The West Africa Network for Peace Building (WANEP), a sub-regional NGO specializing in peace building and conflict prevention, and the Ghana Integrity Initiative (GII), the local branch of Transparency International (TI), have warned West African countries about the danger that widespread youth unemployment poses to their fledgling democracies. The UNDP, in association with a handful of other international bodies, has done the same.
The forced alignment of world economies into a one-size-fits-all model is largely to blame for rising unemployment in the developing world, as we force our local economies to adapt to a larger commercial model, and expose ourselves to the supply and demand-based hazards of globalization.
When the World Bank commissioned a study last year to source ideas for job creation among youth, many policymakers hoped the bank would chart a new course; that it would accept responsibility for the inadequate policy recommendations of the past, and admit faulty advice provided to the Ghanaian government regarding job creation that has done more harm than good.
Sadly, this was not the order of the day. Rather, the Bank is trumpeting its tired message, calling for government to further deregulate the labour market, alleging this will create jobs for everyone.
The Bank blames unionism for youth unemployment, arguing that unions restrict an employer’s ability to hire more workers by eliminating his ability to lower wages. The Bank argues the labour market must be flexible and left to determine, without the aid of the unions, the minimum wage.
Naturally, this recommendation finds little favour with Ghanaian workers, in part because the study does not appear to be based in empirical evidence.
Dr. Yaw Baa, Director of Research at the Trades Union Congress (TUC), points out that, as usual, the recommendations are based in a neoclassical theoretic framework with simplistic and unrealistic assumptions.
Dr. Baa argues that the Bank makes no effort in this report or previous reports to define the criteria that determines a “flexible” labour market. Indeed, the Bank admits no consensus exists regarding the principal of flexibility.
Dr. Baa also takes issue with the Bank’s recommendation for lower wage rates. He argues that Ghanaian working wages are already lower than those in most sub-Saharan nations, and that this lends little comparative advantage with regard to attracting investors. Despite Ghana’s low wages, the country accounts for an insignificant share of total FDI flows to the sub-Saharan region.
According to Dr. Baa, this lack of investment contributes directly to lost opportunities for young workers.
Studies reveal that most investors and employers will expand businesses only when assured of managed macroeconomic stability and a predictable list of economic, financial and political risks. What continues to keep investors out of Africa is the issue to address here—far more fundamental than notions about workers’ wages.
The neoclassical framework argues high wages create unemployment, yet the World Bank report cites average monthly incomes for Ghanaians at US$25 and $75 for small and large firms, respectively. At the current daily rate of less than US$2 for eight hours of work, it will be difficult to support the claim that set wages are hindering job creation for Ghanaian youth with any credibility.
Examining the Bank’s policy options, Dr. Baa finds it difficult to explain why researchers would recommend, “larger firms with lower wages” and “increased flexibility” in Ghana, over his preferred, “larger firms with higher levels of efficiency.”
Given the strength of unions in Ghana and their readiness to cooperate with employers and government, he recommends a corporatist approach to economic development that involves all stakeholders in the search for ways of dealing with labour market challenges.
Many of the Bank’s prescribed recommendations remain economic theories rooted in unrealistic assumptions, says Dr. Baa. The Bank would fold unions, opening the door for employers to fire labourers without any promise of severance pay. Severance assurance is part of an unwritten social policy in Ghana ensuring that employees who lose their jobs do not fall into severe poverty while pursuing new work.
There is no guarantee, if we relax labour regulations, abolish trade unions, and allow slave wages in Ghana, that the youth will find employment. What has been established and generally acknowledged is that unions do protect the vulnerable, weak and unskilled workers in the labour market, the majority of whom are young people.
It appears, once again, that the World Bank has gotten it all wrong.
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