averages. Source: The Tea Association.  - 55 - tea estates increased by about 9 percent, from K 12/month in 1977 to K 13/month in 1978 (table 34). 1/ About 10 percent of this represents payment in kind including food and housing. Caution should be taken in comparing average monthly earnings on tobacco and tea growing estates given in table 34. Conversations with government officials in Malawi indicate that tobacco growing estates pay higher wages to unskilled labor than tea estates, and as a result tea estates have recently experienced problems attracting workers, especially during the period in which tea and tobacco harvesting overlap. Table 34: AVERAGE MONTHLY EARNINGS PER EMPLOYEE IN TEA AND TOBACCO INDUSTRIES (Kwacha) 1977 1978 Cash Kind Total Cash Kind Total Tobacco Growing 9.85 0.36 10.21 9.91 0.46 10.37 Tea Growing 10.91 1.09 12.00 11.78 1.26 13.04 Source: National Statistical Office. 4.20 Average monthly cash earnings for tobacco workers in 1978 was K 9.91 per month, or about K 0.41 per day. In addition, workers received K 0.46 per month in benefits. Again, figures are averages of wages paid to both field laborers and skilled workers, and therefore somewhat overestimate the daily wage for the field laborer. Nevertheless, it was reported that estate managers cannot hire labor at the minimum wage of 25 t/day, and in many areas such as Namwera, Neno and the Shire Valley, the managers pay considerably more than the statutory minimum. In Namwera, the field labor wage was reported at almost K 1/day in March 1979. 4.21 Labor is paid on an incentive basis at the SUCOMA sugar plantation. In 1973, the basic daily wage for a cane cutter was 24 t/day, rising to 25 t/day after six months and to 35 t/day after two years. Most also earned a cane cutting bonus of 23 t/day if they achieved a four-ton quota, and received an additional tambala for every 100 pounds cut over this quota. Monthly wages, for a six day week, were K 11 to K 12 per month for a laborer in this 1/ These figures are averages based on the total wage bill divided by the total of all employees, be they administrators, supervisors or laborers, and these overestimate the field laborers wage.  - 56 - first year of employment rising to K 14 per month after their second year. 1/ By 1979, total compensation, including meals and other benefits, was reported at K 1 per day, or K 24 per month, or almost double the 1973 wage. 2/ In real terms the average wage increased by 16 percent between 1973 and 1979. 3/ The Urban Labor Market 4.22 Data on the urban labor market are far from comprehensive. The avail- able data allows us to describe the location of urban employment, the types of formal sector occupations and their related wage levels and, to a lesser extent, the relationship between education and urban employment. 4.23 About 37 percent of paid formal sector employment is located in one of the four main cities: Blantyre, Lilongwe, Zomba and Mzuzu (Statistical Appendix, table 3.02). If agricultural employment is excluded, the dominance of these centers is more pronounced; 61 percent of non-agricultural wage employment is located in the four cities. In particular, these urban areas dominate employment in manufacturing (69 percent), electricity and water (90 percent), building and construction (76 percent), transport, storage and communications (70 percent), and financial, insurance and building services (100 percent). Blantyre, which accounts for a third of all non-agricultural employment, is the single most important center of manufacturing and also dominates, in terms of employment, financial as well as transport, storage and communications services. The majority of Lilongwe's workers are employed by the Government; building and construction is the second largest source of employment in the capital city. 4.24 A 1972 study of Blantyre's labor market provides details of the structure and composition of the work force in Malawi's largest city. 4/ The study results highlight the city's role as an industrial center: about 30 percent of those surveyed were production and construction workers. The number of managers, primarily in manufacturing and construction establishments, was double the number of higher government officials. Professional and technical workers (6.7 percent of total employment) were largely made up of engineers, economists and accountants. The largest other occupational category was service employees (17 percent), mainly invoLved in housekeeping activities in private institutions and households. 4.25 According to the Blantyre study, the occupational pattern differed sharply by race. The major job categories for African employees are: produc- tion, transport and construction workers (45 percent); service workers (18 percent); and clerical workers (14 percent). Professionals and technicians 1/ Coleman and Garbett, op. cit. 2/ IBRD, Malawi--The Development of the Agricultural Sector (Washington, D.C.: May 1981). 3/ Blantyre Low Income Retail Price Index used to deflate 1979 wages to 1973 levels. 4/ Ministry of Labor, The Blantyre Labour Market, 1972.  - 57 - constituted 5.1 percent, managers 0.3 percent, and government officials 0.3 percent of total African employment. On the other hand for Asians, clerical, sales and service jobs account for 52 percent of their numbers with almost none being employed as production, transport or construction workers. Thirteen percent and seven percent of Asians are professionals and managers respectively. European employment is highly concentrated in the skilled categories: profes- sionals and technicians (34 percent), managers (18 percent), legislative officials and government administrators (7 percent) and clerical workers (21 percent). 4.26 In table 35, the respondents of the 1972 Blantyre survey are listed according to their median incomes and median levels of educational attainment. The occupation classes are grouped roughly into high, intermediate and low incomes. As noted before (para. 2.08), Europeans and Asians constitute just under half of the high income category; in contrast Africans make up more than 90 percent of the intermediate and low income groups. The occupational classifications are rough, leading to a fairly wide range of income and educational achievement results for each occupation, the range widening for the higher paid occupations. Nonetheless, there is a fairly clear correspond- ence between incomes and education achievement, especially at the upper end of the scale. Fifty percent of high income respondents had received Form III-V educations or above; similarly the median educational achievement of low income workers was Standard 1-4. The results for the intermediate income class are more mixed; however, those occupations which combine intermediate income status with relatively lower educational background appear to be those which afford opportunities for skill acquisition on the job--i.e., foremen and supervisors, metal workers, and transport equipment operators. 4.27 The Blantyre study also points up other differences between the three racial groups: for any given occupation, Africans generally receive lower incomes than Asians or Europeans; for any given level of educational  - 58 - Table 35: OCCUPATIONS BY MONTHLY INCOMES AND EDUCATIONAL ATTAINMENTS, 1972 Median Income Levels of Educational K/month Attainment High Income Occupations Legislative Officials/Gov't. Admin. 201-400 Form VI Managers 201-400 Forms III-V Professionals 101-200 Forms III-V Intermediate Income Occupations Artists, Sportmen, Religious Workers and Other Professionals N.E.C. 41- 60 Forms I-II General Foremen and Supervisors 41- 60 Standards 5-8 Technician, Primary and Secondary Schoolteachers 21- 40 Forms I-II Clerical Workers 21- 40 Forms I-II Metal Workers 21- 40 Standards 5-8 Transport Equipment Operators 21- 40 Standards 5-8 Low Income Occupations Sales Workers 11- 20 Standards 5-8 Service Workers 11- 20 Standards 1-4 Agriculture and Forestry Workers, Fishermen and Hunters 11- 20 Standards 1-4 Construction Workers 11- 20 Standards 1-4 Other Production Workers 11- 20 Standards 1-4 Lorry Boys and Sanitary Workers 1- 10 Standards 1-4 Source: Ministry of Labor, Blantyre Labour Market, 1972. achievement, African incomes are also lower. These pay differentials appear at least in part to be explained by education and by experience. At any occupational level, European and Asians have had more years of education than Africans. Moreover, holding the level of education constant across the races, Europeans and Asians tended to be older and thus to have had more years of experience on the job. Whether education and experience would account for all racial pay differentials cannot be answered without further study.  - 59 - V. FUTURE EMPLOYMENT PROSPECTS, 1980-1990 5.01 Over the past decade, the rapid expansion of the agricultural and non-agricultural modern sector--coupled with moderate labor productivity growth--has resulted in large increases in wage employment opportunities. All modern sectors have contributed to this growth--most particularly, agricultural estates, manufacturing and community, social and personal services. Despite this impressive performance, which raised the share of the labor force engaged in wage employment from 8 to 12 percent, annual increments to the labor force far exceeded the additions to wage employment; the excess was absorbed in other sectors, mainly subsistence agriculture. Since future modern sector growth is likely to be rapid but somewhat slower (owing mainly to fewer opportunities for estate expansion and to unfavorable external terms of trade), this pattern of labor absorption is likely to be continued during the next 10-20 years. However, since arable land will be in increasingly short supply the absorption of labor in the subsistence sector, at stable, or preferably increasing, levels of real income will be more difficult than in the past. 1/ The solution of the problems of meeting the country-s food requirements, providing productive rural employment and raising rural standards of living will depend less and less on the expansion of cultivated area and more and more depend on the development of intensive agriculture with increasing returns to land. 5.02 With the labor force projected to expand by an annual average of 84 thousand persons over the next decade, 2/ continued rapid expansion of the modern sector will still be unable to provide sufficient employment opportuni- ties. The growth of wage employment depends upon the projected rate of expansion of modern sector real GDP and on the behavior of labor productivity. The Mission has made projections of the growth of sectoral GDP for the period 1980-1990; these are reported in table 36. As for labor productivity, the following three alternative assumptions have been used, the first involving lower productivity growth than in the past and the third involving higher productivity growth: 1/ According to the Ministry of Agriculture and Natural Resources, all of the arable land in the central and southern regions has been exhausted and cultivation has been extended to less suitable land. In the north roughly one quarter of the available arable land is not yet under cultivation. See IBRD, Malawi--The Development of the Agricultural Sector, (Washington, D.C.: May 1981). 2/ The labor force is projected to grow at 2.6 percent per year. An expansion of the labor force at a somewhat faster rate--say 3 percent per annum--would mean an additional 16 thousand persons per year on average over the period.  - 60 - I. Zero Labor Productivity Growth in All Sectors. II. Labor Productivity Growing at 1969-76 Rates in All Sectors (see table 17). 1/ III. Labor Productivity Growing at 2 Percent Per Annum in All Sectors. Table 36: EMPLOYMENT PROJECTIONS, 1980-1990 Average Annual Increase in -in Sectoral Employment- Growth Rate of Sectoral (in thousands) Sector Real Monetary GDP I II III Agriculture (wage sector only) 5.0 12.2 7.8 6.4 Manufacturing, Mining and Quarrying 8.0 4.5 4.1 3.0 Construction 3.7 1.8 -0.3 0.7 Electricity and Water 6.2 0.3 0.3 0.2 Wholesale/Retail Trade 5.4 2.2 1.5 1.2 Transport Communications and Storage 6.2 1.8 0.8 1.1 Finance and Real Estate 6.2 0.7 0.6 0.4 Community, Social and Personal Services 6.0 4.0 4.0 2.3 Total 27.4 18.6 15.2 Source: Mission estimates. 1/ Except for community, social and personal services where productivity growth is assumed at zero rather than negative as in the past.  - 61 - 5.03 In all three cases, modern .sector employment expansion falls far short of providing the necessary jobs. Even in the most favorable employment generating case (zero labor productivity growth), the shortfall would be 57,000 persons per year on average; in the least favorable case (2 percent labor productivity growth), 69,000. An improvement over past employment generating performance--as represented in the differences between assumptions I and II, for example--would only add 90,000 additional jobs per year. Even a faster rate of expansion of the modern sector--say by 6.7 percent as opposed to the 5.7 percent projected here--would not make a sizable dent in the problem: employment would then grow by 21-34,000 per year (the range depending on assumptions about labor productivity), an improvement of 6-7,000 jobs per year over our three cases cited above. For the modern sector to absorb all of the additions to the labor force, it would have to grow at 12-14 percent per annum average rate, more than double our projected increase. It is clear, therefore, that a majority of additional workers will have to be absorbed in (non-estate) agriculture (or in other informal sectors). To absorb these numbers at rising levels of productivity and real income will require increased government emphasis on intensive agriculture. In general, crop yields in Malawi are quite low and there is considerable potential for raising them through the development of hybrids and improved husbandry and by the dissemination of this knowledge to farmers. This process has already begun under the Government's National Rural Development Program which is specifically designed to raise the level of smallholder production through the provision of agricultural inputs and services (extension, seed and fertilizers, marketing and credit). 1/ The basic idea of NRDP is to provide agricultural services to a larger segment of the rural population, at first concentrating on the more productive areas and gradually over a twenty-year period extending the coverage to the entire rural population. 1/ See IBRD, Malawi--The Development of the Agricultural Sector, (Washington D.C.: May 1981), para. 2.04 and Appendix 1.   - 61a - STATISTICAL APPENDIX  - 62 - Table 1.01: SELECTED DEMOGRAPHIC DATA Estimated Population, Mid-1977 (Millions) 5.5 of which Urban Population (Percent) 8.4 Birth Rate, per Thousand 54.0 Death Rate, per Thousand 28.2 Rate of Natural Increase, per Thousand 25.8 Net Emigration, per Thousand 2.0 Actual Population Growth Rate, per 23.8 Thousand Infant Mortality Rate (Deaths under One 142.1 Year, per Thousand Live Births) Child Mortality Rate (Deaths between One 68.0 and Four Years, per Thousand) Expectation of Life at Birth (Years) Males 40.9 Females 44.2 Gross Reproduction Rate 3.4 Net Reproduction Rate 1.8 Source: Malawi Population Change Survey, February 1970-January 1972, and NSO estimates.  Table 1.02: POPULATION, 1966 and 1977 P'optu 1 lioll Scx Ratio ('000 persons) Annual Growth Rate (males per Population Density 1966 1977 (.) 1,000 females) (persons/kmZ) Total Male Female Total Male Female Total Male Female 1966 1977 1977 Northern Region 497.4 229.0 268.4 643.5 303.7 339.8 2.34 2.57 2.14 852 894 23.89 Chitipa 59.5 28.0 31.6 72.8 34.2 *38.3 1.80 1.84 1.77 886 893 16.92 Karonga 77.7 36.4 41.3 104.2 49.2 55.0 2.68 2.74 2.62 883 895 31.08 Nkhata Bay 83.9 38.3 45.7 108.6 51.8 56.8 2.35 2.77 1.99 838 912 26.57 Rumphi 46.6 21.1 25.5 64.1 29.4 34.7 2.90 3.03 2.79 826 847 13.45 Mzimba 229.7 105.3 124.4 293.9 139.0 154.9 ?.24 2.53 1.99 846 897 28.18 Central Region 1,475.0 691.6 783.4 2,122.0 1,038.5 1,083.5 3.33 3.72 2.96 883 958 59.62 Kasungu 97.5 45.3 52.1 190.0 98.1 91.9 6.19 7.19 5.23 870 1,068 24.11 Nkhota Kota 62.9 29.1 33.8 93.8 45.2 48.6 3.66 4.05 3.31 860 931 22.04 Ntchisi 66.8 31.1 35.6 86.4 41.3 45.1 2.34 2.56 2.15 874 914 52.20 Dowa 182.0 86.9 95.1 248.9 121.2 127.8 2.86 3.03 2.69 914 948 81.87 Salima 86.6 39.5 47.0 126.7 61.9 64.8 3.49 4.11 2.93 841 955 57.68 Lilongwe 498.5 24.0 257.5 694.2 343.0 351.1 3.02 3.23 2.82 936 977 112.71 Mchinji 85.3 40.4 44.9 158.7 80.7 78.0 5.74 6.42 5.10 901 1,035 47.29 Dedza 230.7 104.8 125.9 293.1 138.2 154.9 2.18 2.52 1.88 832 892 80.90 Ntcheu 164.7 73.4 91.3 230.2 108.9 121.3 3.06 3.62 2.59 803 897 67.23 Southern Region 2,067.1 992.6 1,074.5 2,796.3 1,332.3 1,464.0 2.75 2.68 2.82 924 910 88.06 Mangochi 232.7 103.6 129.1 295.7 134.5 161.1 2.18 2.38 2.01 803 835 47.13 Kasupe 226.5 103.1 123.4 342.5 157.2 185.3 3.79 3.86 3.73 836 848 57.42 Zomba 282.4 139.5 142.9 349.3 164.6 184.7 1.93 1.50 2.34 976 891 135.40 Chiradzulu 142.2 66.9 75.3 168.1 78.1 90.1 1.52 1.40 1.62 888 867 219.30 Blantyre 237.3 124.2 113.1 410.1 213.1 197.0 5.04 4.98 5.12 1,098 1,082 203.80 Mwanza 42.0 19.4 22.6 73.5 35.8 37.8 5.17 5.66 4.73 858 947 32.04 Thyolo 256.6 126.6 130.0 341.1 116.4 174.7 2.59 2.49 2.69 974 953 198.96 Mulanje 398.9 190.8 208.1 496.8 228.6 268.2 1.99 1.64 2.31 917 852 144.01 Chikwawa 147.4 71.3 76.1 205.9 101.1 104.8 3.05 3.20 2.92 937 965 43.29 Nsanje 101.2 47.3 54.0 113.3 53.0 60.4 1.02 1.03 1.01 876 878 58.34 Total 4,039.6 1,913.3 2,126.3 5,561.8 2,674.5 2,887.3 2.92 3.06 2.79 900 926 59.00 Source: NSO, Population Census 1977, Preliminary Report, March 1978, and Prelimnary Report Supplement, April 1978.  Table 1.03: URBAN POPULATION BY DISTRICT, 1966 AND 1977 Percentage of Sex Ratio Urban Population Total Population Annual Growth Rates (Males per 1,000 Females) District 1966 1977 1966 1977 Total Male Female 1966 1977 Northern 18,307 44,055 3.7 6.8 8.3 7.9 8.8 1.096 997 Chitipa 1,429 3,079 2.4 4.2 7.2 6.6 7.7 1,146 1,020 Karonga 1,128 11,873 1.5 11.4 23.6 22.1 25.1 1,186 904 Nkata Bay 1,188 4,024 1.4 3.7 11.6 10.7 12.5 1,031 865 Rumphi 1,916 3,998 4.1 6.2 6.8 7.2 6.6 818 867 Mzimba 12,646 21,081 5.5 7.2 4.8 4.6 4.9 1,138 1,107 Central 31,514 137,012 2.1 6.5 14.3 14.0 14.7 1,229 1,149 Kasungu 1,628 6,472 1.7 3.4 13.2 13.1 13.3 1,030 1,014 Nkhota Kota 1,117 10,312 1.8 11.0 22.1 21.4 22.8 1,016 890 Ntchisi 1,218 1,855 1.8 2.1 3.9 2.7 5.0 1,171 914 Dowa 1,552 2,067 0.9 0.8 2.6 2.4 2.9 1,058 999 Salima 2,307 4,646 2.7 3.7 6.5 6.3 6.8 1,271 1,198 Lilongwe 19,425 102,924 3.9 14.8 16.2 15.9 16.5 1,276 1,200 Mchinji 831 1,962 1.0 1.2 8.0 9.2 6.7 955 1,235 Dedza 2,318 5,448 1.0 1.9 8.0 7.2 8.8 1,208 1,026 Ntcheu 1,118 1,326 0.7 0.6 1.6 0.3 3.2 1,529 1,105 Southern 140,138 289,710 6.8 10.4 6.8 6.4 7.4 1,308 1,183 Mangochi 2,767 6,536 1.2 2.2 8.1 6.9 9.5 1,255 966 Kasupe 2,049 12,107 0.9 3.5 17.5 15.9 19.3 1,267 915 Zomba 19,666 21,000 7.0 6.0 0.6 0.0 1.3 1,320 1,145 Chiradzulu 609 691 0.4 0.4 1.1 1.1 1.2 897 888 Blantyre 109,461 226,151 46.1 55.1 6.7 6.5 7.1 1,311 1,223 Mwanza 692 2,271 1.6 3.1. 11.3 11.6 11.0 983 1,050 Thyolo 1,394 4,186 0.5 1.2 10.4 10.6 10.2 1,223 1,275 Mulanje 1,225 2,997 0.3 0.6 8.4 7.6 9.4 1,470 1,225 Chikwawa 902 7,680 0.6 3.7 21.5 20.6 22.5 1,261 1,062 Nsanje 1,373 6,091 1.4 5.4 14.3 12.2 16.9 1,487 939 Total 189,959 470 777 4.7 8.4 8.6 8.2 9.1 1,272 1,154 Note: "Urban areas" include all townships and town planning areas, and all district centers. An urban area need not be an administrative center, but must have other installations, such as a police post or a works camp or a post office in addition to trading stores and a market. Source: Government of Malawi, Population Census, 1977 Preliminary Report, March 1978.  - 65 - Table 1.04: POPULATION 1901-2000--ESTIMATES AND PROJECTION (in thousands) 1901 ..... 737 1911 ..... 970 1921 ..... 1,202 1931 ..... 1,573 1945 . ..... .. 2,050 1966 .... 4,130 1971 1/ .... 4.714 1976 .... 5,386 1977 ...... 5,526 1980 2/ .... 5,968 1990 2/ .... 7,715 2000 2/ .... 9;972 Source: NSO. 1/ All figures from 1971-1977 are based on the preliminary results of the 1977 Census. 2/ Projections are based on 2.6 percent per annum growth rate.  - 66 - Table 1.05: ESTIMATED MID-1979 POPULATION BY AGE AND SEX ('000 persons) Both Sexes Male Female Age Number Percentage Number Percentage Number Percentage Under 5 1,151 19.8 547 19.7 604 20.0 5 - 9 893 14.8 413 14.8 450 14.9 10 - 14 689 11.8 331 11.8 358 11.9 15 - 19 567 9.7 269 9.6 298 9.9 20 - 24 485 8.4 233 8.3 252 8.4 25 - 29 410 7.1 199 7.2 211 7.0 30 - 34 335 5.9 165 5.9 170 5.6 35 - 39 276 4.7 138 4.9 138 4.6 40 - 44 225 3.9 112 4.0 113 3.7 45 - 49 187 3.2 92 3.3 95 3.1 50 - 54 153 2.6 74 2.7 79 2.6 55 - 59 127 2.2 60 2.1 67 2.2 60 - 64 106 1.8 48 1.7 58 1.9 65 and over 243 4.1 116 4.0 127 4.2 All Ages 5,817 100.0 2,797 100.0 3,020 100.0 Source: NSO, 1979. Based on 1977 Census results.  - 67 - Table 2.01: NUMBER OF-PAID EMPLOYEES ON TEA AND TOBACCO ESTATES BY QUARTER, 1968-76 ('000 persons) 1st 2nd 3rd 4th Tea Estates 1968 36.9 30.7 25.2 32.2 1969 38.9 27.1 23.5 30.4 1970 36.9 26.7 22.6 36.8 1971 38.5 30.8 23.3 37.6 1972 42.7 23.4 24.4 34.6 1973 42.8 31.3 30.3 36.5 1974 40.8 32.3 28.6 39.1 1975 42.4 34.4 29.3 41.0 1976 42.5 32.5 31.1 40.9 Tobacco Estates 1968 5.5 5.0 3.6 5.0 1969 6.3 10.7 6.8 8.4 1970 14.7 12.3 11.6 13.6 1971 19.9 17.3 11.9 14.6 1972 20.9 22.2 18.2 19.4 1973 30.5 28.9 21.2 17.9 1974 27.8 23.5 17.7 20.9 1975 27.8 21.0 13.9 19.3 1976 36.8 28.6 25.1 31.9 Source: NSO, Reported Employment and Earnings Annual Report, various years.  - 68 - Table 2.02: MALAWIANS EMPLOYED IN THIE MINES OF SOUTH AFRICA UNDERCONTRACT WITH THE EMPLOYMENT BUREAU OF AFRICA LIMITED (WENELA DIVISION),1/ 1965-78 Number of Contract 2/ Year as at End of Year Number Attested by Year 1965 43,802 41,603 1966 28,756 28,879 1967 45,669 39,538 1968 52,426 35,036 1969 53,184 40,992 1970 90,642 61,622 1971 99,849 65,951 1972 123,845 81,628 1973 123,251 76,227 1974 68,448 31,650/ 1975 2,711 - 1976 - - -1977 17,443 18,206 1978 17,891 n.a. 1/ Previously known as Witswatersrand Native Labour Association. 2/ Attested persons are those who have been contracted and informed of the conditions of employment by a labor officer of the Malawi Government. 3/ People were attested only up to April 1974 and from June 1977. Source: NSO. Malawi Statistical Yearbook, 1978, March 1979, p. 77, and Ministry of Labor, Labour Statistics, 4th quarter, 1978.  - 69 - Table 2.03: REMITTANCES OF MIGRANT WORKERS BY COUNTRY 1965-77 (K '000) South Africa Rhodesia Zambia Total 1965 3,090 622 346 4,058 1966 3,046 544 668 4,258 1967 2,802 520 646 3,968 1968 3,484 606 216 4,306 1969 5,750 690 478 6,918 1970 7,836. 728 437 9,002 1971 10,479 704 465 11,548 1972 11,995 778 1 12,774 1973 19,390 1,721 - 21,111 1974 29,744 1,163 - 30,907 1975 30,793 1,312 - 32,105 1976 3,195 1,055 - 4,250 1977 1,505 928 - 2,433 Source: NSO. Malawi Statistical Yearbook, 1978, March 1979, p. 78.  Table 3.01: 10.1(ER OF ?AID CIQLOYEES IN( PRIVATe A.N1 GOVEMENT SECTORS BY INDUSTRY, 1968.19 j old Suri-!,3! N-S-- 197ih 1969 1970 1971. 1972 1973 1974 1975 1976 - 971977 1 97~ 127~9 ~ 'restrv y ihn j 48.3 53.7 57.4 63.7 7638. 30139 .....2.1- IL. 169.) 1" I Pr ~~~~~~~vo :e ~~~~~~~~40.8 42.5 48.6 53.7 59.4 71.4 74.8 86.1 15T112.4 132.8 148.3 Gc-ver=-*nt 3.4 5.8 5.1 3. 7 4.3 4.9 5.6 6.9 8.2 21.5 22.3 21.0- ____7_____ 050.-8 0.5 0-6 08 070.8 . 0. 9 1.1 0.1 0.6 0.6 0.6 0. 3 0. 7 0.5 0.6 0. 8 0.7 0.8 0.9 1.1 TT 0.6 U . 6 0.6 ~~~~eflt ~~~~~~~~~~~~0. 2 0.1 - - - - - - - - - 21.2 17.7 19.5 Z.L. 23.1 25. 7 26.8 31.-4 36.0 31.4 33.7 3t.2 3..j z' e ~~~~~~~16. 6 17. 7 18.8 21.0 22.3 24.5 25.7 30. 3 34.9 TT*3 ITrz 3TiTI jo. r=e=t ~~~~~~0.7 0.7 0.7 0.7 0.8 1.2 1.1 1.1 1.1 1.1 1.3 1.6 -n 7.7a:e 1522.4.92.7 3.0 2.8 28.93.5 1. 1 1.2 1.2 1.4 1.6 2.0 1.7 1.0 2 3 2. 3 2.5- 0 4 0.3 0.5 0.8 0.8 0.9 0.8 0.8 0.9 0.5 0. 5 0.4- .xc,trvct1on5. 17.4 A.1. L7.7. jj2 21.1 22.8 21.1 Z.LI IL 2 3.2 31.5 V. -5 7.8 12.2 12.9 12.0 12.3 13.8 14.S lITT 15. 7 17.6 18.6 2 7.4- tv 7.5 5.2 5.6 5.7 5.9 7.3 8.0 6.0 5./s 4.7 4.6 4.1 a______________9.4 11.0 ILI ILLJ Ilsi hEA ZLI 19. 9 20. 7 18.3 25.2 21. 7 u. 9.4 11.0 12.3 13.8 15.8 18.4 20.8 19.9 20.7 17.9 ~ T 27.1 'v e-.eI - - - - - - - - - 0.4 0.4 0.4 ':~ t :--:; and Cocrnica'onsr. 8. 2 8.4 8.1. 12 . 10.4 il .12.9 15.7 16.6 17 z0. 7 6.5 65 6.6 7.1 7.6 iT8.7 9.4 1. T 7 4 c r-=~~~~- c ~~1.7 1.9 1.9 2.1 2.2 2.3 2.7 2.5 2.9 371 3.7 3.8- ?!nanCr7r. !ns2a%e7.e and Buildingo Services Q~2 1.1 .21.4 LA4 1.9 2.3 . ~ j3.4 6.0 Li i 7 0.9 1.l 1.2 1.4 1.4 1.9 IT2.7 3.3 5T1 6. 1 6.2- - - - - - 0.1 0.1 0.1 0.6 0.6 0.6 'cc1al and Personal Serviceo 37.-4 40. 3 &.1. 4L..1 20.3. 321 2 61.2 61.9 44.8 45.6 47.4 47. 7. ~~~~ ~~~~~6.4 7.7 8.1 8.5 9.2 9.3 10.9 10.0 10.4 9.0 9T1 ThT --e t ~~~~~~31.0 32. 6 35. 3 39. 8 44.9 48.6 48.1 51.2 51.5 35.8 35.8 36.6- 134.5 146.5 159. 3 172~2. 111.1 211.1 22.1 ZM. 26-4.1 2 75. 3 309.0 2I4.1 U36. 1 Pr i,ste 49. 6 49.9 110. 1 119.4 130.5 150.1 160.5 176.2 19 4.0 3O-1T- flTT 271.2 1~.Ie r.=a t 44.9 46.6 49.2 52.8 59.0 65.2 66.4 68.5 70.1 68.3 69.2 60.3 I/ 77.;r.x arc.eras of four q,.art.rly fLgures. Statutory Bodies are included in the Private Secter. All figures exclude uepeid !r .J .,Pers car vorki. pr.prietors. 2/ 5--e:cs" ce,ers or.iy fi vo or orga.oiation. in which 20 or "ore persons aro engaged. 2,' or~.es i4,;re. for 1577 cannot be 41rectly cooparcd with previous years because somec industrLal activity, particularly government. was velaasitLed eez-..en~ 1976 &ard 1977. In particular govern,oent agricultural extension wrkers were reclassifiead from "Oummltty. leclal NWd ?eroael 8ar,8.."' to ".1~r1.c1t-vr* Forestry and 0Lhn,` 4/ Thq* "N.. Series" covers all c,=;loy.es workIng in establishmeants In Malawi. regardless of the number apl.yed by ossis. Uoeiv. ea sma ller firms .4,.Lch are not regL.tered on the liational Statistical Office List or establishment aer eat *oviared. liesg meet at Seao we gamil owrod, the ab.rabr of paid euployeea will met be serIously underestimated due to those osmioaise.