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Causes of Unemployment in Ghana: a cross sectional analysis from demand and supply perspectives

The Extent of Youth Unemployment in Ghana.

Ghana’s population has a youthful structure with the youth (defined officially as aged 15 –24 years) constituting about one out of every four of the population. Over the past forty years, the number of the youth in the total population of Ghana has increased from 1.1 million in 1960 to 2.3 million in 1984, and to 3.5 million in 2000. The latter constitutes about 22.6 percent of the economically active population.

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Causes of the Youth Unemployment in Ghana

A number of factors account for the growing youth unemployment in Ghana. Historical evidence indicates that youth unemployment in Ghana is due to, on the one hand, a more than a threefold increase in the youthful population over the last forty years, and on the hand, failure of the economy to generate sufficient employment outlets. The Ministry of Manpower, Youth and Employment has identified a number of factors contributing to this phenomena

Causes of Youth Unemployment in Ghana.

  • According to the Ministry of Manpower, Youth and Employment the causes of youth unemployment in Ghana include the following 
  • the introduction of the Junior Secondary School and Senior Secondary School system without adequate planning for integration into the trades/vocations and job placement;
  • education and training have no link to the needs of the important sectors of the economy;
  • the near collapse of Ghana’s industrial base due to ineffective management of the divestiture process which resulted in the closure of many factories without a structural transformation of the economy to generate alternative jobs for people;
  • the shrinking of public sector employment opportunities coupled with a relatively slow growth of the private sector;
  • the lack of a coherent national employment policy and comprehensive strategy to deal with the employment problem

Source: Ministry of Manpower, Youth and Employment Ghana Youth: Working to Build our Future’ March 2006

It may also be argued that the youth unemployment challenge in Ghana is a consequence of the
poor macroeconomic performance over the past 50 years and therefore the need to go beyond a
purely supply-side response (see also ILO/O’ Higgins 20011
, Amankrah 2006).2
It cannot be tackled in the absence of sustained economic growth (UNECA, 2005). In addition, any solution
has to take into consideration the profile of the unemployed youth.

Profile of the unemployed youth

In order to help address the issue of youth unemployment, the need for comprehensive data on
the characteristics of the youth population and its unemployed component became paramount.
This was resolved by the requirement for the registration of unemployed and underemployed
youth in the country in 2001 (Nsowaah-Nuamah and Amankrah, 20003)3. Data available from the registration exercise show that there are about 230,000 new entrants into the Ghanaian labour market every year. The profile of the youth unemployed is presented in the causes of unemployment in Ghana PDF.

Challenges in addressing youth unemployment in Ghana

  1. The structural transformation of the Ghanaian labour market has implications in
    addressing the youth unemployment.
    Following over a decade of structural adjustment policies, Ghana’s labour market has undergone a structural transformation from a government-dominated labour market to a private sector-led market (Amankrah, 2000a4, Baah-Boateng, W and Turkson, Ebo F. 2005).
    The change has implications for labour market outcomes that affect challenges and prospects in addressing the youth unemployment challenge in the Ghanaian labour market.
    Data available from the five Rounds of the Ghana Living Standards Survey (GLSS 1-5) reveal that the labour market in Ghana is changing from a wage sub-market into non-agricultural self-employment. This transformation has brought about an evolution of four sub-markets for labour:  the wage sub-market where decent jobs are available, and three other sub-markets where decent jobs are lacking, namely agriculture, non-farm self employment and unpaid family
    sub-markets where decent jobs are lacking, namely agriculture, non-farm self employment and unpaid family sub-markets
  2. The implications of the wage sub-markets in addressing the youth unemployment challenge
    The wage sub market exhibits features with varying implications for addressing the youth unemployment in Ghana. In the first place, the wage sub-market in Ghana continues to exhibit features of a dual labour market for various types of skills: (1) market for labour by the government as the largest employer of labour in the formal sector and (2) market for labour by the private sector.
    Secondly, the wage sub-market where decent jobs are available there also exists features of a dual labour market where those actively seeking for jobs have a choice to enter the informal submarket where quality jobs are lacking as an alternative (crowding hypothesis) or remain unemployed and queue for a good job in the wage sub-market (the Harris-Todaro model). (Amankrah 2000b, Amankrah 2000c7). This has become necessary where, paradoxically, it is a
    luxury to remain openly unemployed within the Ghanaian labour market environment, and this invariably affects activity status of the labour force. (Amankrah/ILO, 2003c). This poses a challenge to those actively seeking for jobs to improve or have additional skills and competencies so as to enhance prospects of employability and/or succeeding in the changing labour market. A recent survey by the Ghana Statistical Service (2006) reveals that holders of
    analogous qualifications comparable to Level 11 in CA (Ghana), ACCA, CIMA and CIM are the most sought after in the Ghanaian labour market, constituting about 25.2 percent followed by first degree holders constituting about 24.6 percent (see Figure 1). Apart from paper qualifications employers are also asking for computer literacy and some years of working experience as additional skills for the available job positions. Besides, employers prefer job seekers who are self starters and have initiatives, innovativeness with good human relations and interpersonal skills, ability to work without supervision, ability to organise and motivate others, smartness and neatness in appearance and ability to work within deadlines.
  3. The implications of agriculture, non-farm self employment and unpaid family submarkets
    in addressing the youth unemployment.  Data available on changes in economic activity and composition of the working population since
    the beginning of the century provides further evidence on the implications of the transformation
    process in the Ghanaian labour market in addressing the unemployment challenge. (see Tables 8,
    9 and 10). For the agriculture, non-farm self employment and unpaid family sub-markets the
    structural transformation process involves a gradual reduction of labour from the wage sector
    and the agriculture sector to non-farm self employment. This transition has also brought about
    two significant outcomes affecting the dynamics of demand for skills in the Ghanaian labour
    market – the first is the contraction in wage employment as a proportion to the total, and second
    is the explosive growth of urban self employment (Amankrah, 2006). An emerging key issue relates to the inability of the formal sector to provide jobs for the unemployed which has invariably resulted in an increase in residual urban self-employment. As a result of this about 58 percent of the employed population are estimated to be working poor in
    low productive and low paying jobs with decent work deficits and lack adequate economic security (Amankrah/ILO 200311). Such a high proportion of the population as working poor constitutes a real challenge to demand for skills in a country experiencing widespread underemployment in low productivity/low-wage activities (Amankrah, 2006).
    The other key issue is that considering the types of jobs created by the private sector the explosive growth of urban self employment has brought about the emergence of various types of skills and initiatives meant to provide the needed safety nets to assist the unemployed to better.

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