Economic growth and employment generation nexus: insight from Ghana

Abstract

Ghana is undoubtedly regarded as one of the leading lights in Africa in terms of strong growth performance since the wind of economic reforms blew across Africa in the 1980s. The challenge has, however, been the effect of this remarkable growth story on the creation of sufficient jobs for the increasing working age population. This paper uses arithmetic computation and econometric estimation to measure and assess the employment effect of the level and sources of growth on the employment generation. It further shows the role of education in the job creation debate. The empirical analysis indicates significantly moderate effects of economic growth on employment generation and the extent of employment response to growth has continued to decline since the beginning of the new millennium. The analysis also shows that economic growth impelled largely by higher growth of agriculture and manufacturing relative to other sectors is improving job creation impact. On the supply-side, improved education of the workforce above the basic level has significantly increasing the employment-generating effect. The paper recommends a change in policy direction from a high obsession with growth without paying attention to the source of the growth. Thus, for growth to sufficiently impact job creation requires a policy shift towards employment-focused growth through high productive agriculture and manufacturing. Ghana can also leverage the strong growth performance of the extractive, finance and telecommunication sectors by channelling the returns from these sectors into infrastructure development to support the growth of agriculture and manufacturing.