Youth Employment Programs: Linking constraints and assumptions to growth

The theoretical basis for any effective employment program rest on the idea of a perfect integration between an economy’s competitive drivers, the skill requirement to sustain those drivers and how all that situates within a broader context of global competition.

In Ghana, a significant portion of the country’s economic output (GDP) is produced the by Service sector; 54.4% compared to 25.3% for industry and 20.3% for agriculture (see Revised 2015 Annual GDP). Incidentally sectors with the highest outputs have the lowest share in employment. For instance wholesale and retail trade, a sub-sector of Services, which has contributed an average of 5.8% of GDP (2011-2015) employs 19.5% of all employed persons 15 years and above compared to 44.7% employed by Agriculture, Forestry and Fishing. The latter has contributed an average of 22.5% of GDP in the last 5 years (2011-2015).

Why is this important?
An effective youth employment policy must take cognizance of strategic linkages between the broader macro-economic framework and overall economic development strategy, having regard for the output/employment mismatch in the structure of Ghana’s economy. In this regard two central policy questions need to form the basis program evaluation; (1) what policy mix offers the best trade-off between a stable macro-environment, output growth and low unemployment within the present fiscal and monetary constraints? (2) How do we pursue such a policy path at the same time enhancing our competitiveness both regionally and globally? To answer the first question, a review of Ghana’s international trade performance may offer some useful insight. According to International Merchandize Trade Statistics Report (2011-2015) Ghana’s import trade with China, Belgium and U.S in 2015 was valued at 33.05% of our total merchandize trade (GH¢ 46.8 billion). Out of the total import value for 2015, GH¢ 5.2 billion (11%) related to food items. Ghana’s exports to same countries (China, Belgium and U.S) reached GH¢ 6.2 billion in 2015 (13.73% of total exports). Given this context, the policy question ought to be; how do we build indigenous private sector capacity within the agricultural and industrial space in order to reduce imports while at the same time growing our export base? Improving terms of trade will directly impact inflation (cost-push), currency valuation and interest rate with consequential impact on fiscal stability and credit to the private sector.

The second important policy question points to how we want to compete as a country. To frame the question - what is Ghana’s desired competitive edge? It’s important to note that framing the policy question to focus on a desired future state as opposed to the current state of play, unleashes the economy’s creative capacity and ensures that there is alignment between policy direction, infrastructural investments and innovation. The optimum response, following analysis of Ghana’s real, fiscal and external sector vulnerabilities, is to ensure that skills development programs focus on bridging the skill gap needed to make agriculture and industry competitive. A robust service sector (ICT, professional services, etc.) almost invariably evolves from a strong primary sector.

So for effective policy design, program assumptions and constraints needs to be properly reconciled with goals and outcomes. Developing relevant skillsets is critical to building a globally competitive economy.

What is the ideal Implementation Model?
There is an undeniable body of scholarly evidence (for instance Rodrik, 2006; Kohli, 2007; UNCTAD, 2006) which suggest that countries that pursued purely neoliberal economic models (e.g. Latin America and sub-Saharan Africa) following the Washington Consensus, failed to deliver development outcomes compared to others such as India and China that interspersed state interventionism with market reforms. So when it comes to policy implementation there is no simple approach. Each country and region has its peculiarities which must inform the execution approach. Given Ghana’s current fiscal constraints Public-Private-Partnership arrangements may be a suitable model for. There are certain sectors that private action may suitable for pursuing a skill development program. For instance developing skillsets in manufacturing, oil and gas, ICT and agro-processing are best suited for experienced private sector actors as development agents. This may require fiscal incentives to encourage such private action. Other sectors such as health, education, security and sanitation may benefit from government’s competitive edge in providing affordable public services. This type of execution approach borrow lessons from the failures of the Washington Consensus and adopts a more pragmatic view of economic policy formulation where state intervention and private action work hand in hand to achieve macroeconomic outcomes.

The full article would be published in the Business & Financial Times Newspaper on 31.10.2016.

Works Cited
Rodrik, D. (2006). Goodbye Washington consensus, hello Washington confusion? A review of the World Bank's economic growth in the 1990s: learning from a decade of reform. Journal of Economic literature 44 (4), 973-987.

Kohli, A. (2009). States and economic development. Brazilian Journal of political Economy, 29 (2), 212-227. Available at http://www.scielo.br/pdf/rep/v29n2/03.pdf

UNCTAD (2006) Trade and Development Report, United Nations Publications. Available at http://unctad.org/en/docs/tdr2006_en.pdf