UNITED NATIONS
ECONOMIC AND
SOCIAL COUNCIL
str. LIMITED
ECA/SERPD/INDIC/11 3 January 1984
Original: ENGLISH
T
ECONOMIC COMMISSION R.OR AFRICAExpert Consultation on a System of Socio economic Indicators for African Planne Addis Ababa, Ethiopia, 23-27 January 1984
CONCEPTUAL FRAMEWORK FOR IDENTIFYING LABOUR AND EMPLOYMENT AS INDICATORS FOR SOCIO-ECONOMIC DEVELOPMENT PLANNING
CONCEPTS: EMPLOYMENT UNEMPLOYMENT, DISGUISED UNEMPLOYMENT
f:':"'"' ■■''.! l- ' s:" . -"lABQOR' 'FORCE,' VTOFKdANDTAY°' '" V* -!-:?/''° >/:" ,jl* '.
; .-■. rf*yrr> £ T:.' ' '•.*■'.* .. .*; v. ;-s< . - .^t.-1.; -. .' .1.. U'.-T-.v, ..~\*r : .".'■!*.._■. *
j..r ;m**.-: ;n "•' "if'~: T.. ".."*'- ! f * v 1-•*'* ■ ' I ' f ::" Oi.^ .';7' ' ' ,T ".<; ;"m>:. • ." ,; '».., ■ ., ■'/•. -on
Standard definitions of unemployment put the accent on one crucial1 aspect-1:-an -: ' individual must.be involuntarily unemployed, and he is considered to be so if he is unable, to, find-a_. ;job at the- going-wage-rate for^iisvskall -level .-^Unemployment comes
about whenever there is a maladjustment in the^'supply >and'demand for labour-'for -giveif" ''
skill categories. It may be temporary (cyclical) or more permanent (structural)such as the disltflb; d h '
fractional- unemployment:, that; is:,.whenever ^yclicalr-and structural: unemployment•i;sL:-/-' f- eliminated^,, .In,addition} tibvthe yariousVtyp.es. ofcunemployment, :an;.individual is fsaird '■'•' -f to be under-'eniployed wheneyer/he; supplies iess^labour than, he would/ ^voaunta-rily, ■afj:';' ::
the going wage, rate.- fof;his,-skill,r-lev.el. l/>:.-In> order:fto eliminate^ tot;al sub-jettivityi.-.-'' ■
in the definition of underemployment-;'., howeveri/i reference,'is usually" made to'nbrma:l-i>^f'i;-"
working hours. .. -■ .
It should be'clear from th'e abjpve that: ..■ .-/)rj-"-r;r;:i.; j^«'-'i;.ct[ r,: ?.-.u". ?.i ..-'.!- -yz.u:M z-:}zl '-\>y> ' :■-:■ ' r" "-.' isT-'-1 v't^cevJ;. v>- \!i ..:s . -.- ^ :-.r ;" ;.2';^>' ■ *■'- ■ ■' :-' ? '>r*
^^/py^ statistics
on wage;i employment... .; ;. .'fi ';.''>:'. \;',t .-:".t,A T-:o\;:f"i- .-■ r <" i. V . d;V!: .»< ■ fo ■ •'. » ->S ^r
■n,'-.CbD^.'fflT an- individual to be'.raeanihgfuny' employed,'as,.opposed 'WluMeikmioyJ^
misplaced, his actual wage rate must■=be''clfcse"fer'equal to-'thTgoing wageJrate';rfor "*'""*
is
.gy employed,as,.opposed WluMeikmio
or misplaced, his actual wage rate must■=be''clfcse"fer'equal to-'thTgoing wageJrate';rfor
his skill level.
I--..*' ■''.''"'' *..■,;, .} .■:. ';;'i;j>".:.: i-™"1 :< ';.rffi'''i:'j,^i?,f,! .,..'::.rj Jo i"1'.^";," -^rt or 1: 1 f
ffl^^fe,lf-e^pl.?ypent.'is ;unemploymenti (or'.-af ■.the very^-least underemployment^
or misplacibfoentVi'f i$'is*'iTiyolunt4yyj|i !'"*'i' 'hn 'j:j:t;i" !?" lr^ ?'_-i; an ?.':-.. : :'■ a-j ■»'_
The measurement-i/of'^ to/the- ' ' .' i.'trrr: •
designated-by the, surveyj^usualiynthe.-Week prioritofthe survey'week";
--If-sqrad other? r^erqnce period is\s§tect:edf;the iQompqsit^ipn^c
unemployed group,may:;be,;diffefent^."2/^:soaf:.!;:i..'\^ V'.',7;t!fi:~r- : >\ . -*'v*'y^-r ..> .t: ^fj* v
■— :1- '-^—r ■ * "■•'■' V; :'"'! '-■■?; '■' ; " '"O'S '^'-.'t "* ■* "* i." '■""■y -"-15 ' _ - ":* ■■■ ^ ■ .-; -■'■ '
1_/V see JFor^examp'lerMia-to;!! H;'Sspence"r, Corit§mpofary"Economies'; Wbrth" ''" ?"'' •t'lii'^:'
Publishing'Inc. r New :York, 1971^(p'.-:i:2si^ .-.■■- -l • *--w^ '-'■: v-^.r.^'-:*;■ --^u:^:^'^. .- ., 2/ Harry .T^^Oshima^ ^'Unemployment'varid.-Income Growth ;in- Less 'Pev.elpped!0 -r"-ir; v.'..; '-~ ■-•
Economies: Th.eJfAsianrCase'^r^iri Eco'n^m'ic Development:,Readings-Un the^ry,I4n;(i.>Pra:ct&e, "'-'' L p,RgsUn th^Fyvi^jiiP edited by X.--Morgan and^G.){Bet2,;:Wadswor.th:Publish.in&^epmpany Inc.^-MBelmpnt ii'
California,-.1970;.M(p..r-:;278>)j. vc...-; - s ;A '■:•-, ,* <•, h -.^ ^^X /-.:'-,"tV:/:.- .c>\-- - ;"^
.,;. -:-c a
Page 2 ' ' * -!'
We address ourselves to the concepts of labour- force, work, pay and the notion of "disguised unemployment*1 later. Already, howe'ver, it is obvious that for employment, unemployment and underemployment to lend themselves to precise and unambiguous measurement,
one needs to presuppose,:.- ■ . ■ ■■-.£ ' '"■ , * ' "'< '' r' * '!- j- . ■ ;" • '
\.\ '-A highly organized,, -monetized and: industrialized! 'economy in which ;tire process- of proletarization.o.f labour.- is very advanced. : ': .'' ' :*." ^ <-• :•,>•* 'iw-. >■':*'• ■'■■"y"
2. -An economy in which, the. dichotomy between capital 'and1 labour .(bwnersh'ip of' -1:>
means'of\ production ,and the sale of .labour: powerv as the only1 alternatives for earnin'g ;•;;■■
a livelihood)-isi sharp and stable. -'For., to: the-extent that* the process-: or\"cbncen"tr at-ion*-x of capital is still ongoing or, (as, is .more.) characteristic of African economies')1- ;;-i - primitive accumulation .'is.rdomihant,. "involuntary proletarizationi'is'boun'il to'be'"''*' - > °' a raajort feature of the socipj-economic formation-. _ This-will! necessarily blur-^tne Iv '<-".;■"' distinction^.between structural .andjfrictional-unemployment-." ' v •*-'- '^ '— • -- ■ _'"'■;_ £.r
3. An economy in which labour markets are sufficiently well-developed and where there is close to perfect information on: wage rates for given-skill levels':" ^
This is crucial because it is difficult to classify unemployment due to unrealistic expectations, of■- labour, (i-e-.,, to situations where labour-, refused proposed employment
in the hope of obtaining a job at a higher wage than his skills entitle-him* t:0 ; *"' ' "* '"l and the phenomenon is more widespread in i'newly. emergent^' countries and especially
among "the-educated new'entrants'.to'the labour markets. ', ' '. ".* . . . s- ,rt- . -, : - v •, i •: - . :; A It is to the credit of traditional-concepts of employment, unemployment and
underemployment,-that the notion of. productivity, of■{ labour'plays ■ only a-marginal . ....
role in the determination of the status of labour. In-:the first place* the:problem"'-■;;; -' is conveniently assumed away through the implicit/explicit assumption of profit
maximizing behaviour on the-npart of employers': -^Since the 'demand' for labour (like;5;■*;■'';
the demand for all factors of production" for that matter) is a derived- demand,L';"-:'^"- : J<3 it is concluded that labour would be employed if the value of the marginal product
of labour were not at^least as great-as.its iwa:ge .rate". 'This means,-for example,1 that the underemployment can be determined solely by comparing-the-number'of'hours an individual actual lye-works :with- the -number' of hours he would) have • 1 iked-"-to 'work at the wage rate for his skill level, without *any;reference to his productivity'.
Further, even though .neo-classical economists may be.'the first'-'to admit that- wage levels are dependent on as many "extraneous .factors'! (minimum wager legislation1, ■' the power of trade unions etc.) as on the purely "objective factors" of supply__and _ _ demand, the effect of the .''extraneous factors'- is,to. lead to excess-demand^pr supply^
(i.e. maladjustment of supply''and demand) in" the labour markets. -'.What this means,. ■ .-v- \s -ct concretely, is that in seeking to measure employment,"underemployment arid job
misplacement, the.data that, the-economic^statistician-heeds'are': hours':worked ,'■•-' .•
wages and-qualifications':" An .individual, then, \is'i fully 'employed; if he is able. - :';.'''o:-:1 to obtain a full-time job at th.e--going wage ;rate for his-skills level .■'■ Otherwise', ;r! -|"Ei?
he is either unemployed, underemployed or misplaced. Note that .cpmpeti.tion'and profit -■' maximizing behaviour exclude wage payments above skill levels while the earnings of
owners of capital can always be justified under i:entrepreneurshipn or "risk-taking"
i.e. "justified by their contribution to the process of production11.
Page 3^..
Even in -highly: organized,nmoneti?edI:and industrialized- economies,,-jthe; concepts,?
of eraployme'ntv^^uheinpi;6yinentyrwork;-i. pay ,and- underemployment, increasingly fail top caj^
economic realities and^ore^impprtantl-X:, eva*de; measurement.; ;Wi;th,;,thef.deye.JLopment^6£,-j y;r
the I'Und^er ground Bcononiy" provoked by the .big, bite of'taxation "in -social democratic societies'," the sale and'purchase -ofvl abpur'tp_pyrer} increasingly ,take^.pi ace,, outside thestructured labour marketsjjwitn .ijicrj;aj>ingv:reso_rt. to:j^
statisticians nightmare-. ..;j.-sw ^y i>:r.~ :?;.,rr v,v ,y;f+ nr.tfi i^+LZ'^i ic.'^sCvi .<n -■■••■:■■, j is .'i'h-xof-c:' I .rt; V. osi?$r *-."?.>* yi'.'; c . i: -\j ?* :.rt'. j.:i;^.-
Transposed to developing^.countries-^ and-African social .fprmati^cnsiin^particular, it is an understatement- to'.argue^tHat'J^theXf cannot .fully, capture -the.jecpnomic^realities
in Africa nor the".dynamics;c6f .prpduc^tion:>n:,:the-->^
sectors." The problems .here .are ,many.:\ ,The .first, is^that," the -.concepts;Lof ^labour force,,
employment and unemployment-are^appliedftp -deveioping countries with^ext^eme^difficulty.
The typical case ,is/f,that'.;incomesi in the #nqn7modern s.ectpr.Sj^and wages,..evenjin^the modern sectors, ''are,lso-jIo.w ;that ■ targei.portions of the population .who.^would normally'be
classified outside:Jthe; labour-force, 5'must\obligatorily,^
process. This is thc-'Case^-especially- for .school^children: ,^ ,4• ■r^^o'^yn v*t;rr;! oW even in iirbaa areas1, student's and housewives, defined to >._- ^^7V0r3 be..outside the labour force are likely to work for a few Hours .
?.i br~ pendayy especially .inffamily-.entreprjises. = These.problems^.j^ ^.^ ^-t ^^^
j;.-ir:qor vrelatingr toHhefcbncept of labouriforce-;and temployment^dp .. ■ 0+ ,,-i,f0 >f ;T. ?nf,^ T .
^existoin^deve'lo^ed'countries^but-iare of,rrelatiyely^minor im-^ : . .T, _ :..'V^.v.j o+
' ffT :";;,.?portance.uiSucH-,:probJ;ems, are,.much greater rin,most;,underdej/e^,j;/ '-.-^ -Qji,-^_,..-,T..f '' ' iiLO.1^ iopedicountrd;e.'sW-.There;is,,a wide,;-gray zone-between.r'employment^.,.;,.' \ _.;t,,if, .; ;.''■■andiiunemployment^aTid .-those-in and, out- of thet labour'force.),.and.r-;; -.,., rJ ^-^r^'pi ' :;.. . ' any^, attempt; to measure the size of the unemployed labour force ' - r
:;i;'JM b-j'is-:likely.j..torbe7somewhaf-arbitrary-. .-1/ (our emphasis.).- ,.j.- -jjj^j^ ,.(j 7Cf -,.;, ::\
vTHe: second7set'^.6±'7problemsJ.a^e duetto attempts^by;.the-mainstream,_ ecpnomis,ts vt v.
to introduce>new;.co%cepts;:ofjhuracm^resource utilization^which.,,supppsedlyppfoyid^
'picture of ..the'.labour ipro.cess.in developing countries. vOne^ such-cpnc^ptj;.fpr exaropl^,,^
is the not'ioni of^^.disguisedAunemployment^f thS'. argument, being, ^that^ since" tdeve loping, ^
countries are, neither ..-highly organized, monetized nor industrialized/ (anil labour' markets
are characterized,.,-by imp.er.fec;tions; and ■p_rofitrmaximizing^^ absentin large sections, of thetveconomy0',,'.ityis.illegitimatef to,^excJLude.it^ measurement of ■
"labour productivi:ty.'!yin .dis.cussi'ons ^fipp.timal^utilizajuion'.of.jiuman^^^^py ^
In factv.the,;mains.tr.e^4Mterature;Ipn\employmentJ- in_deyel opting .c^puntri^eSj.-start with the
wing premises: :-j \i-'wo-rs h -jtisL *io bT^Tj- s'^iiu:"'wli^' following premises:. :-j . \i..-'.,*/o'rs . ,i'i -j^z'SsL *io o.t^tj- -v^tiu:, $1
Ira I 'The;isubsistence/agrarianusectbr-vis;,char^^^^^ J?^ 'funlimi.ted" .supp.lie^. of labour.;-ff;O".T .>:i v , ■*:, j '• or-y- fiitr :i'ToL-f-f. !; f.Jbi ^.'.•.■i -I?, rynq . !j >o Aoi*-rr..,;fc,ir ■f;.;;^L--
: 2. : T,The:orderly progression .orVeVeiits;entii-rs!*-the' transfer,Jpf 'thi^,surplust{labour, (along with the surplus agricultural products ■ released by this "labour).■;■from agriculture
to a nascent but dynamic and high produdtivity modem/industriaJL .sector^ Thi^transfer_ii more or l'ess.rs.pG.ntanepus^andjiScprqYokea/ibyfthe real; income,.gag^etwe^e'ii^the rural and
urban areas. . (7-y ,':i .in r;^ r--v, t;.^^ .iru'if^-^i -\
1/ IBID,. (p. 2.780;
Page 4T o.t ;
Only when tne; disguise'dly* unemployed have: been absorbed ' "% '-.'■' '»■- -; ;.;■..'...,.:- --j i.%' ... , • ^ <foefe7/thV margiriai-contribution of labour to -output become - - i ■'"'-■• \-;;, . . '. ;■"■' - as great or .greater than the institutional real wage. -As:-a"\'! .. ;. ^;---'I'l■&':,'.-■ J£
. i '* ' result,.,it! is-'then .to the advantage of the landlord to bid. ....'. ".■■■■--. ' . '• ■'■■;■ ^'actively .for labour; the' agricultural sector, can- be said- to- c "\- :v '.;vs.•;'-..
/},''[i':: T^"hayer::b'Wcome'fCbmmetci'alized; as/the; institutional wage fate is "; i : j■ . .^ -\:> ■" » ri 'r;-'.;'J rrab-andpned "ancl 'competitive market forces yield the 'commonly ' ■■ ;.'■..,. ".!* '*'• -1;"--:-''-"- - ,ll !.* j/':iaccep£ed ^equilibrium conditions'.... 1 J'....:....'...,.'' ■: .' ' '■^'■'■■:l"i-' . ,.-. l-yi-;-^f^^-^^Q^pi-e£iiyni 6f-the'disguised.unemployed, there willy*1" ~; ;-'■. r",/-;-^^
, V; .'occurra switch;1 forced'b'y circumstance, in employer beKaviouf, .' ■ ■'".■.■,;,-';
[J'' '1:'i:;e. 'tSh'e'advent "ofvfuliy commefciali zed'agrucultural sector: ■ - \v??.i '■'!■:.;.; ■./„,>.
ag.1 '"xhis^'iandmark may be 'defined' as the'end- of the take-off process r ";^\-: ■ z;y~
We know no other way to'establish a non-arbitrary 'criterion■■'. '/ ' -1'1'.1 .-".;.'"..■/■/.
for. an ,economy rekching the.threshold of so-called self-sustaining1 ... ;i. . growth. \f.' '% !'^1'':. : ■.'■'■■' : ";<::' /: : :"': r] J~\[ ";_ ■ (\ ' :Tl"-""_; --' ..'*"' ■■"■■-. ..-.■
This is the. ArtHur-Lewi's "model, -subsequently :fbrmalized by Ranis .,and Fei, and is meant not only to be descripti've'of -a specific type of transition'from underdevelopment
to development.,-it' is; presumably 'the only.path;. It corresponds ..to the '.'orderly
progression, of eventsV:'and is 'characteristic of. -optimal-' humart-resource utilization in the socio-econoMpidey/elppment^process...*; The .near^uhanimpus ■ acceptance'.of this model is such that wri't'ingi.i'n'Gctoberl 1983,..an author?couldj-confideritly-;asse.rt_;:that.:
.."It is -not debataljl'e^whether-the., famous tew.islmbdei'of^ ^development-withiuhlimited supplies of labbur is relevant or not". Rather, if the orderly, progression of-events as envisaged by, th.e; moyei';'Kas;: jiot^beeh' attained '^'despite- the- fact that many development plans;, have
^predicated o:n-tlie!'objective's'of transfefrin'g resources pur of agriculture to the.- < ,-> ■■
'..'. |industti^V;sector.':'as^sugges ".it is 'because1 not, enough effort :• ■j-u":
has be4n."exerted;by^goVernmentsf.on 'expanding'.■the-industfial7niodei^i;se.ct6r'bas'e::n_:^.;^
"'li'j.Tiij'-;../.:'.^.,.,' Ti'. '.A ;-..;'ir."...".'. ;.; ' ..i1 -■;;■;■■ '-1 ■;■ .,, ':; ■„.'■"> ■••<■'••-:•. ». ■. »-*■. i -..^7,' - ■,-'■■.- .,>•■ • -
/■ ' -V:- '-"■■ ^..-j-, : ... ' ■..-■. : ■.■ ,■•.- . . ■ ■ ' ■■ ; .;. -;_- ; ' - ■ -; ~
^'■■•^^c.V'^Thri's^b.ase^ should 'be- recbghized" as beings in, the productive/sector^ -.■.■-''.: ..
to "' andv'nb't necessarily-dii.thV non-productive',public sectors Despite' • j ^.ji"' "
' :; -'■■"'»*■;the-'cniciai^'prace of' wage -'empioyment in.'a modernizing, .capitalist1;1. ■.. v,^;: t., . t economy, ;tnevwage.earning/productive sector dees- not provide a ,-"-i ,■-.
:,: :.H'. '"T-J"wide!-Teriough base1 for creatihjg employment of -the magnitude"required■/.'-.;;
~! -%'f -f;- '^-by/.rth^..current trend of labour force growth. 1/ .. ■ ■' ■ ''--': 'av-I:-1'
.'° In'rfact not1 only 'did' the Lewis'1 mbdel^erevate^.wagei-employment as a critical,;;and
J\ pb^itiVe indication of the progress towards a modernizing economy but, by introducing-.■^the .concept:of disguised unemployment, it introduced a phenomenon that is much easier
'..to^define-iii narrrpw ■ecpnomistic-te'ims- thafn'-to' verify its1'existence or to. measure. V":" "'l/! Gustave' Ranis ''and' John C;Hlr Fei-;:;"-"A; Theory of Economic■:Dev.elbpraent-!i.ti. ■'• ■ *• >.i v- in Mo7gan and Betz, Op Cit., (p. 93) ' ■;. ;: r •■- ■' J" ; '■ ''
2/ The NISER Econometric Model of the Nigerian Economy: Analysis of Model and Results; Coordinator, Akinola Owusekun, Ibadan, 1983. _.._•-
E/ECA/SERPD/INDIC/llq
Page "5
the rhqti6nfcof "pToduct.ivi^
The phrase "disguised unemployment" was ■coinedrb"yWs Robinson-- =J
and use-d to designate workers, who having lost well-paying
S-':*y^- positions'* in Hindus tr.y "to wh'icfi: the'ifosKil'l' and°trainirig' entitles^'-- f.o;.?fiT'-th^mV :^fepdoirig*6dd:: jofis, • raking I'e'aves'or^selling applei^'td •- "> '''
.0,1 v'teicg;ou^:miserabrei'liv^ing;-rl/;':;VXi' '' ^--^ ^ ■■./Jt-jd ./ -..?■.„: ^ri.:. ^a;
: Leap movement^Agricultural ^output fel'l^sharply-partly;';: -cpiiuyfto/>
as a consequence-of%Usesh'ift°aha-Su^^ 'M;7: iT^-
i tt been. rreversed. 2/
* An alternative method consists of estimating ther incomeTempl:oym^nt groWthv^
coefficient, for any two years for which GDP and E^ioyment^fipires'^are''1-''"1"'5'^'^1'
ilab.le.^aThe^coefficient., defined,as.-fnGQP,,.^X,,fEMPO,.>. .gives^us
>c :o- i-g?:?wth-tof-Gp.P^ssocia;ted with,.a l^.g^wth^in.emp^oyraent.^Th.is coefficient\xr^fo
^0 ^multiplied b^Jhe^^u^lcjale^Qf^^pwth-iif^the^ tells,.usJAbw * ^^
much GDP must grow in order* to absorb all the" new" entrants to the labour ' (i"^
force. See, for.example Oshiraa. —
A':-2AI.\0JT .JiuzzJtt^^^j^-i^-t^oi : z tit ?.b^z.% ^i--."<i *. Lvz~S \\
1/ HaVerler, "Unemployment' iri~Under"dever6pe~d~Cbuntri"e'syf inV Leadingwlssues" in
Development/^cp.npmics^j^editedib York,
1964. ( p.77) .V:.^ l3-i'3rfA vtt,b.s ti :^ ^^^t
2/ Oshima, Op. Cit., (p. 278) :^lA) ;tJ.:.D .^ r:. ^,tl.-, (^->^^<i: \^
3/ See the NISER Econometric Model, Op. Cit., for estimates of the elasticity of agricultural output with respect to labour.
v; i- ,-It,iSr.tp the;creditrof,the International iLabour Organization to .^ave forced .-,*
governments j^and-economic^statisticians toVcome, to, terms with the existence of;.£U:'-L j >
large. I'sector".,pf, theneconomies^,of'developing, countries :Cwhich.-.;isvjneither.agrarian <f;>
nor modern.but coexists with the latter mainly in the urban areas);fand; which, is»mpre likely than not to be the sector to absorb labour "released from the agrarian sector".
This is the sp-called.."informalf:;sector1j. -+t (■v,,/^..-- , ■;,._ -...;».=-£n- <j"v*n i: ■
Of cours,e, -trie term:; informal sector iis ,itself ambiguous-andsubject^to varying definitions "depending, on who* describes vthe sector. In;"fact, i* ,is, no exaggeration to say that the sector is better defined by what it is .not-than by what it is i.e.
neither agrarian nor modern. In a study on Zambia by the ILO, a reader is forced
to-conclude that the sector embraces a wide range;of (.prpductive-,.actiyities: ; carpenters, tinsmiths, tailors, welders, leather workers etc., small scale construction, especially, housebuilding, retail trade-in a.wide variety of goods;-from,;charcoal<to household implements, vegetables to.soap powder,,and.services [.including ther.repairing-of shoes, bicycles,
cars, machinery,^watches and radios.l/;<ro It can,easily be^ascertained.^.therefore, that it is a "sector'^that embraces a-hodge-jpodgevof^actiyities-fromtraditional handcrafts
(probably subject ,to"competition from-.the modern sector), ;to .new activities (for example, radio and watch,repairs} which are^complementary,to the .modern.^sector productive
activities.* It is.;this; feature pf;thejJse.ctor -that jmakes-f-it^dangerous to speculate on the origins^and...causes/for the explosion -of this".sectpr.;j-!n^-r, -.;. -, ; ,■-,
In fact, one may justifiably question whether there are any unifying characteristics in^the^actiyities listed above, that^entitle-us-rto^roup^them^iOtp; a-'/sector" .-Definitely, the ^studies>which exist so;far ;;on .the Africanoinformal .sectors -dp not- permit us ,to readily isolate any. unifying characteristics^ this,,is because they areimicro--empirical. and 7 r descriptiverstudies and-*which,,-jfpr..the,3most part, exibit.an'aversion.tOjany 'jtheorizing"
which would enabie.us, tp/characterizejthe^sectpr.prj to capturejther dynamics ofvprpdiiction
within lit.,". It( is".not:unusual, -there fore/for a' reader to come-across-as'./many, soTcflled
"characteristics": of informal :sectpr^activities,as^there;are. researchers, productive , activities .in/the^ sector,, as weli.7as countries , studied; .Based^ pn.,studies l on-, manufacturing entreprises iiv Lusaka,, for example,-a "reader^may be tempted;tp-.conclude that.,informal sectpr.iac^iyities.Tare characterized-byf low ,costs of; operations,, smallness; in^size, frozen technology, low incomes for informal sector operatives as well as catering mainly,£but not exclusively, to low income groups.^/ Based on a study of the Garabian informal
sector, however, the accent may rather be on output/capital ratios, employment generation and import intensities, all of which may vary considerably depe'nding^ori: th*e~country" and the
productive activity studie'di3/ii; '"3t' :;< * - f *" \\~ lC^ .. J°' ."_' "r'J!' .-'*
< We'believe, however, that the oniy_.objective: way to1 define-the' sector" is: on
the basis, of the nature of the labour pTOcess:.r informal, sector ojperatiyes are usually,
owner/proprietors ancT they^fareiy resort5 towage labour for; any ^considerable periods of
time. "Employment" in*1 informat^ sector'" establishments- "consist's almost exclusively of':,,,''Vtti .*'.; s-.7 c.3..'Ysr, ■;■ .i.e. ■■■'"' I,! - ■-\^<z: > ■ '; ■: <-*^f< r-T '--i^ j~'j:> '•-:-* : ^ ;.n
— ..-■■'i'-, : ylvrr.-, *.(>* . • >'c. ..-.oio'-r
1/ Zambia: Basic Needs in an Economy Under Pressure. ILO/JASPA, ( v
; . * [ -*■'-'- 'Art/I ^'C- :ur\ QrNO*' IQnT1 "*nI 7^ tx'1 r7**±*.*^-+ --^
( /r:^ v''':SeeT''for example-," George^Aryee; "X Study of the'-*Gambian? Informalf Sectbr1^^7 Unpublished Manuscriptwritten for ILO/JASPA, Addis Ababa, 1981. '■•*'- ' -*****
3/ ILO/JASPA, "Zambia", Op. Cit., (P.32) <"u * ) ■■j:r3 '"- ^a«.Je0 V->
E/ECA/SERPD/INDiqil.. ., - .^
11 "'-Page-"7:: •'^r.
family members and apprentices. It is this feature that makes .the.economic-statisticians,
(convinced as he* is-of '.'.the xrucial- place'of wage employmehtj-in a modernising capitalist
"economy", as well as the. difficulty, of datagathering-speci-r^ic to.the^sector) blind to employment in this'sector.. .. ..'_ 1' ■'"_.'. -'.-'..:__-' ' ..-v.;-.'/'.<\ .' l- ',
In fact, the.point ofdeparture.for.the economic-statistic;ian is:."almost.certainly a major^expansion ,<>£ informal sector employment has' occurred' to "fill tfhe^gap b'etween,
•rising riuihber.s and' declining formal1' sector 'oppqftuniti.es'; Ji/ ,; .and 'from this .optiqite,. ,",^
a number of observations-and^policy recommendations riaturaliy'frillow:' "''' ' ' J'..'';''*■' '.
w *■ v -'" * .• s" * 'j'-ms- •-■■ ■'*, :. . '-;-J .'• ■/.}:'■ . \- ■'•■' ;rMv). j1-1 ■'."' ■-!.: tt» ,;::'. oJ
V ' Ja) -'Informal sept6r^a.ctiv'ities;'are involuntary and the"qperatives'are.(. .". j.'- 'i'
'^iabourdrs-in-waiting^'^Tiie implication [ of this'is'that .'the labour force' for' _';..- \ "". '"
odern sector cannot-be'defined to include'ohlyrthose e'ngaged^in^lor ;iooking for"''
o ;!;;' the modern, sector cannot-be'defined to include'.o.hlyrthose e'ngaged^in^lor ;iooking( for"'',■; !;;.' work in ;Xhe:;modern!.sector ^ro4uct:i've establi'shments but/fcare^unabie^to.^firid^thGniV : ^'^: n^
It iric^.udes■-inf6I^rial^itec't6r■op;erati.ves^Vs;^ ''argume^nt^'eing^jthat .while!theyr^''''{;'{:
may'Wt^ be-'a'otively'looking-for LwofkJ^ in the^modefn^sector th^y^will almost 'certainly •};', ' >
accept eraployment 'if 'appr6priate"job:s b'e.came'available. ° 1' ' ■'"! *.1"'' -1' ' ■"■r ■ ■"/:'..■'-
■■"■*■• - ■■■; ■■■> ■ hJl ;■ ■ ■ .."■,■.- "■ i ■" ■ ':■■:, :■
b) As:'^gap-filling11 activities they are, naturally, r characterized by .. _,
low productivity, low incomes, in turn due to low capital iWtVnsi-^-and-frbze'n-l--—--'3--/^
technologies. . . , : ." : f ■ ■■ -
' •#_icjl/-1th'e."solutibiiI';^therefore-,J.±s'Jto expa'^^niplovraeri^in/thd: pr.pductive modern/:.
sector or-make 'credit^andiothe'r facilities availabXe to the- 'informal se'c'tpr _in 'ordef.^to1- ■
ri 'l sct'J-L"ji *
increase-capital 'accumuiatiori 'and' :tfius "improve^ rlabour'productivity. 'L , 'J-
V/e contend;;that: whirepit. mky''be t'rue th'aV some'informal-, sector op'eratiyes '"(especially
those engaged in' low-volume1, low'income" re'tVi'l and-unski'fled'servi'ce'activitic-V)'may irifact
be wage labourers-in^wa'iting, the hypothesis that there exists a negative correlationbetween emplpymentviin the ;.infornjal sector and the; employment':t>asre in, the modern' '(formal)
sector, Is.,yet''Jtp;bb seriously tested1.1 Clearly,.'there are; a number'jpuf activities 'in the t informal sector ^i'cjy arc complementary ..and- thus^'respond^posi'tiveiy "to .the},;dynamism 'of l'
the modern' ^sector. The'^obvibus activities .being.:, :thes£'illW services, /Cbicycl'e/'sh'oe's,, jcar, machinery,,'Watches'- and;-radio- repairs); which'^are best'organize'd on ,a ..small' fs"c'aie^",,f.
basis;' the retail'^trades; and ther productive activities' 'which- cater to the; 16w "'inconie;"''"'.'/.
mode*rri: s'ectojr■ employees.1 ■'■ 'If this is tHe cas'e',' then it. .is Jci'early .unjustifie'd1 for ,'tKe
economic-statistician-tbs view th-e- sbctor' 'as "transitoryIlt'i/"eA' rik'eiy;,'to rd'isappe^r 'witK'l;'
the expansion of the employment1 base in th'e modern sector';- 'On' the dontraryj th'ere is'1 ■'' growing evidence that informal sector activities are closely linked to the modern)',, sector::': .''■- -;? "' ■ ^■"-'■- ' " ^•■;tvj"-' '= ;- »-'■> l!- ""-A'9"*; '-»/1-? ^'■rij 'T?-- '■-i;rf'1.'1•:n. ■ -^T06?6 arej'impqrtantanput: and output nlinkages ;.fourid "in. x-^ay cities'of _■*!;•• v, - ;;
a -, .^developing'countries-between .format, and^informal sector":activities;.'V^ ,':. r <<-v Subcontracting is widspread, for instance-in Indian cities ;(.1978.o Ii\f:..rf.t , j>.'-':
World Bank-data compiled by E. Bevan Waide and Christine I. Wallich) ti_" inputs from.modern sector- whole, salers -.or .markets'^are1 ti^p
- even for street vending-, -small,stores and^artisari!repai*t 'sho^ps-.i/.-.r v:.:
1/ -■ Johannes7t.^:Iii:nn-iv/jCi^^^ Policies- for .theif. ^.!; ' \v'-
Equitable-and E£fiqient--G^irtK,^ A'astfing^on, ;i;?83:. !(P;40)
2/ ILO/JASPA, "Zambia", Op'. Cit., (p.40) "" ' ,■ '"I "■-<'
Page ■ 8- ■■■•^.■■■■■"(-"-:i---:
■ II. 'The-Labour'Progress, in Afficnn; Social Formations; . Salient-,
*" ._'•;.„.. '-,' Features of Employment and Problems of Measurement in the' :.
j- "["{.":, ...'. ■.Subsistence/Agrarian, Informal andModern' Sectors ;. :. .
:■• "■'From "the foregoing .discussion, it is. "clears that in. order, to determine the- ability ; ■:
or inability of/a society, to optimize -the uss" of (its.human resource'si .in•■the- socio-eCoricjnic development process', it is. necessary, first tb identify the; nature, .of' the labour/process •' in each of the various "sect.qrs", as well'-as the interrelatibns betwebn/tnem'.' True, that in some of the sectors, the temployment :prob*lem may pose ■.itself as simjply->the'-lack of ■' sufficierit opportunit-ies tfor gainful w≥ employment.' ,,,;in others, however, Wage employrcont may scarcely be: relevant/ '.RattferV the'employme'ht, pfoblcm ;may posqritself.aS' long and'-"' ""-,, arduous ^hoUrs/spent by/labour/in productive'' activities..withoW labour being able-to'/^-V1 reproduce .itself. . 'This/isT.;'why .it. is .necessary .to.put a special emphasis on^the in-t;e;r'-, ' ,<
relationship :be,tween/f6:nris. of .employment iivthe. ^.--i^ious. sectors 6tf^the/eco'nomyr. .We~are convinced that ihyariatfly .the problem, of ^employment,, in one JseCtor/canftot" .be,, treated .in isolation from "employment:,in the other sector. "". 1 /'."-./ -H-' ' . ' / "' ][ :'
The Subsistence/Agrarian. Sector. '.,.,, .. '-'//■■ -. :..;,-- ■ '-- -. 'Z■'■'.-'^ .-. '.,'-.. './.''!'I-:.-; ;. ;
As we argue above, the assumption that the" subsistence/agrarian sector is characterized by "labour surplus" is :almost definitely unjustified.i;rThe evidence,
in. fact, would^seem to indicate that .'the cqntrary\is t-h;e ■caser/incountr'ies.where _• ,-.
agrarian capitaii'sm is'well.' adyancedy., agrarian.,capitalists, either have to .-rely, on . . . ; migrant labour, or impose on the 'state, policies which forcibly dispossess.the
peasantry in order to oblige the latterf,t.q sell theiV'labour power. , The.-case, is, ■;
well, documented in Southern.Africa,. Kenya, Ivory Coast \and elsewhere,, .,, ,. - , , _,' . To ."the' extent that it is .true that the rural areas are rapidly being, depopulated...- -.a as females and children increasingly take up the-major burden, of,-farm maintenance; . j-: • the men going into urban centres in search of wage employment. - it/becomes, difficult -. ,_...
to accept the validity-of the assumption',that latiour in agriculture is'characterized^
by zero or negligible marginal productivity.' in'_ addition,, there are a .whole/host..of t , economic;and social activities carried on in the rural areas, (house maintenance, ,fence -r^
building, .land'.improvement, small scale livestock an"d' poultry farming,'..communal, labour / , etc.. ./during'and outside the' farming seaspn) whicH^.necesaarily. contribute. t,o- th,e . , ., -^
reproduction of/labour but. escape narrow economistic measurement.- _ .. v, - ., ... ,.
We suspect that the problem in the subsistence/agrarian' sector is not so much .;. . /V/
one of unemployment, underemployment or I:disguised unemployment'-, but one of ..altering the conditions; of production in.such ^a mariner that agriculturei:'c"an1 be'eome a -remunerative full-time occiipaitipn !for the vast majority of rural inhabitants;, as. -is/rajlread)^.1 the; case
for.^;.handfiul' of .emergent ^.agrarian capitalists. *c/. .< ';,', .; ■ ■■£./'\ :'->: *k^$? S* '""
In'some ..cases, this may.^ involve "land 'reform.. We- suspect, however j- that •'in'-the,' . .J:. r*' vast majority of .cases, this will entail': improved ae-»^«omic technologies, -better
farm-gate prices, improved rural communications network, be-u— extension, services^
and, more importantly, industrialization strategies s^Tio^t:.lve ^"i^
modernization in the incAt.^^c^or. ' ^"a ;Wcent; publication.- on
Zambia, the ILO argues: " !u '' '■•-■■■ > a.., ^
o^t:lve ^"i^ process ofe on Ea^;^ i?
■>■' \ '■ ■ ■ '■ - '";'■- ,. , - . ." . ■'.-■■,'-■■•■,..
'■'■■"'■■• - ■■■■)■■'•:• ;■-■ 'if! -"■ ! ■*'/>• ■ ••■•-. .' \-;-y'.vn ■(;'■■■;/ ."■:■*-,•■■':-
i; .. E/ECA/SERPD/INDIC/11
. -jr Page 9
. ■ ivt f/v j v* '_,"•;' '-T ■ -i/^ * s f:..-^ :.-■•' ?i^ai/x ■ •.*?. ..-:'j it j". r* \c loIi-.c1 rrrrn.>..i ,r^ '■!'f':~jv > [r^ - -^no *"■■ :t " .?■ :jt:. —.j- "... ^i^xr -;,-fJ /iJ. ■ /I'.'/Ll';^- .- nair:?..[:yji;i
A binding labour constraint is one of the reasons for rural
f.:"ppverty. .-'For this^reason^industryihas'a priorityr.tdjeaseir.;. j,. ■- ' tli ;^rf
,"0'"j -the "ruralnlabour. constraint- by increasing, supplies'/of v: -r-*vi . :-*iv; x,.i+?y;
-tn-;improvedotoolsoand"drudgery-saving ^equipment.1! :Itvis-easy.-/-. i-.(l v.r. -. r-wj / >;.t rto produce.a^list because'the needs'^ of'theomajority of, subsistence, i:-' •::'<*> }q
<' ' farmers' are^so"glaring: traditional^tools'"7 (hoes;andAJaxes/-etc?)-. ■-. •. ." rlf -.;•;.-;y;
r.i fr. •"("■.as'-'well 'as improved! ones',-;^ such r as ioxr'equipment::i(plbu^*srf.;,_■,' a^;' ..;.r -■ r c: ?i ,'■■-■'-rt.^Scotch^carts .etc*;-)-';-simpl'e'iirrigation1'.pumpsj pipes.'/JWheelbarrows,"^ ,,,,i^: ^..-o-j v 7;.jii -'etc/,, and"drudgery.rreducing:tools:;for ?food?pr6cessihgi (cassavaT-.r.v * ^ A": •. >-f
". :■> r>-■» /peelers'/ maiz.e:and>cassaya;grinders>;maize. shellers-f<etc.)U:-' ':i' *iT*.i-3i. .. ^r /.'- ,'i'cooking .equipment; bicycTes^and bicycrel'spar-e^parts.i itoblslfor ^;(i::v»-_ir:-^_r,.f:.r/;i f:r. .-,«!:'■ -carpenters^'-blacKsmiths-, ■. tailors,:'barbers., etc^rrfxThe list.- is>-/^vaT 110 ■. r:"v v..op c.".c:eridless ahdiis^well^within .th'ef.ca^aljility ofitthet Zambian (yL'-o^p.'foD .9'fI*''O>
•■-■"" it: industrials sector': l/'icV. vpi-r, ;.rr ,»jt*j i;^1-=fi-i. eo^* I"i ^s "c ' ijiui ';;.;J:j^ iio-:': ■ .-VI i-i' this means is that there (is:n°jpossible1, solution to the problem of improving
?of'-the; labour process-*ahchthe .TefwarAs1-t'o.. labour in-- agriculture^-;- ifrtreated
tdrblx: Rth thblmpB' i
. IVhat
the" naturef
as an i'soiatedrproblem.x: Rather, >the.£roblQmApB''e^ i
must' be' seen in-.relatiori t6ittfie-:yhole ' strategy "ofc development, rt-/'.-kHi^.n .- <\i->l'-w yii^.
;y , .. ;:o /r ;.j offjj ^i
X' "Having- characterized this:sectorLby:ihe nature^of the: iabour( process;; i.evfrare resort
to-1 wage-"l&bourii i^t-is also'possible to i'addf a/;few. morevcharacteristiGS.iWhich. are..generally, though obviously: hot ■always,"-true,'of-informal sector, operatives;. 'i.-Ampn;g: these ;are_:i-Jhe*n absence^ of^^for^a;^refcp^rds( and-thev.near... impossibility :.pf- distinguishing: between-workings i^ and'Vh"4>Qperia!tive1'"sitancpiiie;. ;■The/evidence,T-ho,wey.er.>. is; quite,_strong, thatj;!,-, tyni
;: -^ Entry tb;! thecactivitj.es'carried out by the poor and the jpbs held ;* "v ,,...■':
n: '";:.by...them is not always unrestricted nor are these'activities o^.^oVr^ra'o-r-j.rr v.-;: , jobs necessarily unregulated or untaxed by the "gdverhment;-^.,.^ - -.■—h;-,---,-^ ;^r—
&\di 'r v/.Vv;J. ;5imi1iarry'j"'tax paymentsi'or!; ■I:icencej.f1e.esvar,e- legally* '?'.*■;'saz CcrtcKv^r
V^?:1;!;- requireti'^r'1 informal, sector, activities,' in\mps£ pities. J:0f cpurse,V-:7- '^'ytfk-wv
s ;:r.-.>: the; degree b£.eyasion:.ofc.these ftaxesi-andj;ltic.enc.ej.requirements ^;- ^v^.i sVc-H"**." *.7 ij..i "".'ris generally''subs-tant;ial..->2/rfJ?i'Xr' ?r -;i.-v;T.v,-i-.-od ,i,oa.:; M&r .-:. ^^rVcV-.:.!!"-':;. ::fWe aifgue above that it may be erroneous'to consider the expansion of ,inr"prmai:
sect'or employment* as"= "filling^the.gap. :betweenf;r,isin'g numbers- -arid (declining form^lr'
secVorNb'pportunities?1.;.''■ Inr facti;v£.there; is: .evidence:, ('especially .ini countries;.whijch:w ticq have' be'eti^the. Hardest hit ;by.the xris.is ;of :jthe) seventies .and early ie.ifihties,:^ Ghana, i.-.
Sierra?"fLe^6ne> 'Nigeria/'Tanzania-, Ugarida.;etc.;.'r):b that* formal ;se.ctor employment;-is;;;;,-r ^ rap'i^ly^-. losing Vits lustre ras - an •alternative.-.to. .infp'rmar^sQCtpr .activities,? especially ,^
■irf"thre -retail trades^^blacki ma'rketeering:!:'andT speculation,an;rth.e.^real;'.es,tate_.markets..; r;-
'■TK-ifS'-'is becausevform'al. sector wage^;;:have\been \un.abj.e,,!tb!i:keep up, ■with..the idizzyingr^r i r,\
rates, of inflation|Vwhereas a ■■producer, 'in'^therinfp:rmai> sector,~}ipr La rretailer..is fable, -_ .., normally, -to 'capture; part of tKe^retail/margin which- o'fte,n:moves- in^tan^dem wi^h ^th'e •■ rv ira'te^of; infration. ■" In:;fact-, rin vmany -instances,, iformal sector; employment 'is,.;s£ught,-, ^r;
/only as^.a1;camouflaged as ;means;..of gaining ;.or:maintaining-^access ^tp(relevant ministries,;
or sources of supplies, or for reducing the-risks (through(ia-,regular-,wage.); inherentrjinx
1/ ILO/JASPA, "Zambia", Op. Citr.^- (pT
2/ Johannes F. Linn., Pp.. Cit;.'V/;( vp.^
E/ECA/SERPD/IHDIC/11 . . * - . Page 10
-." •*:■:*'*
informal sector activities. The result has been a growing and lengthening chain of intermediaries especially in the areas of transport, real estate and distribution.
What this means is ..that it. increasingly becomes untenable ;to:equate?irifprmal sector activities with activities-engaged; iiuby the^poort^nlt does not mean, 'however, that-there are no employement problems- in. the sector-; >0ne'> obvious; problem -is.1 that of the "apprenticed who'*normally,does"vnbt receive, a.wage and may;be kept,, on much longer than is necessary-.for him'tb acquire the skills of the trade. . Objectively, it is in the interest of\info"rmar sector -operatives:to\minimize the threat .of. potential competition by.:prolohgihg- the-peripd'ipf .appfenticeship;as .much^as possible.VcFurther, ^ barriers to entryf in certain activities'.mayialso 'havei;a; similar effect:.! In^addition,
it is a legitimate questipn'to pose, esjieciairy.-witnin.;the framework .of -optimal use of human resources in. socTb-economic'activities;\as torwhether all. informalrsector
activities, regardless, of incomes^that can be earned-; should be;.treated'on* the same footing. Concretely, this^means' that tabs . should, be kept ^on,. activities->which- are truly productive and essential for an efficient and orderly distributive systems, as opposed to merely parasitic.
|; li^is-is-easy:'t6rpbse asrgenefal guidelines or'criteria-for the determination* ■. >:s of tne-»optimal userbf human resources;• In^practice however,. there .are.dangersjrtp. ■. -\
hasty actions. Unpleasant surprises, are many:, and cases where* "obviously.!parasitic"j.--(\,-:
activities were brutally suppressed only to have catastrophic consequences for the productive and distribution systems, are too many to cite. What this means is.that! . -f.
there are no alternatives to in-depth studies of the various activities that can be"
vv grouped under the -informal sector and their intra-sectorial Minkages;: rSuryeysi simply
< vfbr-'enumerating-the numberof operatives-1 involved dn each-activity,'the incomes; earned,?
as^weli- as the1 sizes of operations1 and-.the qualifica'tionsrof individual s;involy.ed ;- ,-«.rft are nbt;brilyiikely-to be? inefficient;but.: the results- arer likely,, to be mos.t/misleading:?*
For, objectively, informal sector^ operatives!have*no interest in revealingi.such. information or even admitting their involvement in given lines of operations.
The Formal SectoV' : *J-.T".vi •?,..■- :-c.i..:iv -• ;> h^fr^y . r..*i -. ■■. ' •<.,, .t rjt\\ <>',
Formal sector employment;,* whether-:pubTic;fi(in'.administration, or productive public entreprises) 'or1 "private,"- usually pose" very:'fewt.problems as- far as the .measurement of levels, hours of work, 'pay etc. are concerned.- As.-far as; optimal utilization, of
human resources is concerned, however, it is necessary, to-go beyond, simple enumeration and tQ analyze, the nature and types of employment.
In "most* African1 countries ;l public -sector,.employment,-,accounts for the.rpreppnder.ant-,.
part of;formal s'ectbT' employment-.: :This-has its advantages:, the impact .of. t)i6reconomic,' crisis of the'seventies" and the eighties: on'formal'.wage employment has -not ;been. a^1'V',."'
drarnati'c-"as':could:be expected due "to attempts;iby, mpst'.states, to keep unemployment r, ..
w'it'jiih manageabiev;limits -by "expanding orrs'carceiy -reducing the volume' of ;their services
as wel:l;-as maintaining'overmanning in most parastatalsr.\ rln. addition,'labour legisla.tipji in many countries^make'it1 difficult for/private, sector entreprises toVeJxpan;d;- or contract employment':iri line with 'the level of economic; activities.-and the, degree, .pf ^capacity..:--£
utilization:' The' disadvantages^ (a necessary corollary of :the> ".advantages".) -is rtha.t .,•».,;.
underemployment in formal sector activities is ^likely..to be .a serious .problemi.especially
in time^'''p£ l'bw1 economic activity; '-"Job misplacement'^especially in .public.-entreprises,,
is:-a'JprobTem ih-mahy' countries':" ■-'!-•' >* i -^"> \\ i-'^ ■' i~- Iy ,■■ '..-:i ^ .:j?*i.:U.'' ~o
..*>rv Joi
