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African Journal of Economic and Management Studies

Structural change, employment and education in four countries in Sub-Saharan Africa


Theo Sparreboom,
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Theo Sparreboom, (2017) "Structural change, employment and education in four countries in Sub-Saharan Africa", African
Journal of Economic and Management Studies, Vol. 8 Issue: 2,pp. -, doi: 10.1108/AJEMS-04-2016-0045
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Structural change, employment and education in four countries in
Sub-Saharan Africa

Abstract

A wide and growing body of literature demonstrates the important role of structural
change in the economy and the creation of decent jobs, and the linkages with education
and skills. This paper explores the relationship between advances in educational
attainment on the one hand, and structural change in employment on the other, in four
countries in Sub-Saharan Africa for selected periods. The paper is based on a
decomposition of changes in education intensity of employment (the proportion of
workers with a certain level of education), which is complemented by an analysis of
rates of return to education.
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It is demonstrated that if countries want to exploit structural change, levels of education


need to rise. Low levels of education explain why the increase in educational attainment
in Tanzania was barely sufficient to keep up with structural change in this country, and
Mozambique would have been in the same situation if structural change would have
occurred. In Ghana and Namibia levels of educational attainment are much higher, and
the paper analyzes how education was used to accommodate structural change in these
countries while taking dualism in employment into account. Rates of return to
education in all four countries appear consistent with patterns of education intensity.

Key words: employment, education, structural change


JEL Classification: I25, J24, O14

1
1. Introduction

A wide and growing body of literature demonstrates the important role of structural
change in the economy in enhancing employment and productivity.1 Evidence shows
that structural change is at the heart of economic development, and that some countries
followed patterns that led to high and sustained growth in productivity and jobs while
other countries could not achieve this. McMillan and Rodrik (2011) identified
productivity-reducing patterns of structural change in both Africa and Latin America
since the 1990s, while they found productivity-enhancing patterns of structural change
in Asia. Productivity-reducing patterns were explained by large labour productivity
gaps between the formal (modern) and the informal economy and a shift of labour from
modern to informal economies.

Structural change is also considered as instrumental in the creation of decent work, and
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is linked to advances in education and skills. Higher value added economic activities in
industry and services and more complex technologies with higher productivity levels
allow for better conditions of work and higher wages, while increasing the demand for
higher levels of education and skills. Education and skills by themselves, however, do
not create (decent) jobs, and an increase in education attainment levels may also result
in unemployment, overqualification and the underutilization of skills. It is not
uncommon to find high rates of unemployment among the better-educated in
developing countries (Fares et al., 2005; ILO, 2013).

This paper explores the relationship between advances in educational attainment on


the one hand, and structural change in employment on the other. It aims at a better
understanding of how different patterns of structural change are related to changes in
educational intensity of employment (the proportion of workers with a certain level of
education), while taking the dual nature of employment in African countries into
account. In this paper, we define educational intensity as the proportion of workers
with at least secondary education. The analysis identifies those (parts of) sectors that
absorb most of the increases in this proportion, and examines the extent to which this
has been achieved by the reallocation of resources between sectors (i.e., structural
change), or by increasing the share of education intensive jobs within the sector. The
paper also analyzes how these changes are related to changes in private rates of return
to education.

The analysis demonstrates the differences in the pace of structural change, the extent to
which this change is reflected in employment and employment quality, and the extent to
which educational attainment of the workforce keeps up with structural change in four
countries in Sub-Saharan Africa. Two of these countries are classified as low-income
economies (Mozambique and Tanzania), one is a lower-middle-income economy
(Ghana) and one an upper-middle-income economy (Namibia). For all countries the
analysis is based on labour market microdata from nationally representative household
surveys, and on economic data from national accounts. The availability of survey data
determined the periods of analysis: Ghana, 2006-2012; Mozambique, 2004-2008;
Namibia, 2004-2008 and 2008-2012; and Tanzania, 2001-2006.

1Hausmann et al. (2011); Imbs and Wacziarg (2003); Kucera and Roncolato (2012); McMillan and Rodrik
(2011); Nbler (2016); Ocampo et al. (2009).

2
It is found that Tanzania experienced strong structural change, while the pace of
increase in educational attainment was barely sufficient to keep up with this change and
the education intensity in services (the proportion of workers with at least secondary
education) decreased. By contrast, and despite the similar structure of educational
attainment in Tanzania and Mozambique, the latter experienced little structural change
in employment and education intensity increased in all three broad sectors (agriculture,
industry and services). In both Ghana and Namibia levels of educational attainment are
much higher than in the other two countries, and levels of wage employment are also
higher. It is demonstrated that this places these countries in a better position to
accommodate structural change. In Namibia, structural change was accompanied by
increasing education intensity in the segment of non-vulnerable employment. In Ghana,
education intensity decreased in this segment, which seems to reflect sectoral
developments in this country. Patterns of education intensity appear consistent with
rates of return to education in the countries.
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This paper is organized as follows. Section 2 summarizes the economic performance,


structural change and labour market outcomes in the four countries, as well as the
levels of educational attainment of the workforce. Section 3 provides an empirical
analysis of structural change and education. Section 4 concludes.

2. Economic growth, structural change and employment

All four countries experienced an impressive economic performance in the period 2000-
2013 (see Figure 1). Ghana, Mozambique and Tanzania recorded average annual growth
rates exceeding 6 per cent, while Namibia recorded 4.8 per cent, which is also the
average annual growth rate for Sub-Saharan Africa. Although the pattern of structural
change in economic output for Sub-Saharan Africa as a whole seems clear agriculture
becomes less important, the region is deindustrializing and increasingly relies on
services - country experiences show far more variation. Considering the period 2000-
2013, Ghana experienced strong structural change reflected in a decrease of the share of
agriculture in GDP by almost 18 percentage points.2 Structural change was less dramatic
in Namibia, but also this countrys share of agriculture in GDP decreased. In
Mozambique, the share of agriculture increased considerably and in Tanzania
marginally (Table 1).

2 The calculation of Ghanas GDP was revised and the base year changed from 1993 to 2006 in 2010. This
revision generated a substantial increase of Ghanas GDP, and also affected the shares of broad economic
sectors. Nevertheless, UN (2013), which takes the discontinuity into account, also shows a strong decline
in the share of agriculture.

3
Figure 1. Real GDP growth in Ghana, Mozambique, Namibia, Tanzania and Sub-Saharan
Africa, 2000-2013 (%)
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Source: World Bank (2015).

Table 1. Broad sectoral shares in GDP in Ghana, Mozambique, Namibia, Tanzania and
Sub-Saharan Africa (%)

Change
(percentage points)

2000- 2007- 2000-


2000 2006 2007 2010 2011 2012 2013
2006 2013 2013
Agriculture
Ghana 39.4 30.4 29.1 29.8 25.3 23.0 21.9 -9.0 -7.2 -17.6
Mozambique 24.0 27.1 27.1 29.7 30.0 28.9 29.0 3.1 1.9 5.0
Namibia 11.8 10.5 9.2 9.3 8.9 8.7 6.1 -1.4 -3.1 -5.7
Tanzania 33.5 30.4 28.8 32.2 31.5 33.2 33.8 -3.1 5.1 0.4

Sub-Saharan
Africa 17.1 16.4 16.3 15.2 14.8 14.8 14.3 -0.7 -2.1 -2.9
Industry
Ghana 28.4 20.8 20.7 19.1 25.6 28.6 28.5 -7.6 7.8 0.1
Mozambique 24.5 25.7 23.3 20.5 20.3 20.8 20.8 1.2 -2.5 -3.7
Namibia 28.0 34.6 34.8 30.2 30.1 32.2 33.4 6.7 -1.4 5.4
Tanzania 19.2 22.9 21.7 21.1 23.6 23.0 23.2 3.7 1.5 4.0

Sub-Saharan
Africa 33.9 31.7 31.5 28.3 29.1 28.5 27.8 -2.2 -3.8 -6.1
Services
Ghana 32.2 48.8 50.2 51.1 49.1 48.4 49.6 16.6 -0.6 17.4
Mozambique 51.5 47.2 49.5 49.8 49.7 50.4 50.2 -4.2 0.7 -1.2
Namibia 60.2 54.9 56.0 60.5 61.0 59.1 60.5 -5.3 4.5 0.3
Tanzania 47.3 46.7 49.5 46.7 44.8 43.7 43.0 -0.6 -6.6 -4.4

Sub-Saharan
Africa 49.0 51.3 51.5 56.1 55.7 56.2 57.5 2.3 6.0 8.5

Source: World Bank (2015).

4
In Tanzania, the share of agriculture in GDP decreased from 2000 to 2006, but increased
from 2007 to 2013. Contrasting patterns of structural change are also evident in the
shares of industry and services in Ghana, Mozambique and Namibia. Only in Tanzania
was the direction of change the same during 2000-2006 and 2007-2013 in both
industry and services. Growth in services accounted for almost all of the decrease in the
share of agriculture in Ghana, while the industrial sector decreased and subsequently
expanded in this country reflecting an increasing share of mining and construction in
the latter period.

How has economic growth and structural change affected job creation? To assess labour
market outcomes we use the classification by status in employment and distinguish
between vulnerable and non-vulnerable employment. Vulnerable employment consists
of the sum of the status groups of own-account workers and contributing family
workers. These workers are less likely to have formal work arrangements, and are
therefore more likely to lack elements associated with decent work such as adequate
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conditions of work and social security. Non-vulnerable employment consists of


employees and employers, and is used as a proxy for formal employment (ILO, 2016;
Sparreboom, 2011).

In Ghana and Namibia (2004-2008), the share of workers in non-vulnerable


employment increased. By contrast, in Mozambique the share of workers in non-
vulnerable employment decreased from 2004 to 2008, and the same is true in Namibia
from 2008 to 2012 (Table 2, first column). The contrasting development of the
vulnerable employment rate in Namibia in the two periods is partly due to
measurement issues. Not all employment was adequately captured in the 2008 labour
force survey in this country (which concerned in particular own-account work and
contributing family work).3 Improvement of the survey-methodology resulted in a
strong increase in the number of employed persons,4 but also in a dramatic increase in
the vulnerable employment rate. Nevertheless, this rate remained low in Namibia in
comparison with the regional average. Namibia is the only country in our sample in
which the majority of workers are in non-vulnerable employment (68 per cent in 2012),
while the commensurate percentages in Ghana, Mozambique and Tanzania are 31 per
cent (2006), 9 per cent (2008) and 12 per cent (2006), respectively.

Although the pattern of structural change in non-vulnerable and in vulnerable


employment tends to be similar, structural change in non-vulnerable employment
seems more limited (Table 2). For example, the change in the share of workers in
agriculture is larger in total employment than in non-vulnerable employment in Ghana,
Namibia (2004-2008), and Tanzania, and the same is true with regard to services. In
these three countries the change in the share of employment in agriculture far exceeded
the change in the share of non-vulnerable employment across all sectors, which
indicates that much structural change consists of a reallocation of workers from own-
account work in agriculture to similar employment in industry and particularly in
services. In Namibia (2008-2012) and Mozambique the share of workers in agricultural
employment, as well as the share of agriculture in GDP, increased. In Namibia this was

3Sparreboom and Abdullaev (2015) and Republic of Namibia (2013).


4The employment-to-population rate in Namibia increased from 30 per cent in 2008 to 48 per cent in
2012.

5
due to the fact that much of the employment that was not adequately captured before
2012 concerned employment in agriculture.

Table 2. Changes in broad sectoral shares in GDP, employment and non-vulnerable


employment (percentage points)

All
Agriculture Industry Services
sectors
NVE GDP EMP NVE GDP EMP NVE GDP EMP NVE
2006-
Ghana 6.6 -7.4 -10.2 -6.1 7.8 0.0 1.0 -0.4 10.2 5.1
2012
2004-
Mozambique -1.5 3.0 2.3 -4.0 -5.9 -0.5 5.0 2.9 -1.8 -1.0
2008
2004-
Namibia 7.6 -1.5 -10.9 -6.4 8.0 2.1 2.4 -6.4 8.8 4.0
2008
2008-
Namibia -18.4 0.4 11.7 -2.5 -5.1 -4.4 -0.6 4.7 -7.3 3.1
2012
2001-
Tanzania 2.6 -2.5 -8.2 -2.7 3.6 2.1 3.3 -1.1 6.0 -0.6
2006
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Source: World Bank (2015); Sparreboom and Abdullaev (2015); Sparreboom and Gomis (2015);
Sparreboom and Nbler (2013); Sparreboom and Staneva (2015).
Note: EMP=total employment; NVE=non-vulnerable employment

Structural change and education

Levels of educational attainment of the employed show marked differences between


Mozambique and Tanzania on the one hand, and Ghana and Namibia on the other. In the
two low-income countries the large majority of the employed had primary education,
while in Ghana and Namibia a substantial share of the employed had attained secondary
or tertiary education. The share of the employed with tertiary education in both
Mozambique (2008) and Tanzania (2006) was less than one per cent (Figure 2).

The pattern of education by broad sector of employment is similar across all four
countries (Figure 3). Workers with at most primary education dominate agriculture,
accounting for at least 95 per cent of the employed in this sector in Mozambique and
Tanzania, while the greatest shares of workers with higher secondary or tertiary
education are found in services. In Ghana and Namibia, the industrial sector employs
the greatest share of workers with lower secondary education.

This pattern suggests that if countries aim to exploit structural change to generate
growth and employment, levels of education need to rise to accommodate such change,
unless these levels are already considered too high. The latter is unlikely, given that all
four countries are characterized by high levels of underqualification (Table 3).
Underqualification, which means workers have less education than required by their
jobs, is particularly widespread in Mozambique and Tanzania, as most jobs require at
least secondary education.5 However, even in Ghana and Namibia levels of
underqualification are high in comparison with European countries.

5See ILO (2014) for methodological details on the measurement of underqualification; the same
methodology was applied in the four African countries.

6
Figure 2. Educational distribution of the employed (%)
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Source: Sparreboom and Abdullaev (2015); Sparreboom and Gomis (2015); Sparreboom and Nbler
(2013); Sparreboom and Staneva (2015).

Figure 3. Educational distribution of the employed by broad sector (% of broad sector


employment)

A. Ghana, 2012 B. Namibia, 2012

C. Mozambique, 2008 D. Tanzania, 2006

Source: Sparreboom and Abdullaev (2015); Sparreboom and Gomis (2015); Sparreboom and Nbler
(2013); Sparreboom and Staneva (2015).

7
Table 3. Underqualification in Ghana, Mozambique, Namibia, Tanzania and Europe,
selected years (%)

2001 2002 2004 2006 2008 2010 2012

Europe 35.1 32.5 30.8 30.1 26.7 26.3


Ghana 52.0 44.7
Mozambique 92.6 88.7
Namibia 58.8 50.9 50.7
Tanzania 93.5 90.7

Source: ILO (2014); Sparreboom and Abdullaev (2015); Sparreboom and Gomis (2015); Sparreboom and
Nbler (2013); Sparreboom and Staneva (2015).

All four countries have made progress in raising levels of education of the labour force
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(and the population at large), and the remainder of this paper examines the extent to
which structural change is accommodated by these advances in educational attainment.

3. Education intensity and structural change

Changes in aggregate (economy-wide) education intensity (the share of workers with a


certain level of education) can be driven by the change in average educational
attainment within sectors or changes in the sectoral employment structure (given that
educational intensity differs significantly between sectors). Changes in education
intensity can be decomposed into components that capture the effects of these two
drivers of change in the distribution of education the so-called within and between
effects. The within effect captures the percentage point contribution of sectors to
change in aggregate intensity which is accounted for by a change in the intensity within
each sector; and the between effect captures the percentage point contribution of each
sector to aggregate change in education intensity accounted for by changes in the
employment structure. The decomposition methodology is summarized in the following
two equations:

(1) et1 et0 = i(it1 eit1) i (it0 eit0)

(2) i(it1 eit1) i (it0 eit0) = eit0 i (it1 - it0) + it1 i (eit1 - eit0)

In equation (1), et0 and et1 are the education intensity of employment for year t1 and
year t0, which each equal the sum of the sectoral education intensities ei weighted by
the share of each sector i in employment, denoted by i. Rearranging of terms yields
equation (2), in which the first part at the right hand side is the change in education
intensity due to changes of sectoral employment shares (the between sector effect), and
the second part at the right hand side is the change in education intensity due to
changing intensities within sectors. In the context of a growing and developing economy
which is moving up in terms of the complexity of production as well as productivity,
increases in educational attainment would be needed to accommodate both an
increasing share of more education intensive sectors, and an increase in education
intensity within sectors (positive between and within effects).

8
Table 4 summarizes the results for all four countries (including two periods for
Namibia), and shows the changes in sectoral employment shares, sectoral educational
intensity, between effects and within effects in each sector as well as aggregates; the
penultimate column shows the contribution of each sector to the aggregate increase in
education intensity (the sum of the between and within effects, in percentage points),
while the ultimate columns shows the same as a percentage of the aggregate increase in
education intensity.

Ghana, Namibia (2004-2008) and Tanzania experienced a decrease in the share of


employment in agriculture, while the aggregate education intensity (or the intensity
across all sectors) increased (by 8.7, 8.9 and 1.2 percentage points, respectively). This is
the sort of change which could be expected following growth in the non-agricultural
economy and rising levels of education that are often part of development. Ghana and
Namibia (2004-2008) also experienced increases in education intensity at the broad
sectoral level in all three sectors. However, in Tanzania this was only true in industry,
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while the intensity was stagnant in agriculture and decreased in services. The columns
showing the decomposition demonstrate that the aggregate increase in education
intensity in Tanzania is fully accounted for by the between sector effect, which in
particular reflects the increases in the sectoral shares in employment of industry and
services, both of which have much higher levels of educational intensity than
agriculture. Accordingly, no within sector increase is found in Tanzania, and the
countrys educational advancement is only sufficient to accommodate the expansion of
the industrial and service sectors. By contrast, in Ghana and Namibia (2004-2008), the
within effects are positive and in fact account for most of the increase in aggregate
education intensity in these two countries. In all three countries it is the service sector
which accounts for the lions share of the increase (last column in Table 4).

Mozambique and Namibia (2008-2012) show a different development as the share of


employment in agriculture increased. Due to the lack of structural change in
employment or the lack of employment creation outside agriculture in Mozambique, the
within sector effect is dominant in this country, and the increase in educational
intensity is more than fully accounted for by this effect (the between effect is negative).
However, given the low levels of education in agriculture in Mozambique it is clear that,
if structural change would happen, this is likely to place the country in a similar position
as Tanzania. In both countries the very low level of educational attainment of workers
in agriculture necessitates strong advances in educational attainment to accommodate
structural change, but in Mozambique this is not evident because no structural change
occurred. The reverse structural change that is shown in Table 4 for Namibia (2008-
2012) demonstrates the effects of the inclusion of a larger share of the population in
employment, and in particular workers with low levels of education. At the national
level, this resulted in a decrease in education intensity, which was exclusively due to the
between effect.

Table 5 shows the results of the decomposition for non-vulnerable employment.


Although this segment of employment is small in all countries except Namibia, it is
important as conditions of work are likely to be better, productivity is higher and levels
of education almost always exceed those in vulnerable employment.

9
Table 4. Education intensity and structural change

Between Within
Share of employment Education intensity Contribution Contribution
Ghana sector sector
(%) (%) (p.p.) (%)
effect effect
Change Change
2006 2012 2006 2012
(p.p.) (p.p.)
Agriculture 54.9 44.7 -10.2 33.4 40.2 6.8 -3.4 3.0 -0.4 -4.1
Industry 14.2 14.2 0.0 62.0 69.8 7.8 0.0 1.1 1.1 12.5
Services 30.9 41.1 10.2 70.6 72.4 1.8 7.2 0.7 7.9 91.6
Aggregate 100.0 100.0 49.0 57.6 8.7 3.8 4.9 8.7 100.0

Between Within
Share of employment Education intensity Contribution Contribution
Mozambique sector sector
(%) (%) (p.p.) by sector (%)
effect effect
Change Change
2004 2008 2004 2008
(p.p.) (p.p.)
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Agriculture 78.7 81.1 2.4 2.2 5.6 3.4 0.1 2.8 2.8 76.2
Industry 5.0 4.5 -0.5 22.7 29.2 6.5 -0.1 0.3 0.2 4.7
Services 16.3 14.5 -1.8 32.8 41.9 9.1 -0.6 1.3 0.7 19.2
Aggregate 100.0 100.0 8.2 11.9 3.7 -0.7 4.4 3.7 100.0

Between Within
Share of employment Education intensity Contribution Contribution
Namibia sector sector
(%) (%) (p.p.) by sector (%)
effect effect
Change Change
2004 2008 2004 2008
(p.p.) (p.p.)
Agriculture 26.6 15.8 -10.9 19.4 21.2 1.8 -2.1 0.3 -1.8 -20.5
Industry 16.1 18.2 2.1 45.8 49.3 3.5 1.0 0.6 1.6 17.9
Services 57.2 66.0 8.8 57.9 64.0 6.1 5.1 4.0 9.1 102.6
Aggregate 100.0 100.0 45.7 54.6 8.9 3.9 4.9 8.9 100.0

Between Within
Share of employment Education intensity Contribution Contribution
Namibia sector sector
(%) (%) (p.p.) by sector (%)
effect effect
Change Change
2008 2012 2008 2012
(p.p.) (p.p.)
Agriculture 15.8 27.4 11.7 21.2 20.4 -0.8 2.5 -0.2 2.3 -51.6
Industry 18.2 13.8 -4.4 49.3 58.4 9.1 -2.2 1.3 -0.9 21.1
Services 66.0 58.7 -7.3 64.0 62.2 -1.8 -4.6 -1.1 -5.7 130.5
Aggregate 100.0 100.0 54.6 50.2 -4.4 -4.4 0.0 -4.4 100.0

Between Within
Share of employment Education intensity Contribution Contribution
Tanzania sector sector
(%) (%) (p.p.) by sector (%)
effect effect
Change Change
2001 2006 2001 2006
(p.p.) (p.p.)
Agriculture 81.7 73.5 -8.2 1.6 1.6 0.0 -0.1 0.0 -0.1 -12.8
Industry 3.0 5.2 2.1 11.1 11.3 0.2 0.2 0.0 0.2 21.3
Services 15.3 21.3 6.0 18.0 17.9 -0.1 1.1 0.0 1.1 91.5
Aggregate 100.0 100.0 4.4 5.6 1.2 1.2 0.0 1.2 100.0

Source: Sparreboom and Abdullaev (2015); Sparreboom and Gomis (2015); Sparreboom and Nbler
(2013); Sparreboom and Staneva (2015).
Note: Education intensity is measured as the proportion of workers with at least lower secondary
education; p.p.= percentage points.

10
Table 5. Structural change and education intensity, non-vulnerable employment

Between Within
Share of employment Education intensity Contribution Contribution
Ghana sector sector
(%) (%) (p.p.) (%)
effect effect
Change Change
2006 2012 2006 2012
(p.p.) (p.p.)
Agriculture 15.2 9.1 -6.1 48.3 49.4 1.1 -2.9 0.1 -2.8 552.3
Industry 24.6 25.6 1.0 78.1 76.3 -1.8 0.8 -0.5 0.3 -62.1
Services 60.2 65.3 5.1 86.8 83.1 -3.7 4.4 -2.4 2.0 -390.2
Aggregate 100.0 100.0 78.8 78.3 -0.5 2.3 -2.8 -0.5 100.0

Between Within
Share of employment Education intensity Contribution Contribution
Mozambique sector sector
(%) (%) (p.p.) by sector (%)
effect effect
Change Change
2004 2008 2004 2008
(p.p.) (p.p.)
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Agriculture 15.3 11.3 -4.0 5.4 10.1 4.7 -0.2 0.5 0.3 2.5
Industry 19.9 24.9 5.0 30.5 34.2 3.7 1.5 0.9 2.4 19.7
Services 64.8 63.8 -1.0 45.2 61.0 15.8 -0.5 10.1 9.6 77.7
Aggregate 100.0 100.0 36.2 48.6 12.4 0.9 11.5 12.4 100.0

Between Within
Share of employment Education intensity Contribution Contribution
Namibia sector sector
(%) (%) (p.p.) by sector (%)
effect effect
Change Change
2004 2008 2004 2008
(p.p.) (p.p.)
Agriculture 21.1 14.6 -6.4 23.1 20.9 -2.2 -1.5 -0.3 -1.8 -30.3
Industry 16.3 18.7 2.4 50.7 52.5 1.8 1.2 0.3 1.5 25.9
Services 62.6 66.7 4.0 61.1 66.7 5.6 2.5 3.7 6.2 104.4
Aggregate 100.0 100.0 51.4 57.3 6.0 2.2 3.8 6.0 100.0

Between Within
Share of employment Education intensity Contribution Contribution
Namibia sector sector
(%) (%) (p.p.) by sector (%)
effect effect
Change Change
2008 2012 2008 2012
(p.p.) (p.p.)
Agriculture 14.6 12.1 -2.5 20.9 28.5 7.6 -0.5 0.9 0.4 7.0
Industry 18.7 18.1 -0.6 52.5 60.0 7.6 -0.3 1.4 1.1 18.6
Services 66.7 69.8 3.1 66.7 69.8 3.1 2.1 2.2 4.2 74.4
Aggregate 100.0 100.0 57.3 63.0 5.7 1.2 4.5 5.7 100.0

Between Within
Share of employment Education intensity Contribution Contribution
Tanzania sector sector
(%) (%) (p.p.) by sector (%)
effect effect
Change Change
2001 2006 2001 2006
(p.p.) (p.p.)
Agriculture 12.4 9.7 -2.7 6.1 5.1 -1.0 -0.2 -0.1 -0.3 90.5
Industry 16.4 19.7 3.3 18.0 17.1 -0.9 0.6 -0.2 0.4 -144.1
Services 71.3 70.6 -0.7 33.2 32.9 -0.3 -0.2 -0.2 -0.4 153.6
Aggregate 100.0 100.0 27.3 27.1 -0.2 0.2 -0.5 -0.2 100.0

Source: Sparreboom and Abdullaev (2015); Sparreboom and Gomis (2015); Sparreboom and Nbler
(2013); Sparreboom and Staneva (2015).
Note: Education intensity is measured as the proportion of workers with at least lower secondary
education; p.p.= percentage points.

11
Education intensity is higher in all countries and in all broad sectors in Table 5 in
comparison with the previous table,6 with the exception of agriculture in Namibia (in
2008), which is quite likely due to the fact that relatively few workers in vulnerable
employment were captured in this year.

In contrast to total employment, structural change in non-vulnerable employment is


evident for all countries (including two periods for Namibia), as reflected in a
decreasing share of employment in agriculture. In Mozambique and Namibia (both
periods), aggregate education intensity increased and was mostly accounted for by
within sector effects in the service sector. Remarkably, the increase in education
intensity in non-vulnerable employment in Mozambique was far higher than the
increase in total employment; the sharp increase in education intensity of the
(shrinking) non-vulnerable employment segment underlines the enclave type of
development this country was experiencing and the lack of job creation outside
agriculture. Namibia (2004-2008) shows the opposite pattern (education intensity
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increased less for non-vulnerable employment), but only because part of vulnerable
employment was not captured (otherwise the increase in education intensity in
vulnerable employment would have been less).

Education intensity decreased in non-vulnerable employment in Ghana and Tanzania,


which is likely to reflect different factors. In Tanzania, the limited supply of educated
workers seems an important explanatory factor for this movement. Education intensity
in Tanzania is the lowest of the four countries, and the increase in economy-wide
education intensity was limited to 1.2 percentage points (Table 4). It was also shown
before that this advance in educational attainment of workers was fully accounted for
by the between sector effect. In the absence of strong immigration flows, educated
workers are therefore relatively scarce, which limits the increase in education intensity
in non-vulnerable employment.7 By contrast, Ghana shows comparatively high levels of
education intensity in both total employment and in non-vulnerable employment, and
experienced a large increase in aggregate education intensity in total employment,
which means that scarcity of educated workers is far less an issue in this country. The
decrease of education intensity is more likely to reflect the expansion of sub-sectors and
activities in Ghana in the broad service sector with low education intensity, such as
wholesale and retail trade, and increasing dependence on exports of commodities
(Sparreboom and Gomis, 2015). In both countries, education intensity may also reflect
other factors such as investment and migration flows.

Returns to education

Rates of return to education are often high in Sub-Saharan Africa (Psacharopoulos and
Patrinos, 2004; World Bank, 2012), which is perhaps not surprising in view of the
generally low levels of educational attainment. Returns may decrease over time due to
an increasing supply of educated workers following increased enrolment rates in
education, but also as a consequence of limited demand, which is turn may be linked to

6 Sparreboom and Staneva (2014) demonstrate the higher levels of education in non-vulnerable

employment in a larger sample of countries.


7 In principle, education intensity can rise in non-vulnerable employment and decrease in vulnerable

employment; however, the potential for such changes is limited by the very low education intensity in
vulnerable employment in Tanzania.

12
a lack of growth in non-vulnerable or formal employment and lack of structural change.
Rate of return analysis over time can therefore complement the understanding of the
role of education, including with regard to levels of education.

Rates of return for the four countries have been calculated using years of schooling and
based on a conventional Mincerian earnings function approach which is limited to
workers in paid employment.8 It is found that the returns to years of schooling in all
four countries are higher than the global mean rate of return of 9.7 per cent reported in
Psacharopoulos and Patrinos (2004b, Table 3), and are high in both low-income
Tanzania and upper-middle-income Namibia (Table 6). The lowest rate of return is
found for Ghana (10.7 per cent in 2012), which is also the country with the highest
education intensity (more than three quarters of workers in non-vulnerable
employment have at least secondary education).

Table 6. Changes in broad sectoral shares, education intensity and returns to education,
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non-vulnerable employment

Change in Change in the


Change in
the share of share of Change in
returns to
non- industry and education
years of Returns first Returns last
vulnerable services in intensity
education year (%) year (%)
employment employment (percentage
(percentage
(percentage (percentage points)
points)
points) points)
Ghana 2006-2012 6.6 6.1 -0.5 -0.7 11.4 10.7

Mozambique 2004-2008 -1.5 4.0 12.4 -5.2 20.8 15.6

Namibia 2004-2008 7.6 6.4 6.0 0.1 18.6 18.7

Namibia 2008-2012 -18.4 2.5 5.7 0.5 18.7 19.2

Tanzania 2001-2006 2.6 2.7 -0.2 -1.0 19.6 18.6

Source: Sparreboom and Abdullaev (2015); Sparreboom and Gomis (2015); Sparreboom and Nbler
(2013); Sparreboom and Staneva (2015).

Rates of return to education slightly decreased in Ghana and Tanzania, and much more
strongly in Mozambique. In Ghana and Tanzania the education intensity also decreased
in non-vulnerable employment, pointing at some potential effects at the demand side.
However, the change in returns in Tanzania is small, and as was argued before the
limited supply of educated workers seems more important in this country. In
Mozambique, education intensity did not decrease, but the share of non-vulnerable
employment in total employment declined, which appears to have had a much stronger
effect on the demand for educated workers.

Although the global evidence for many years indicated higher returns at the primary
level compared with secondary and tertiary levels, more recent studies suggest a lower
return at the primary level as well as a decreasing long-term trend in returns to primary
education, pointing at a convex earnings function (Colclough et al., 2010). Colclough et
al. (ibid.) highlight that the average return to primary education in a sample of studies
with similar methodologies shows a decrease by two percentage points in studies
undertaken since the year 2000.

8 See Sparreboom and Gomis (2015) for methodological details.

13
Rates of return in the four countries have also been calculated based on levels of
education as opposed to years of education.9 In Ghana, Mozambique and Namibia,
primary education showed the lowest returns, and in all countries the returns to
primary education decreased over time. The picture regarding the highest returns is
more mixed. In Ghana, tertiary education showed the highest returns, and this role is
taken by higher secondary education in Mozambique and Namibia (Table 7).

Only in Tanzania the returns to primary education exceeded the other levels in the first
year of analysis, and exceeded the returns to tertiary education in the second year.
Returns to secondary education increased sharply in this country, at the expense of
tertiary education. The decrease in returns to tertiary education may be attributed to
quality issues in tertiary education, which may also have contributed to the decrease in
returns to years of schooling despite the limited supply of educated workers in this
country (Sparreboom and Nbler, 2013). The quality of education may also be
important in the other countries; for example, rates of return may be different for
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workers trained abroad.


Table 7. Returns to levels of education

Primary Lower secondary Higher secondary Tertiary


First Last First Last First Last First Last
Change Change Change Change
year year year year year year year year
(p.p.) (p.p.) (p.p.) (p.p.)
(%) (%) (%) (%) (%) (%) (%) (%)
2006-
Ghana 2.0 0.8 -1.2 8.6 11.9 3.3 14.2 6.1 -8.1 21.3 25.1 3.8
2012
2004-
Mozambique 5.8 4.2 -1.6 25.0 13.4 -11.6 38.9 29.7 -9.2 24.3 19.7 -4.6
2008
2004-
Namibia 7.4 7.1 -0.3 20.5 13.6 -6.9 38.7 41.5 2.8 19.1 24.6 5.4
2008
2008-
Namibia 7.1 6.3 -0.8 13.6 11.6 -2.0 41.5 44.2 2.7 24.6 29.7 5.2
2012
2001-
Tanzania 15.6 12.9 -2.7 14.4 22.6 8.2 13.0 5.9 -7.2
2006

Source: Sparreboom and Abdullaev (2015); Sparreboom and Gomis (2015); Sparreboom and Nbler
(2013); Sparreboom and Staneva (2015).
Note: Lower secondary education in Tanzania refers to all secondary education.

4. Conclusions

This paper explored the relationship between educational attainment and structural
change in employment in four countries which experienced rapid economic growth. It
was demonstrated that such growth is not necessarily driven by structural change, and
countries show differing sectoral developments with regard to the economy and
employment. Mozambique experienced fast rates of economic growth together with an
increase in the share of agriculture in GDP and employment, while the vulnerable
employment rate increased. In Ghana, Namibia and Tanzania, structural change in non-
vulnerable employment was far less than in total employment, and much structural
change consisted of a reallocation of workers from own-account work in agriculture to
similar employment in industry and services in accordance with McMillan and Rodrik
(2011). It can therefore not be assumed that structural change in the economy (as
reflected in GDP) automatically results in better labour market outcomes, and may well
reflect sectoral shifts in low-quality employment.

9 See Sparreboom and Gomis (2015) for methodological details.

14
It was shown that if countries want to exploit structural change, levels of education
need to rise, which is more challenging if levels of education in the labour force, and in
particular for workers in agriculture, are low. Low levels of education explain why the
increase in educational attainment in Tanzania was barely sufficient to keep up with
structural change in this country, and Mozambique would be in the same situation if
structural change would occur. Rates of return to education are high in both countries,
but in Mozambique declined strongly in line with the shrinking share of non-vulnerable
employment.

In Ghana and Namibia levels of educational attainment are much higher, both in
vulnerable and in non-vulnerable employment, and the latter accounts for a larger share
of employment. In Namibia, the pace of increase in educational attainment was
sufficient to keep up with structural change from 2004 to 2008, and most of the
increase in educational attainment was due to within sector effects. However, from
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2008 to 2012 education intensity in vulnerable employment in agriculture and services


decreased (but not in non-vulnerable employment). This reinforced the dualism in the
economy and labour market in Namibia, and underlines the need for more inclusive
economic growth in this country. Consistently high and rising returns to higher
secondary and tertiary education point at continued demand for better educated
workers in non-vulnerable employment.

Education intensity in the three broad economic sectors in Ghana increased from 2008
to 2012. The scope for within sector effects, despite considerable structural change and
the much higher education intensity in the expanding service sectors, is due to the
relatively high levels of education in agriculture in this country in comparison with
Mozambique and Tanzania. Nevertheless, education intensity decreased strongly in the
more productive segment of non-vulnerable employment, which suggests limited
transformation of economic activity beyond sectoral shifts. Rates of return to education
are lowest in Ghana, and together with the levels of education intensity confirm that
levels of education are less likely to pose a constraint to development than in the other
three countries. Educational and training policy challenges in Ghana can better be
considered in relation to the lack of industrial job creation, the need for economic
policies to support innovative activities and dynamic sectors, and the formalisation of
the informal economy.

The analysis demonstrates that labour market monitoring should not be limited to
(broad) sectoral aggregates. Analysis of more detailed breakdowns of employment are
needed to gain insights in economies and labour markets of countries, including with
regard to the role of education.

15
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