Ghana's labor market (1987-92)

POLICY RESEARCH WORKING PAPER 1752 Ghana's Labor Market The rate of return to education in Ghana increases (198 7-92) with higher education and work experience. The return for each additional year of SudThomarsh Canagara jabschooling ranges from 4 to 6 Saji Thomas percent, quite high for a Sub- Saharan African country. Private and social returns to education are greater for primary than for secondary or postsecondary education. The World Bank Africa Technical Families Human Development 3 April 1997  POLICY RESEARCH WORKING PAPER 1752 Summary findings Using the household survey and other data sources, formal sector (in which most workers have middle or Canagarajah and Thomas analyze returns to education secondary schooling). and other aspects of Ghana's labor market profile from Unemployment is pervasive in urban areas, and is less 1987 to 1991. visible in rural areas. Labor productivity may not have The labor force grew slower than the population did increased and is possibly declining. between 1980 and 1990, but the supply of labor is Between 1987 and 1992, there was reverse migration, expected to increase as the population of youth is with many people moving from urban to rural areas, expected to grow faster from 1990 to 2000. And labor mostly for family reasons. Employment-related migration force participation rates for 26- to 45-year-olds have has also been on the increase. been increasing rapidly. As is true elsewhere, the level of education affects Over time, the average labor force participation rates participation in the labor force. Literacy rates for women of women have become equal to men's; that of children are lower than those for men, which is one reason men younger than 15 has remained unchanged at 38 percent. dominate the private formal sector. The rate of return to More than half of Ghana's child laborers are employed education increases with higher education and work in agriculture. experience. The return for each additional year of The formal sector's share of employment is on the schooling ranges from 4 percent to 6 percent in Ghana, decline, while the private informal sector's share has quite high for a Sub-Saharan African country. Private and increased, especially in urban areas. Over time, the social returns to education are greater for primary than informal sector (in which most workers have a primary for secondary or postsecondary education. education or less) has absorbed more labor than the This paper - a product of Human Development 3, Africa Technical Families - is part of a larger effort in the region to analyze the links between education and employment. Copies of the paper are available free from the World Bank, 1818 H Street NW, Washington, DC 20433. Please contact Betty Casely-Hayford, roomJ8-270, telephone 202-473-4672, fax 202-473-8065, Internet address bcaselyhayford@worldbank.org. April 1997. (50 pages) The Policy Research Working Paper Series disseminates the findings of Dork in progress to encourage the excaange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely tbose of the autbors. They do not necessarily represent the vieur of the World Bank, its Executive Directors, or the countries they represent. Produced by the Policy Research Dissemination center  GHANA'S LABOR MARKET(1987-92) Sudharshan Canagarajah and Saji Thomas' i The authors are with the World Bank.   TABLE OF CONTENTS 1. Introduction 5 2. Supply of Labor 8 2.1 Determination of labor participation I 1 3. The absorption of labor 13 3.1 Sectoral employment 13 3.2 Child labor 23 3.3 Turnover rates. 25 3.4 Trends in Earnings and Employment. 26 3.5 Unemployment. 34 3.6 Migration. 36 4. Education and Employment. 39 4.1 Literacy rates by gender and region in Ghana 40 4.2 Dropouts and repetition 40 4.3 University graduates 43 5. Returns to Education 44 5.1 Private and Social returns to education 47 6. Summary and Conclusions 49 7 Bibliography 51 3  INDEX OF TABLES Table 1 Macro indicators in Ghana, 1984-94 7 Table 2 Main population indicators and trends, 1990-2005 9 Table 3 Labor force participation rates by age-group, gender and sector, 1987-91 (in percent) 11 Table 4 Probit estimates of labor force participation model 12 Table 5 Employment by urban and rural sectors (in percent) 14 Table 6 Employment by broad sectors, education and gender 15 Table 7 Characteristics of male and female wage workers 17 Table 8 Characteristics of male and female self-employed workers 18 Table 9 Characteristics of wage workers in the informal sector 19 Table 10 Source of income for wage workers by locality 20 Table 11 The characteristics of civil service workers in Ghana 21 Table 12 Characteristics of child labor by sector, education level, gender and occupation 23 Table 13 Quit rates by education level and gender, 1991 25 Table 14 Share of different sectors in the total GDP (in percent) 26 Table 15 Employment and locality (1987) 30 Table 16 Industry and Locality (1987) 30 Table 17 Employment and locality (1988) 31 Table 18 Industry and Locality (1988) 31 Table 19 Employment and locality (1991) 32 Table 20 Industry and Locality (1991) 32 Table 21 Unemployment rates by sector, locality, age-groups, gender and education level 34 Table 22 Sectoral migration in Ghana 36 Table 23 Regional migration in Ghana 36 Table 24 Major reasons for migration, 1987-91 36 Table 25 The characteristics of migrant workers in Ghana 37 Table 26 Progress in adult literacy 40 Table 27 Education level by age-groups for those currently enrolled 41 4  Table 28 Charcateristics of university graduates 42 Table 29 Mean earnings by educational level in Ghana. 43 Table 30 Basic Earnings function by years of schooling. 44 Table 31 Extended earnings function by levels of education, in Ghana 45 Table 32 Marginal returns to education 45 Table 33 Unit costs of public education by levels 46 Table 34 Private and social returns to education, using the short-cut method. 47 Table 35 Returns to education by four levels of education using 47 the full method INDEX OF FIGURES Figure 1 Labor force participation rates in Ghana 10 Figure 2 Estimated quit rates among wage workers in Ghana 24 Figure 3 The trend of real monthly earnings per employee in public and private sector in Ghana 27 Figure 4 The trend in employment by sectors in Ghana 27 Figure 5a The trend of employment and real GDP in the agricultural sector 28 Figure 5b The trend of employment and real GDP in the industrial sector 28 Figure 5c The trend of employment and real GDP in the services sector 29 S   1. INTRODUCTION Since 1983, the Government of Ghana has implemented a gradual but sustained adjustment strategy under the Economic Recovery Program (ERP), under the belief that the changes in the relative prices, which are central to any adjustment program will incite economic agents to allocate resources based on market signals. The reforms under the ERP have successfully turned the economy around. During the period 1983-93, the growth rate of real GDP averaged around 5 percent per annum. A large part of the growth in per capita GDP reflected the larger growth in per capita private consumption, which increased by an average amount of 3% per annum over the period 1987-92. Average per capita income growth rate has increased during the sarne period from -5 percent to 2 percent per annum. Inflation has come down from a peak of 123 percent in 1983 to 10 percent in 1992. The year 1991 was the high point in Ghana's ERP; inflation was down, a budget surplus equivalent to 1.5 percent of the GDP, real GDP growth rate at 5.3 percent, the growth in money supply high-but falling. However, in 1992 a fiscal shock resulted in a break in the otherwise sustained progress in terms of inflation, fiscal balance, private investment and current account balance (World Bank, 1995). The success of any adjustment program depends on a well functioning and flexible labor market, in which labor is allocated through the market mechanism, and which creates sufficient incentives for human capital investment. Labor markets have three kinds of effects on the allocative efficiency between the micro- and macroeconomies. First, they match labor supply and demand between workers and employers through the wage rate. Secondly, they allocate workers among sectors by matching skills with job requirements through relative wages, and finally they provide information about incentives for the allocation of resources over a time period, i.e., for human resource development through education and training. Evidence indicates -some anecdotal and some empirical- that a large public sector impedes the competitive functioning of labor markets and of the overall economy (Stevenson, 1992). The role of the public sector is particularly salient in light of the renewed emphasis on efficient labor markets as critical to sustainable growth2. The likely presence of wage rigidity or labor mobility raises the fundamental questions regarding the effectiveness of macroeconomic policies and the extent to which the supply response needed for adjustment will be forthcoming. The conventional view assumes that macroeconomic policies such as those emphasizing demand restrictions via fiscal and/or monetary policies to control inflation or exchange rate policies aimed at raising the relative price of traded goods - reduce nominal wage increases and thereby lower real wages. These policies rely heavily on the "transitory" nature of the increased unemployment induced in order to "discipline" the labor market. Real wage flexibility is 2 In Ghana, the public sector is an important concern for policy makers because it employs a large share of the formal sector work force (over 62% in 1992), absorbs a large portion of the government recurrent expenditure, and affects the private labor markets (see Aldermann et al, 1995). 6  a necessary condition to attain macroeconomic adjustment. Although often complicated by labor market regulations, the labor allocation between tradable and non-tradable industries is the fundamental ingredient to achieve structural adjustment. The presence of formal mechanisms of wage indexation has been usually mentioned as a deterrent of the wage flexibility needed for structural adjustment. In particular, the dynamic role of unions and minimum wages in pushing the entire wage structure ( and inflation) has also been pointed out as a crucial mechanism for creating wage rigidity in many countries. It is in this context that we examine whether the ERP was helped or hindered by the labor market and whether the reliance on market forces to reallocate and absorb labor was indeed justifiable. This labor market study uses the Ghana Living Standards Survey (GLSS) data which provided sufficient information to monitor the trend in employment patterns, unemployment, migration, earnings, and the demand for labor. The study uses all three rounds of the GLSS data sets. The available data relate to the periods from September 1987-August 1988 (GLSS 1), October 1988-September 1989 (GLSS 2), and September 1991-September 1992 (GLSS 3)3. This paper provides an overview of characteristics of labor markets in Ghana. Section 1 deals with the Supply of labor, labor force participation and its determinants. Section 2 is concerned with the absorption of labor- the sectoral pattern of employment, characteristics of the wage and non-wage workers, their sources of income- wages and earnings, characteristics of child labor, turnover rates and trends in earnings and employment. Section 3 deals with unemployment rates and its distribution by region. Section 4 deals with migration and the characteristics of migrant workers, while Section 5 deals with literacy rates, drop outs, characteristics of university graduates, returns to schooling and private and social returns to education. Section 6 concludes with a summary of major findings and implications. 3 One of the main issue with these three rounds of survey is the that of comparability, since the format of the questionnaire has changed slightly in GLSS 3, rnaking some of the modules incompatible with the earlier formats of GLSS l& GLSS 2. 7  Table 1: Macro Indicators in Ghana, 1984-94. Indicator 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 Kenya Cote D' Ivoire GNP per capita 1.1 1.4 1.0 2.5 2.2 0.7 2.3 1.0 1.7 0.6 0.2 -4.7 (percent growth) (1980-92) (1980-92) Gross Domestic Income 2.9 6.3 4.5 5.1 3.3 2.7 5.4 3.3 3.5 5.2 (percent growth) Terms oftrade 100 91 105 101 96 81 75 77 71 62 73 67 65 (1984=100) (1987-100) (1987=100) Nominal exchange rate 36 54.5 106.4 162.4 202.4 270 330 375 437 649 956.6 32.22 264.7 (domestic currency/dollar) (1992) (1992) Debt service (percent of exports) 21.6 23.5 28.5 45.8 56.0 51.8 34.7 28.3 24.6 35.1 26.6 Inflation (percent growth) 10.4 24.6 39.7 31.4 25.2 37.2 17.9 10.1 25.0 24.8 9.3 1.9 (1980-92) (1980-92) Trade balance( millions USD) -66.6 -44.7 -0. 1 -114.0 -117.2 -202.4 -303.4 -315.3 -470.8 -664.1 -350.5 -374 -873 (1992) (1992) Life expectancy at birth (years) 56.0 59.0 56.0 Illiteracy rate (in percent) 40.0 31.0 46.0 Population growth rate 2.2 3.2 3.6 3.8 (in percent p.a) (1970-80) (1980- (1980-92) (1980-92) 92) Labor force growth rate 2.4 2.7 3.5 2.6 (percent p.a) (1970-80) (1980- (1980-92) (1980-92) 92) Infant mortality rate 111 82 66 91 (per live 1000 births) (1970) (1992) (1992) (1992) Source: Ghana private sector growth and poverty reduction: A country Economics Memorandum, The World Bank, 1995; World Development Report, 1994.  2. Supply of Labor In the 1 970s and early 1 980s the labor force growth rate has been slower than the population growth rate (Table 1), but projections for 1990s and beyond show that the labor force is expected to grow at a faster rate than the population growth rate (Table 2). These increased labor force growth rates will be brought about by an increased growth rate of the youth population, which is expected to grow faster than the overall labor force growth rates in the 1 990s. This means that labor markets have to become more efficient to absorb the increase in active population. The growth rate in labor force has been brought about mainly by change in the age composition of population (the population pyramid) and age specific participation rates (Table 3). In fact the contribution to labor force participation of the group of workers between 26-45, which tend to have higher rates of labor force participation have increased. Labor force participation rates are defined as the proportion of the total number of economically active persons in the working age group (those between the ages 15-64); A person is defined as economically active if he/she is employed (either on a weekly or yearly basis). This definition differs slightly from the definition of Beaudry and Sowa (1994), whose economically active group, also includes the unemployed persons who are not too young or old and who are not actively searching for a job, a group that is currently not being rewarded by the labor market. Table 3 shows the trends in participation rates in Ghana by age groups, gender and rural/urban sectors. The table indicates that the overall participation rates have increased from 55.8% in 1987 to 65.4% in 1991. The rates were higher for men than for women in 1987, but the participation rates of women have increased during this period and in 1991 the rates for men and women were almost equal. The rates are especially higher (about 95%) in the 25-60 year age group for males. The participation rates for both men and women have increased during this period in all the age groups. The issue of child labor (ages 7-16) can also be pictured from Table 3. In the rural areas, 47% of the children in the 7-16 age group participate in the labor market. In the 7-16 age group, the participation rate for male is 37% while the same is 31% for females (probably an underestimate), which indicates that almost one-third of the children in 7-16 year age group are economically active and participate in the labor market. It is also possible that the increased female participation in the labor force has come form expanding employment opportunities in the public sector (Table 6); the percentage of female public sector workers have increased from 24% in 1987 to 28% in 1991. Eventhough the male participation rates are higher than the females, the change in the female participation rates are more impressive, as the gap between the male and female participation rates have narrowed during this period. Even though the overall participation rates have become more or l1ss same, the rates are higher for males in the prime age-groups (26-60 years). One of the reasons for the low participation rates for females is the difference in education between men and women. Over 26% of the males  Table 2: Main population indicators and trends (1990-2035). 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 Total population 14.8 17.2 20.0 23.0 26.2 29.6 32.7 35.9 38.8 41.6 Active population (15-64 yrs) 7.5 8.8 10.4 12.3 14.4 16.8 19.4 22.2 25.0 27.5 Active population 50.32 51.3 52.2 53.7 54.8 56.8 59.3 61.9 64.4 66.3 (as % of total population) Youth population (15-25 yrs) 2.8 3.3 4.0 4.71 5.4 6.0 6.8 7.5 7.9 8.4 Youth population 18.9 19.2 20.0 20.5 20.6 20.3 20.8 20.9 20.4 20.2 (as % of total population) Growth Rate 1990-95 1995-2000 2000-05 2005-10 2010-15 2015-20 2020-25 2025-30 2030-35 (in percent) Total population 2.96 2.99 2.82 2.65 2.38 2.03 1.82 1.59 1.35 Active population 3.37 3.41 3.45 3.06 3.15 2.95 2.72 2.39 1.96 youth population 3.3 3.9 3.3 2.77 2.13 2.53 1.97 1.04 1.23 Source: World population projections 1994-95.  are literate(people who can read and write) in Ghana, while only 16% of the females are literate. Women on average have received less years of education than men. Among the literate over 50% of men have education beyond the primary level, only 30 percent of the women have received primary schooling (Table 10). Wage differentials between male and female could also lead to lower female participation rates, if the way individual's productive characteristics are rewarded in the labor market depends on whether it is a male or female. Fig 1: Labor force participation rates by age-groups, 1987-91. 1 00 80 - - -60 - ~. 40 20 <16 17-25 26-45 46-60 >60 age-groups 1987 - -x-- 1991 Source: GLSS 1,,3. The increased rates have been brought about by women in the 26-45 year age- group whose participation rate has increased from 72% in 1987 to 92% in 1991. Naturally, younger and older women have lower participation rates than prime age women (Figure 1). This is a commonly observed pattern in many developing countries, and Ghana is no different in that aspect. The main argument being school enrollment for younger groups and the existence of pensions/savings for the older groups. The increased rates for females of prime age could be due to a variety of reasons ranging from increased hourly wages/earnings, increased levels of education, and lower fertility rates (issues which will be discussed in the later sections). The participation rates have increased substantially in the rural areas from 62% in 1987 to 75% in 1991. One of the features of the this increasing labor force is that it is an educated labor force, with most of the workers having middle or secondary education. The increase in the stocks of educated labor (primary and above) and increased enrollment rates have also contributed to an increased supply of educated labor force.  Table 3: Labor force participation rates by age-group, gender and sector, 1987-91(in percent). Age-groups Rural Urban Male Female Total 1987 7-16 43.77 14.81 36.72 30.58 33.74 17-25 66.26 46.58 60.26 58.01 59.08 26-45 78.18 71.02 79.81 72.00 75.51 46-60 76.90 70.84 78.60 71.73 74.86 > 60 61.61 42.64 66.19 46.63 56.31 Total 62.00 44.45 58.23 53.59 55.80 1988 7-16 32.40 13.48 28.46 24.29 26.45 17-25 66.49 48.85 63.04 57.67 60.14 26-45 80.75 76.76 86.82 72.81 79.27 46-60 75.46 75.25 82.59 69.83 75.39 > 60 60.72 50.82 68.00 49.10 58.35 Total 57.87 47.49 57.70 51.39 54.33 1991 7-16 47.54 6.30 36.78 30.54 33.78 17-25 81.29 36.26 60.31 67.44 63.99 26-45 97.05 86.25 94.50 91.93 93.01 46-60 94.17 86.09 95.64 88.60 91.79 > 60 76.45 54.66 82.45 59.47 71.00 Total 75.02 47.27 65.41 65.42 65.41 Source: Authors calculations from GLSSI, 2, 3. Note: Labor force participation is defined as the ratio of Individuals who are either wage workers or self-employed to the working population ( i.e. those between 15-64 yrs of age) Source: GLSS 1,2,3 2.1. Determinants of Labor force participation Table 4 presents the results from the estimates of the labor force participation equation using maximum likelihood probit model. Age is included in the participation equation to reflect the effects of human capital investments on wages which will effect participation. As expected, age has a positive effect on work in all the three years. An interpretation is that as age increases, the level of human capital acquired increases and the offered wage goes up. An increasing wage, holding all else constant will increase the probability of participation. Age-squared is included as a regressor to pick up the possible non-linearities in this relationship. The significance of the squared terms in all the three periods supports the hypothesis of non-linear effects of age on the probability of participation. Education variable has mixed results. In fact, a person with no schooling 12  Table 4: Probit estimates of labor force participation model. Variables 1987 1988 1991 Intercept -6.9 -6.64 -6.67 (-24.75) (-26.5) (-13.81) age 0.388 0.40 0.34 (32.4) (21.95) (17.4) age-squared -0.004 -0.004 -0.004 (-35.97) (-20.01) (-17.86) exp 0.047 0.05 0.012 (5.4) (3.61) (0.72) primary 0.84 0.32 -0.295 (4.5) (2.13) (0.86) middle 1.00 0.41 0.004 (5.8) (2.51) (0.2) secondary 0.395 0.09 -0.28 (2.14) (0.45) (-1.1 i1) higher 0.299 0.64 0.31 (1.08) (2.26) (2.01) income -0.0001 0.0003 -0.003 (-2.53) (-1.43) (-1.24) hhsize -0.009 -0.002 -0.03 (-1.6) (-0.44) (-5.34) rural/urban 0.57 0.56 1.02 (12.3) (11.89) (22.16) N 7357 7293 8428 Log Likelihood -2225.65 -2160.73 -2522.45 Pseudo-R2 0.56 0.56 0.57 is not likely to participate, while the probability of a person with higher level education to participate should be high. In 1987 and 1988, participation was higher for primary and secondary school leavers, while in 1992, participation was higher for those with higher than primary and secondary levels of education, which indicates that labor market is becoming more responsive to education and skilled employment. The household size variable could have positive or negative result. If there are a large number of children under 10 years of age then participation rates could be low, since the parent may have to stay home and look after the child; however if there are a number of adult children in the household then older children can reduce childcare costs of labor force participation by taking care of their siblings while the parents are at work. In our analysis, we find that the household size has a negative effect, but is significant only in 1992. Similarly, the income variable as expected, have negative effects on participation, but is only significant in 1987. Being in a rural area significantly increases the probability of participation. 13  Thus human capital variables, such as age education and experience and household variables such as income and household size effects an individuals participation decision. 3. The Absorption of Labor 3.1 Sectoral Employment The growing labor force was absorbed in the different segments of Ghana's labor market. In this section we analyze the distribution of formal and informal workers, the public-private composition of wage workers-especially the formal workers. The questions one would like to ask is: Is public sector the main provider of wage jobs? Does female employment distribution differ from that of male employment distributions? What is the main source of wage employment for females? Does public employment depend on educational level? Are most of the wage jobs in the rural or urban areas? Is agriculture still the main source of employment in the rural areas or has there been a decline in the agricultural sector employment. The objective here is to identify the important sectors of employment and changes -if any -in the relative importance of sectors during this period. A related issue will be to find out to what extent are the employment differentials - occupational or industrial- justified? Another broad distinction is the difference between private and public wage employment. The GLSS data set allows us to make this distinction within the formal labor4 market. Looking at the broad employment distribution we find that agriculture is still the main form of employment for the labor force as a whole. In terms of formal and informal employment, in 1992, 21% of the workers were wage workers, of which 13% worked in the public sector; in 1987, 24% of the workers were wage workers, of which 14% were formal sector workers. Over 74% of the workers were self employed, of which 48% were engaged in agriculture (a decline from 49% in 1987). Among the wage workers, 62% were formal sector workers and 38% were informal sector workers. In terms of male and female workers, over 49% of the male workers and 47% of the female workers were engaged in agriculture (Table 6). These figures indicate that formal sector is still the main provider of wage jobs although its share has declined during this period. Interestingly, among the formal wage workers, 71% were males and the only 29% were females. Similar pattern was observed among the informal sector wage workers. Thus most of the wage jobs are taken up by males. Only in the self employed category were the proportion of females greater than those of the males. During 1992, in the urban areas, 43% were self employed doing business and 24% were public sector workers, while in the rural areas 64% were engaged in agriculture. Over 39% of the urban workers were wage workers while only 14% of the rural workers were wage workers, perhaps an indication that most of the wage jobs exist in the urban areas (Table 5). 4 A person is classifed as employed in the formal sector if he is a wage worker, is not self-employed and gets fringe benefits such as health insurance, leave, pension etc. 14  Table 5: Employment by urban and rural sectors (Figures in percent). 1987 1988 1991 Sector Rural Urban Total Rural Urban Total Rural Urban Total Government 9.67 23.87 14.06 10.21 23.77 14.09 8.70 23.49 12.97 private-formal 2.93 14.15 6.92 4.70 14.04 7.89 2.45 9.10 4.51 Private-infornal 2.43 5.22 3.37 3.03 5.58 3.87 2.71 6.36 3.91 Self-employed 68.71 14.06 49.24 59.88 11.84 43.57 64.34 11.98 47.0 agriculture Self-employed 15.92 39.17 21.54 21.93 42.39 28.80 20.41 43.24 27.46 business Non-working 0.34 3.54 2.14 0.25 2.37 1.74 1.39 5.82 4.13 100.0 100.00 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Source: Authors calculations using GLSS 1,2,3 In terms of education and employment we find that most of the wage workers had middle school education (Table 6). Over 70% of the private sector wage workers had middle school education. Of those with post-secondary school education, in 1992, 52% were employed in the public sector and 16% in agriculture, implying that education pays in the public sector. Among the self employed in agriculture 52% only had primary school education. Thus public sector seems to be attracting workers with higher education, while those with little or no education are self employed. However, the share of formal employment has decreased during this period, while the share of private informal has increased especially in the urban areas. Females are predominantly engaged in self-employed business/trading activity, a sector which has been growing in Ghana in the last decade. In summary, we find that formal sector share of employment has decreased over time. Most people are still self employed in agriculture, even though its share is declining. On the other hand, the self employed business category has increased, which indicates that trade and commerce is absorbing more labor. Most of the educated workers are in the formal sector, with a majority of them having middle or secondary schooling. If informal sector has more potential of growth and labor absorption it may indicate that the present education system does not seem relevant for the informal sector. Over half of the post-secondary educated are employed in the public sector- an indication that education pays in the public sector. The public sector is dominated by males, but the share of females in the public sector has also increased over time. 15  Table 6: Employment by broad sectors, education and gender in Ghana , Ages 7-64. (figures in percent). Education Gender Sectors Primary Middle Secondary Post-sec Males Females 198 Government 4.8 63.54 17.90 13.76 75.22 24.22 7 (2.58) (10.28) (16.77) (52.27) (11.58) (3.38) private-formal 12.24 71.43 15.51 0.82 82.37 17.63 (3.52) (6.18) (7.77) (1.82) (7.00) (1.33) Private-informal 24.42 70.35 4.65 0.58 64.90 35.10 (4.93) (4.28) (1.64) (0.91) (4.33) (2.07) Self employed agriculture 25.7 66.21 6.77 1.32 47.45 52.55 (54.81) (42.51) (25.15) (21.82) (51.54) (50.54) Self-employed business 22.25 68.54 8.01 1.20 24.83 75.17 (21.83) (20.25) (13.70) (9.09) (9.75) (26.15) Non-working 15.41 60.38 22.97 1.26 45.24 54.76 (11.50) (13.57) (29.86) (7.27) (13.84) (14.84) 198 Government 6.42 59.34 18.29 15.95 76.95 23.05 (3.07) (10.46) (17.67) (73.87) (13.03) (3.32) private-formal 12.94 69.26 16.83 0.97 82.18 17.82 (3.72) (7.34) (9.77) (2.70) (8.50) (1.57) Private-informal 21.72 72.40 5.43 0.45 63.96 36.04 (4.46) (5.49) (2.26) (0.90) (4.98) (2.39) Self employed agriculture 30.94 61.05 7.46 0.55 46.63 53.37 52.04 37.89 25.38 9.01 47.62 (46.35) Self-employed business 25.79 66.26 7.20 0.75 24.90 75.10 (25.65) (24.31) (14.47) (7.21) (11.93) (30.61) Non-working 16.73 59.49 22.78 1.11 42.93 57.07 (11.05) (14.50) (30.45) (6.31) (13.94) (15.76) 199 Government 5.07 59.96 32.07 2.90 71.27 28.73 (2.90) (8.29) (22.96) (51.61) (10.87) (3.75) private-formal 5.67 70.85 23.08 0.40 80.34 19.66 (1.45) (4.38) (7.39) (3.23) (4.96) (1.04) Private-informal 14.80 70.41 14.80 0.00 63.12 36.88 (3.01) (3.46) (3.76) (0.00) (4.04) (2.02) Self employed agriculture 23.63 71.31 4.83 0.24 47.45 52.55 (51.71) (37.73) (13.23) (16.13) (49.68) (47.09) Self-employed business 17.23 75.35 7.33 0.09 24.26 75.74 (20.21) (21.37) (10.77) (3.23) (9.98) (26.66) Non-working 13.16 65.07 21.25 0.53 47.39 52.61 (20.73) (24.77) (41.89) (25.81) (20.47) (19.45) Note: The first row in each sector gives the row percentage, while figures in parenthesis gives the column percentage. 16  In order to better understand the characteristics of wage workers, we break down the wage workers by age-groups, education, place of residence and the type of industry where the person is employed. The wage worker group is predominantly young; majority of both the male and female workers belong to under 40 years age group. Only 10% of the female workers and 19% of the male workers are over 50 years old (Table 7). However, between 79-81% of the workers had recently migrated to the place of work as they had a period of residence less than 1 year. As mentioned earlier, 64% of the female workers had middle schooling and 28% had secondary schooling. Similar pattern was found among the males also. In terms of type of employment, 60% of the female workers and 49% of the male workers were involved in public services and finance, while among the self employed between 64-85% were engaged in agriculture. Thus, the wage workers are relatively young, recent immigrants, with a middle to secondary level education and working predominantly in the services sector. If we look at the characteristics of the self-employed, we find that it is a young group like the wage workers, recent immigrants and with primary to middle school level education. In terms of employment, most of the self employed are engaged in agriculture or in trade and commerce, such as retail and wholesale trade (Table 8). If we look at the characteristics of the workers in the informal sector we find that almost 77% have either a primary or middle school level of education. In the rural areas 46% of the female workers have primary education, while in the urban areas 44% of the female workers have middle school education. In the urban areas the female workers have almost the same level of education as male workers. In terms of occupation agriculture is the main occupation of most of the informal sector workers, Eventhough its share has gone down from 65% in 1987 to 60% in 1991. At the same time the share of services has gone up from 25% in 1987 to 31% in 1991. In the rural localities agriculture is the main source of income( between 78-89%) for workers, while in the urban areas most of the workers earn their income from sales, a sector dominated by females (Table 9). Also, among the informal wage workers, the share of those with no education has increased form 1.7% in 1987 to 15% in 1991. 17  Table 7: Characteristics of male and female wage workers, 1987-91. F (in percent) Characteristics 1987 1988 1991 Male Female Male Female Male Female Age under 30 36.00 57.38 36.90 54.01 26.12 35.83 30-40 29.03 27.52 27.62 27.78 28.59 36.90 40-49 19.43 10.07 21.07 11.42 25.91 17.38 over 50 15.54 5.03 14.42 6.79 19.38 9.89 Period of residence less than I yr 95.28 95.94 91.12 92.88 79.98 81.40 2-4 yr 2.57 2.67 4.63 3.73 4.35 3.77 5-9 yr 1.24 0.76 2.27 1.02 3.48 3.50 10-19 yr 0.58 0.19 1.61 1.69 6.53 8.89 over 20 yrs 0.33 0.38 0.38 0.68 5.66 2.43 Education None 0.15 0.43 0.62 0.00 0.50 0.3 Primary 12.59 13.62 11.85 14.55 7.51 6.23 Middle 67.62 59.15 65.34 60.07 64.87 64.36 Secondary 14.39 13.62 14.96 14.93 25.64 28.37 Post-secondary 5.25 13.19 7.23 10.45 1.98 1.04 Industry Agri/forestry 11.00 10.00 11.48 6.95 8.70 11.60 Mining/Manufact. 14.76 16.67 13.35 20.85 14.04 11.60 Elec./Water/Const. 10.03 2.08 12.06 5.02 8.00 1.93 Wholesale/retail 5.57 15.42 4.57 11.58 5.80 11.33 Transportation 12.67 1.25 11.48 1.16 14.97 2.76 Finance/Community 45.96 54.58 47.07 54.44 48.49 60.77 Source: Authors' own calculations using GLSS 1,2,3. 18  Table 8: Characteristics of male and female self-employed workers, 1987-91. (in percent) Characteristics 1987 1988 1991 Male Female Male Female Male Female Age under30 58.54 51.55 57.29 49.09 43.51 39.01 30-40 14.01 17.66 14.51 19.23 20.79 25.26 40-49 10.19 13.03 9.73 12.32 15.19 17.23 over50 17.26 17.76 18.47 19.36 20.51 18.49 Period of residence less than I yr 93.71 93.90 92.11 92.35 84.09 83.36 2-4 yr 3.31 2.00 3.29 3.67 2.95 3.35 5-9 yr 1.99 2.66 2.48 1.87 3.81 3.77 10-19 yr 0.87 0.78 1.06 1.29 5.25 5.57 over 20 yrs 0.17 0.67 1.06 0.83 3.89 3.95 Education None 1.98 1.08 1.99 1.42 2.41 2.60 Primary 37.68 43.30 39.32 43.49 16.90 25.91 Middle 51.60 52.31 49.87 51.26 73.01 67.40 Secondary 7.31 2.94 8.11 3.56 7.38 4.02 Post-secondary 1.42 0.36 0.71 0.27 0.31 0.06 Industry Agri/forestry 87.34 69.37 82.45 61.07 84.82 64.00 Mining/Manufact. 5.00 8.94 6.28 12.37 5.46 8.73 Elec./Water/Const. 0.58 0.01 1.45 0.03 0.98 0.02 Wholesale/retail 3.96 20.82 5.08 25.19 4.37 25.96 Transportation 0.81 0.03 1.07 0.07 1.19 0.02 Finance/Community 2.31 0.84 3.67 1.26 3.18 1.26 Source: Authors' own calculations using GLSS 1,2,3. 19  Table 9: Characteristics of wage workers in the informal sector Years 1987 1988 1991 Sector urban Rural All urban Rural All Urban Rural All Sex Male Female Male Female Male Female Male Female Male Female Male Female Educ. level No education 0.88 1.79 1.42 2.69 1.76 0.64 0.29 0.67 1.3 0.77 12.32 12.37 15.98 17.85 15.09 primary 25.83 31.98 33.32 41.68 34.00 14.12 23.21 26.03 39.26 26.74 32.99 32.61 39.39 46.42 38.65 middle 55.78 54.97 56.02 52.43 54.71 68.70 65.19 65.64 57.49 63.99 39.29 44.07 39.25 33.59 38.60 secondary 11.40 9.51 6.23 2.07 6.75 11.96 9.89 6.52 1.86 6.92 14.21 10.04 4.21 1.74 6.76 Higher 0.77 0.28 0.80 0.22 0.51 0.01 0.14 0.27 0.01 0.12 0.32 0.12 0.34 0.18 0.25 TTA/koranic 5.34 1.46 2.21 0.91 2.26 4.58 1.29 0.87 0.09 1.46 0.85 0.79 0.83 0.21 0.66 Occupation Professional/technical 0.08 0.15 0.01 0.23 0.14 0.0 0.27 0.09 0.12 0.12 0.75 0.20 0.14 0.10 0.17 Admin./managerial 0.25 0.25 0.50 0.39 0.38 0.61 0.72 0.14 0.93 0.59 2.24 0.30 0.09 0.14 0.27 clerical 7.05 3.28 1.18 0.35 1.83 7.48 4.83 1.94 0.19 2.54 2.49 0.40 0.23 0.01 0.29 sales 13.33 53.38 4.24 11.71 17.58 14.34 48.08 3.96 13.97 16.32 23.88 58.85 1.95 13.20 17.12 service 9.59 3.64 2.10 1.23 2.81 12.50 6.26 2.79 1.93 4.41 4.73 4.25 0.73 0.75 1.53 agricultural 69.69 37.93 91.94 85.66 76.82 64.96 37.21 90.99 82.43 75.38 58.21 18.30 94.23 79.57 73.72 production 0.0 1.36 0.04 0.43 0.45 0.10 2.68 (.(9 0.43 0.64 7.71 17.71 2.64 6.24 6.89 Type of Industry Agriculture 29.45 24.47 86.57 82.96 64.79 25.20 22.94 81.53 79.82 62.53 20.72 16.19 80.56 77.38 59.29 Industry 40.79 17.77 5.27 6.17 10.22 21.12 20.96 6.83 7.53 11.62 17.5 17.41 6.21 6.37 9.91 Services 29.77 57.76 8.15 10.87 24.99 53.68 56.10 11.63 12.64 25.84 61.78 66.39 13.23 16.25 30.8  Table 10: Source of income for wage workers by locality (in percent). 1987 1988 1991 Occupation Accra Other Rural Rural Rural Accra Other Rural Rural Rural Accra Other Rural Rural Rural urban coastal forest savannah urban coastal forest savannah urban coast forest savanna Professional 2.32 0.73 0.69 0.47 0.45 2.89 1.16 1.05 0.04 0.17 7.11 1.43 0.27 0.26 0.07 technical Admin./ 5.24 4.10 1.50 2.56 1.80 4.63 4.76 2.17 3.69 1.70 6.28 5.65 1.46 1.96 1.11 managerial clerical 7.49 4.15 0.34 0.87 0.34 12.96 4.48 1.12 0.94 0.28 14.05 5.46 0.38 0.55 0.26 sales 48.39 34.40 16.68 6.84 5.74 38.95 34.96 14.72 11.26 7.52 38.68 39.10 11.97 5.91 5.76 service 5.02 7.33 0.82 1.69 1.66 8.80 5.72 3.26 1.51 1.02 7.93 5.08 1.95 1.56 0.95 agricultural 30.64 48.22 79.49 87.39 89.92 30.56 47.05 76.67 82.43 89.32 1.49 33.3 77.68 85.92 88.54 production 0.90 1.06 0.47 0.18 0.08 1.21 1.86 1.01 0.13 0.01 24.46 9.98 6.28 3.83 3.31 Source: Authors own calculations.  In Table 10 we discuss the source of income for wage workers. It is apparent that in Accra and other urban areas, most of the workers are engaged in trading activities (39% in 1991), while in the rural areas it is predominantly agriculture. If we look at the civil service workers, most of them are males located in the urban areas, with middle or secondary level education, and most of them (83% in 1991) are non-poor. Table 11: The characteristics of civil service workers in Ghana. Characteristics 1987 1988 1991 Sex male 75.22 76.95 68.97 female 24.22 23.05 31.03 Education level primary 4.8 6.42 5.07 middle 63.54 59.34 59.96 secondary 17.90 18.29 32.07 higher 13.76 15.95 2.90 locality urban 60.8 58.1 61.0 rural 39.2 41.9 39.0 Poverty poor 14.9 14.7 17.0 non-poor 85.1 85.3 83.0 3.2 Child Labor Child labor is perceived to be a problem in developing countries and Ghana is no different. Child labor is especially prevalent in the rural areas where the capacity to enforce minimum age requirement for schooling and work is lacking. Children work for a variety of reasons, the most important being poverty. Though children are not well paid, they still serve as major contributors to family income in developing countries. Schooling problems also contribute to child labor. Many times children seek employment simply because there is no access to school. When there is access, the low quality of education often makes attendance a waste of time for the students. As a result parents may find no use in sending their children to school when they could be home learning a skill (trade or agriculture) and supplementing the family income. The concept of child labor is problematic, since it can apply to a range of activities which children do. They can range from domestic work to wage work. It could be light artisan work to heavy physical work. A key element is whether the arrangement is exploitative- in the extreme case this can take the form of bonded labor or feudal relationships. The International Labor Organization (ILO) defines child labor as an  economically active population under the age of 15. Based on this definition, it estimates a participation rate among 10-14 years old in Africa at 22%. For West Africa the number is 24.2%. In Ghana the child labor force participation rate was 39% in 1992. Table 12: Characteristics of child labor by sector, education level, gender and occupation (Figures in percent). 1987 1988 1991 Sector Urban 18.50 16.45 14.84 Rural 81.51 83.55 85.16 Education level No education 15.50 19.50 27.65 Primary 62.83 61.58 52.44 Middle 20.32 17.00 18.49 Secondary 1.15 1.92 1.41 Gender Male 48.00 53.34 53.0 Female 52.00 47.00 47.0 Occupation Agriculture related 82.55 78.99 67.55 Non-agriculture 17.45 16.83 32.45 Industry of work Agriculture 82.75 70.61 59.21 Mining 5.22 8.43 9.01 &Manufact. Elec. const, water 0.00 1.66 0.90 Wholesale &trade 9.58 13.98 20.39 Finance and 0.66 0.65 1.54 transport Services 1.78 4.68 8.95 Sample size 1677 1526 3732 Participation rate 38.0 32.8 39.0 ( in percent) Cote d' Ivoire 54-55% Nigeria 27-50% Source: Authors calculations from GLSS 1,2,3. Note: Child labor is defined as any child who is below 15 years of age and is working, either as a wage worker or through self employment 23  This is based on the above mentioned ILO definition. Estimates from other west-African countries range from 27-50% in Nigeria to 54% in Cote d' Ivoire (Kanbur and Grootaert, 1995). Since the child labor force participation is high in Ghana, we would like to understand the characteristics of the child labor. As seen in Table 12, most of the child labor is concentrated in the rural areas (almost 85%). Almost 28 percent do not have any education ( an increase from 16% in 1987), while almost 52% have primary level education. This also explains the dropout rate from primary to secondary being high. On gender basis, boys contribute more to the child labor pool than females. With regards to occupation and type of industry of work, it is not surprising to find that most of the child labor is engaged in agriculture related activities, and small portion in trade and commerce. 3.3 Turnover rates An issue related to the absorption of labor is the stability of the labor force. This can be seen from the data on turnover rates for different years estimated from the GLSS data sets. We find that the quit rates have increased during this period, perhaps an indication that the labor market is very dynamic and active. However, the labor market is more stable in 1991, compared to 1987 and 1988. Perhaps the quit rates were kept low by the high wages in the formal sector, while the economic reform program undertaken in the recent years have resulted in a large movement of workers from the formal to informal sector during 1992, as seen in Figure 2. Also, the quit rates are lower for those with higher levels of education (Table 13) and highest for those with no education. Fig 2: The estimated quit rates among wage workers in Ghana. 12 _ .--------- 4) 1D , X 4) 2 0 0-1 3-4 6-7 9- yr yr length of service yr 10 yr --x- 1987 1988 -0 _ 1991 Source: Authors' own calculations using GLSS 1,2,3. Note: Quit rates are estimated using the years of experience. The quit rates for those with experience t, to t2 is estimated as the percentage of the labor force with atleast t, experience minus the percentage with atleast t, experience divided by the percentage with atleast t, experience. 24  Table 13: Quit rates by educational level and gender, 1991. Years of work Level of education Gender exp. no educ. primary second. higher male female 0-1 1.51 0.27 1.60 2.33 0.26 0.49 1-2 13.55 13.29 14.59 8.33 8.56 9.17 2-3 18.0 18.52 15.19 5.19 10.11 11.12 3-4 16.1 14.39 16.42 8.33 9.78 10.28 4-5 13.37 14.60 16.96 7.81 9.40 9.40 5-6 12.75 15.72 11.83 8.47 9.69 11.39 6-7 11.54 9.84 9.76 12.96 7.88 8.44 7-8 14.78 8.18 16.22 6.38 6.08 6.23 8-9 10.2 7.67 11.29 4.55 6.64 6.28 9-10 15.92 10.72 10.91 4.29 8.00 7.19 3.4 Trends in earnings and employment Confronted with the lack of reliable data on the evolution of employment in Ghana, trends in employment can be assessed by labor demand alone, primarily through the analysis of trend in production growth (GDP). It is well recognized that demand for labor is deternined by two factors: production growth and labor productivity, with the latter being influenced by technical advances, elasticities of substitution, labor intensity and variances in labor costs. In the absence of reliable data on these factors we rely on production growth to see if growth in production in different sectors is being matched by a growth in employment in those sectors. As seen in Table 14, agriculture contributed about 47% of the GDP in 1991, while 56% of the population was absorbed in that sector (Tables 15-20). Similar pattern was observed in other sectors also. This means increase in production was perhaps obtained by increase in employment. In Ghana, there exists a dual economy, which features a urban modem economy and a rural subsistence economy. The pattern has remained the same during this period, except that the share of urban self- employed business has increased. 25  Table 14: Share of different sectors in the total GDP (in percent). Sectors 1988 1989 1990 1991 1992 1993 1994 Agriculture 49.6 49.0 47.9 48.6 48.6 47.8 47.3 Agriculture & livestock 34.9 33.2 33.3 33.9 33.5 33.1 33.0 Cocoa production & Mktg. 8.8 9.7 9.1 9.5 9.8 9.3 9.0 Industry 16.6 16.7 15.9 16.0 16.2 16.0 16.2 Mining 2.0 1.9 1.8 1.8 1.9 2.0 1.8 Manufact. 9.6 10.0 9.2 8.7 8.7 9.1 9.0 Construction 2.9 3.0 3.1 3.5 3.5 3.2 3.3 Services 33.6 33.4 35.8 35.3 34.9 35.7 36.1 transport,storage &Comm. 4.2 4.3 4.4 4.5 4.4 4.3 4.4 wholesaleandretailtrade 18.9 18.7 19.0 17.2 18.3 19.0 19.2 Finance and insurance 2.7 2.7 3.9 4.2 3.6 3.8 3.8 Govt.services 6.9 6.9 7.5 8.2 7.5 7.5 7.5 Community, social services 0.7 0.8 1.0 1.1 1.0 1.0 1.1 Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Source: Ghana Statistical service, Ghana. The trends in the real average monthly earnings per wage worker in the public and private sector are shown in Figure 3. It is apparent from the graph that the real earnings have some resemblance to the rate of growth of GDP over the years. The dominant picture is that of a steady increase in real earnings in the early l 980s with a somewhat decline in the late 1 980s, more so in the public sector than in the private sector (Fig 3). While the real earnings in the private sector have remained flat in the 1980s, the same in the public sector have been very unstable, with the real earnings having fallen in the late 1980s. Does the fall in earnings in the formal sector imply that the large wage differential in favor of the formal sector observed in the 1 970s and early 1 980s has largely disappeared. In other words is the labor market closer to an equilibrium situation in which the formal sector wages are more in line with the supply price or alternate earnings of labor? This question has to be addressed in terms of the urban informal and rural sectors. Another related issue is whether the fall in real earnings was caused by a fall in real wages or by a fall in employment or both. The data analysis tells us that there has been a fall in employment in the formal sector, but we don't have the wage information of the self-employed. Similarly, secondary data (Ghana Statistical Yearbook) also provides the evidence that there has been a fall in overall employment, more so in the public sector (Fig 4). Thus, we can say that fall in employment was one of the factor resulting in the fall in real earnings. The effect of the trend of real wages on the trend of real earnings also depend on the wage determination process in the formal sector-through unions or the government. Government labor market policies either through minimum 26  wages or the wages set by the government in the formal sector have added substantial importance to wages and employment matters in the formal sector. On the other hand even though there has been a decline in the aggregate employment, the real GDP has increased during this period (Figure 5), which means that increase in labor productivity was one of the factors that made this possible. It is not clear whether formal sector leads the wage determination process, an issue which needs further investigation. Fig 3: Trend of real monthly earnings per employee in public and private sector in Ghana. 120 100 - _ X 60 _X - X 8 20 O 6. . ::=. .o - -.r ,:..= .r.. 1984 1985 1986 1987 1988 1989 1990 Year - -C * -Public - -X - Private Ail Source: Ghana Statistical Service. Fig 4: The Trend in Employment by sectors in Ghana, 1981- 500 U . 450 3 150 100 0