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Opinions of Wednesday, 19 August 2015

Columnist: Alex Frimpong

Job creation: Critical tool for economic growth

The current economic challenges the nation is experiencing have worsened the unemployment statistics, with companies in the country laying off workers in order to break even.

A survey conducted by the Ghana Employers’ Association at the beginning of this year revealed that by the end of the first quarter of the year, companies had laid off between 10 and 250 employees.

Another reason for the worsening unemployment in Ghana is the government ban on employment in the public sector. This has compelled thousands of graduates from the universities and polytechnics to search for non-existent jobs in a private sector that is suffering due to the prevailing unfavourable economic climate.

Youth unemployment remains an important issue not only because of the need to empower the youth economically but also the need to harness Ghana’s human resource for national development.

Governments, in recognition of this problem, have over the years introduced a number of measures to enhance employability of the youth. Some of the measures include the promotion of skills development programmes, revision of the education sector strategy, the introduction of the Youth Venture Capital Fund (YVCF), the enactment of a labour law intended to ensure a more flexible labour market, Youth Enterprise Support (YES), the National Youth Employment Programme (NYEP), Ghana Youth Employment and Entrepreneurial Development Agency (GYEEDA) among others. The youth unemployment challenge, however, continues to be enormous because of the increasing gap between labour supply and the opportunities for wage employment at the firm level.

Causes of unemployment

Some of the causes of the high unemployment levels include:

• Low manufacturing and industrial base: Ghana’s industrial base has shrunk significantly over the last few decades.

This can be attributed to a myriad of problems industries face, including counterfeiting, high taxes and interest rates, energy challenges and a generally unfavourable economic climate.

• Unsupportive entrepreneurial climate: Just as has been enumerated above, Ghana’s economic climate is not favourable to entrepreneurs and business start-ups.

This creates an employment deficit since most tertiary graduates leave school and come out to look for jobs rather than creating businesses for themselves and creating jobs for others.

• Low levels of economic diversification and productivity.

• Weak education system that doesn't support practical work-related skills.

• Lack of investments in areas of high potential for employment generation e.g. Agriculture.

• Focus on primary/raw products exports due to lack of investments in value addition.

Benefits of job creation

Employment creation programmes are an important policy instrument, especially in low and middle-income countries where rates of unemployment and underemployment are high, the employment intensity of growth is low or even declining, and macroeconomic shocks or natural disasters can undermine livelihoods and require income-stabilising interventions.

Employment creation is a key area where the private sector can contribute to poverty reduction.

When productive employment expands, the benefits of growth are both economic and social. Better employment opportunities provide people with new, and often improved, sources of income. In this way, improving the quality and quantity of employment opportunities directly links economic growth to poverty reduction. Specifically, job creation will give Ghana the following benefits:

• Increased financial security and higher living standards for Ghanaians;

• Increased spending, stimulating economic activity;

• Decreased crime rate;

• Improvement in income distribution and reduction in income inequality;

• investment promotion;

• increases in the country's output, and, among other things, rising ratio of workers to pensioners, thereby lowering the cost of its social safety net.

In order to support job creation in the private sector, the government must commit to the following:

• Reduce import duty drastically on imported machinery and equipment,

• Provide corporate tax incentives/breaks for new businesses,

• Provide excellent road infrastructure throughout the country,

• Extend railway system to the northern part of the country,

• Provide uninterrupted supply of electricity and water,

• Develop efficient and effective judicial system, devoid of corruption and government interference for dispute settlement,

• Provide efficient and reliable communication system suited for the 21st century,

• Implement programmes in resource-rich sectors such as agriculture, tourism, mining, forestry, lands and water and construction.

• Provide an effective and efficient healthcare system, and

• Put in place sound regulatory procedures for the growth of business to ensure reliable corporate tax revenue collection across the board.

That way, the government’s revenue will be greatly boosted by the huge corporate tax revenue that will accrue to the government in the long term when many businesses are established in the country.

Furthermore, to achieve greater economic growth, there must be clear linkages between industry needs and higher education.

To make the human capital development effective, government should compile data on existing skills shortages and future needs of industry and co-ordinate this information with institutions of higher learning so that they can respond through effective planning and continual adaptation of its curricula to economic development policies and projections. Research reveals that through dialogue between government and industry, manpower needs in the national economy can fairly be projected by comparing national employment changes to enrolments by field to identify areas of shortage.

As noted by the president at the recently held National Job Summit, "It has come to the time that we have to move away from being suppliers of raw materials and add value to them to create more jobs for the growing population of this country."

The writer is the Chief Executive Officer of the Ghana Employers’ Association.