E

Employment Creation for significantly impact employment but have been

Youth in Urban Areas of embarrassed by the weak labour market informa-
Developing Economies: The tion system, the low demand for labor due to
Ethiopian Experience structural weakness of the economy, and shortage
of government budget.
Dejene Mamo Bekana
Department of Social and Political Sciences,
University of Milan, Milan, Italy Introduction

Creation of adequate employment opportunities

Synonyms remains one of the greatest challenges for
Ethiopian policy makers for a long period of
Ethiopia; Labour market; Unemployment; Urban time and definitely in many other countries
youth of the developing world. The 2012 Report by the
International Labour Organization, estimated, for
example, that the world unemployment rate
Definition would remain stuck around the current 6% up to
2016. The Report further points out that the num-
This paper finds out that there are various policies ber of unemployed labor force around the world in
and strategies put into practice by the government 2012 was 200 million and will rise to 206 million
for employment generations targeting the youth. by 2016. Globally, the youth are the most hurt due
These policies and strategies were relevant to the to unemployment. In 2011, 74.8 million youth
improvement of the demand and the supply sides aged 15–24 were unemployed in the global labour
of the labour market. Those policies and strategies market. The global youth unemployment rate in
on the demand side of the labour market include 2012 is at 12.7% showing the chance of young
the special incentives and supports provided for people to remain unemployed nearly three times
private sector development, promotion of the as likely as adults to be unemployed. That means
development of micro and small enterprises, and the youth-adult unemployment ratio is about 3.00.
the public employment generation system. On the According to the Report, the rate of unemploy-
supply side of the labour market, there has been ment in sub-Saharan Africa eased marginally with
significant effort to improve labor productivity the youth bearing a relatively large burden of the
through education and training. The paper con- unemployment. Employment remains the main
cludes that these interventions have proved to concern of youth in the sub-Saharan Africa, and
© Springer Nature Switzerland AG 2020
A. Farazmand (ed.), Global Encyclopedia of Public Administration, Public Policy, and Governance,
https://doi.org/10.1007/978-3-319-31816-5_4019-1
2 Employment Creation for Youth in Urban Areas

country variations are important to note. For as high as 31.6% compared with the 16.6% for
example, youth unemployment rates in Malawi young males. However, the March 2012 survey
and Rwanda are under 5%, whereas rates reach result reveals that the overall urban unemploy-
above 20% in Ghana, Zambia, and Zimbabwe and ment rate is 17.5% and the corresponding male
above 30% in Mauritius, Botswana, Lesotho, and female unemployment rates are 11.4% and
Namibia, Swaziland, and South Africa. 24.2%, respectively. Although urban aggregate
The scenario is similar for Ethiopia where the unemployment and youth unemployment have
employment challenge has been pervasive with shown a decline in recent periods, the differentials
the youth being the main casualties (Broussard of unemployment by sex show that female unem-
and Gebrekidan 2012). That is, the youth labour ployment is more than two times as compared to
market is of particular concern for Ethiopian pol- that of males.
icy makers as a result of high proportion of youth The government of Ethiopia has been
in the demographic profile of the population size. implementing various policies to address the chal-
There is concern that more youth bulge in the lenge of poverty and unemployment especially
demographic structure creates difficult pressures youth unemployment (Woldehanna et al. 2008).
on the labour market and a growing youth popu- The various government policy implementations
lation can have important long-run implications over the past two decades started to yield positive
on youth unemployment. In 2007, Ethiopia’s total results for youth employment. In 1991, with the
population was estimated to be about 73 million downfall of the Marxist era of the command eco-
people; this represented a 38% increase from the nomic system, the Ethiopian government identi-
1994 census result. The total youth population is fied poverty and unemployment as the twin
around 20 million, representing 28% of the popu- challenges facing the country. The government
lation. By 2014, the Ethiopian population is esti- identified that poverty is the number one enemy
mated to be over 90 million with the youth making of the country, and the agenda of the government
up around 30 million of that aggregate. is eradication of poverty through pro-poor growth
Millions of Ethiopians especially the youth and policies. More than 20 years later, and despite
women are unemployed, underemployed, or in numerous policy efforts, poverty and unemploy-
the swelling ranks of the working poor (Genene ment continues to challenge the lives of many
Bizuneh et al. 2001). According to the 2010 Ethiopians.
Urban Employment Survey by the Ethiopian A number of policy interventions have been
Central Statistical Agency, 4,790,958 million out formulated and variously executed to address
of the 5,907,470 million labor force were reported the challenges posed because of unemployment
as employed with the remaining 1,116,512 mil- in Ethiopia. Key among these policies is the
lion people being openly unemployed. That is, the growth-oriented development strategy augmented
urban population unemployment rate is 18.9%. with the widening opportunities for the disadvan-
The corresponding female unemployment rate is taged group especially women and the youth. The
reported to be 27.4%, while the male unemploy- government also undertook to engage in direct
ment rate is 11%. employment creation, regulate wages, and
In the Ethiopian national demographic profile, improve labour market information systems and
the youth are those within the 15–29 years of age. re-orientation of education and training systems to
The aggregate youth unemployment rate for skill development-based vocational and technical
those within 15–29 years in urban areas is found training areas as a means of promoting employ-
to be 23.3% in the year 2011. Statistical evidence ment creation.
shows that in this category younger females are Starting from the middle of the 1990s, govern-
more affected by the incidence of unemployment ment employment interventions targeted enhanc-
compared with their male counterparts. The May ing the acquisition and promotion of efficient use
2010 Urban Unemployment Survey result of labour market information, reliance on market
revealed that young females’ unemployment was forces to mobilize resources for sustained growth,
Employment Creation for Youth in Urban Areas 3

provision of public infrastructure, enhancement large in the demographic structure more impor-
of private sector investment, and participation in tantly implies that youth unemployment compels
the economy. More recently, the government of most of the productive labor force segment of the
Ethiopia realized the development of micro and society to remain economically inactive adversely
small-scale enterprises and promotion of indus- affecting economic growth and development.
trial harmony and productivity to curb the urban Thus, this article reviews the challenges and pros-
employment problem. In spite of all these inter- pects of urban youth (un)employment and gov-
ventions, creation of adequate, productive, and ernment intervention policies in lieu of the
sustainable employment continues to be among following research questions:
the major challenges in Ethiopia.
Urban areas in Ethiopia like in many develop- • What is the nature and what are the causes of
ing economies are characterized by very high rate urban youth unemployment in the context of
of youth unemployment. Urban youth represents Ethiopia?
more than one fourth of the urban population in • What is the nature and what are the types of
Ethiopia. Even though the unemployment rate for government interventions to address the issues
this segment of the demographic structure has of unemployment and elaborate successes, fail-
been declining from as high as 31.5% in 2004 to ures, and lessons learned?
17.4% in 2014, still it is high. The literature on
urban youth employment in sub-Saharan African
economies provide strong evidence that unem- Literature Review and Conceptual
ployment and underemployment among the Framework
youth are often higher than among adults (Gibb
and George 1990); the youth are more likely than In defining unemployment, different researchers
adults to be in the informal sector, and less likely viewed it differently. For instance, Adebayo
to be wage employed or self-employed; and the (1999) defined unemployment as a state in
youth are more likely to work longer hours under which people who can work are without jobs
intermittent and insecure work arrangements, and are seeking for pay or profit. This definition
characterized by low productivity and meager gives rise to the problem of measurement, espe-
earnings. cially when we are interested in knowing the
Most studies attribute the challenges of urban average rate of unemployment in the economy
unemployment to various interrelated and over a period of time. Falae (1971) argues that
interdependent factors which include a higher such a definition is too broad because some cate-
rate of urban population growth, failure of the gories of people who are without work should not
informal sector, cuts in government expenditure, really be regarded as unemployed in any mean-
the effect of the structural adjustment programs, ingful sense because anyone who is unable to
rising capital intensity in the production and dis- work is not counted as unemployed, even though
tribution of goods and services in the modern he or she would love to work. Unemployment
private sector, low quality of education, and a literally applies to all persons without work and
mismatch between the skill demand of the labour actively looking for work (Encyclopedia Ameri-
market and the skill supply of the learning insti- cana 1995). But for Englama (2001), unemploy-
tutions (Berhanu et al. 2005). It is also widely ment rate in an economy is the number of people
recognized that youth unemployment is posing unemployed expressed as a percentage of the total
various undesired sociopolitical and economic labor force. The total labor force is defined as the
costs. Youth unemployment is usually the basis number of people employed plus the number of
for social crisis, political instability, and preva- people unemployed within the age bracket of
lence of crime and robbery which are detrimental 18–60 years.
to economic growth and development Urban youth unemployment stands for the con-
(Woldegebriel 2011). The fact that the youth are glomerate of youths with diverse background,
4 Employment Creation for Youth in Urban Areas

willing and able to work in urban areas (Onah sized private sector are responsible for
2001). This results in pressures of supply of unemployment.
labor over the demand for labor, thus causing A study by Tegegn Gebeyaw and Tesfaye
joblessness. Given the lack of sufficient employ- Chofana (2012) using cross-sectional data on
ment opportunities in the formal sector, young urban youth unemployment in Ethiopia identified
people are compelled to engage in casual work that tanning and education attendance are basic
and other unorthodox livelihood sources, often of determinants of urban youth unemployment.
a criminal nature (Gibb and George 1990). Youth unemployment in urban Ethiopia is very
According to Todaro (1992), the high rate of high mainly because of rapidly increasing labor
urban unemployment is a result of continuous supply which is not compatible with macroeco-
transfer of economic activities and youths from nomic conditions in general and the performance
rural to urban areas. of the industrial sector in particular (Getinet
Economic theory attributes the problem of 2003). A World Bank study in 2007 on challenges
youth unemployment to the problems with supply and prospects of the urban labour market in Ethi-
side of the labour market, the demand side of the opia found that despite overall growth in the
labour market, and the labour market information economy, the urban sector has not yet become a
system. According to Birhanu et al. (2005), dynamic engine for growth, employment creation,
supply-side factors such as demographic struc- and poverty reduction as a result of the segmen-
ture, education, and training policies affect the tation of the labour markets into three broad seg-
labour market outcomes in an economy. ments: the relatively privileged public sector; the
Demand-side issues including aggregate demand private formal, and the large informal economy,
of the economy and the absorptive capacity of the which is mainly characterized by small scale and
economy for labor through development of enter- more “survival” than entrepreneurial.
prises and job creation are also key factors that The presence of relatively large youth cohorts
affect unemployment (ibid.). Moreover, the is a factor that generally can be argued to reduce
labour market information system and the institu- the opportunity cost of young persons (Collier
tional and labour market policies can play an 2000; Machunovich 2000). Specifically, social or
intermediary role in the interaction of the supply economic marginalization might prevent the accu-
and the demand sides of the labour market mulation of human capital and wealth and
(Mangozho 2002). Worldwide and in Africa as increase competition for employment, thereby
well, the ratio of the youth-to-adult unemploy- reducing the “alternative cost” to engaging in
ment rate equals 3, which clearly points out the violence (Collier 2000; Collier and Hoeffler
substantial difficulties of youth participation in the 2004). Large youth cohorts have been argued to
labour market. Yet, the youth employment elas- be particularly likely to face unemployment,
ticity to GDP growth is low and only a fifth of that expansions in higher education with limited
observed for all workers (Kapsos 2005). employment opportunities, lack of political open-
For Nzinga H. Broussard et al. (2012), the ness, and crowding in urban centers (Braungart
structural strength of the economy and the eco- 1984; Huntington 1996; Cincotta et al. 2003).
nomic growth rate are important demand-side Hence, youth engage in violence as a means to
determinants of youth unemployment, while redress economic, political, or social inequalities
human capital formation through education and and perceived grievances.
training is a key supply-side determinant of youth Economic activity is an important variable in
unemployment besides the intermediation role of determining youth unemployment. When the eco-
the labour markets information system. For nomic activity is healthy and developing, employ-
Okojie (2003), supply-side factors such as rapid ment as well as youth employment will be better.
population growth and poor quality education and The economic downturns and crises can affect
demand-side factors mainly explained by poor employment as well as youth employment nega-
economic performance and a weak and small- tively. Youth unemployment also depends partly
Employment Creation for Youth in Urban Areas 5

on economic activities, demographic conditions, the economy to generate employment opportunity

and individual characteristics of youth themselves for various skill categories as per the requirement
(Freeman and Wise 1981). After the global crises, of the economy (Broussard and Gebrekidan
the number of unemployed young people has 2012). The supply-side dimension of the labour
increased from 73.5 million in 2007 to 77.7 mil- market deals with whether the skill levels of avail-
lion in 2010. The business cycle has an important able labor force match with the type of skills that
effect on general employment as well as youth the economy demands. In addition to the labour
unemployment. But generally in the economic market dimensions, labour market institutions
recession, the rate of youth unemployment such as the governance of labour market-
increases more than adult unemployment. For industrial relations and labour market services
Borowski (1984), when the excessive supply of play a significant role in employment promotion
labor occurs in the recession, employers prefer (Mangozho 2002). This implies that ill-
mature workers rather than unpracticed youth governance of labour market institutions could
workers. lead to unemployment problem.
Policy makers around the world consider dif-
ferent intervention policies to counter the adverse The Demand Side of the Labour Market
social, political, and economic consequences of Unemployment and particularly youth unemploy-
urban youth unemployment. The common inter- ment is closely linked to the state of the economy
vention mechanisms usually target the failure of (Broussard and Gebrekidan 2012). The capacity
the demand and supply sides of the labour market. of the economy to generate new job opportunities
To address the challenges of the demand side of directly affects the state of urban youth unemploy-
the labour market, governments use promotion ment. Therefore, it is important to analyze the
of economic growth through public and private structure as well as the performance of the Ethio-
sector investments and development of skills pian economy to look at its implication on the
through education and tanning to address the fail- urban youth unemployment problem. The agricul-
ures in the supply side of the labour market while tural sector is the dominant sector in the Ethiopian
improving the intermediation role of the labour economy with over 41% to Gross Domestic Prod-
market information system. According to Tomas uct (GDP), 60% of exports, and employing
Stenstrom et al. (2006), globally in developing approximately 83.5% of the country’s population.
economies there is a growing interest in the need The agricultural sector in Ethiopia employees the
to link job creation to infrastructure investments rural segment of the population and job opportu-
such as housing, transport, urban redevelopment, nity for urban youth in this sector is out of reach.
and municipal service delivery to urban and local The second largest contribution to the national
development policies. Based on the reviews and GDP of Ethiopia comes from the service sector.
discussions in the preceding section the, the con- Recent reports revealed that the contribution of
ceptual framework of this paper is developed. The the service sector to Ethiopian gross domestic
schematic design of the conceptual framework, product is about 46%. The service sector of the
therefore, is as follows (Fig. 1). economy has not only shown flamboyant perfor-
mance with regard to its contribution to the GDP
in recent years but also generated significant
Urban Youth Employment in Ethiopian employment opportunity. However, recent evi-
Context dence reveals that the industrial sector is getting
into momentum in generating employment
The problem of unemployment basically arises although the industrial sector’s contribution to
from two essential dimensions of the labour mar- GDP is very minimal with about 13% compara-
ket – the demand and supply sides of the market tive to the two dominant sectors in Ethiopian
(Okojie 2003). The demand-side dimension of the economy. This indicates significant structural
labour market is associated with the capability of weakness of the economy (see Fig. 2).
6 Employment Creation for Youth in Urban Areas

Demand side of labour market

Youth unemployment Policies and strategies for balanced and Labour market information
better social outcomes systems

Supply side of labour market

Employment Creation for Youth in Urban Areas of Developing Economies: The Ethiopian Experience,
Fig. 1 Schematic design of the conceptual framework. (Source: Author’s construction)

Employment opportunity for urban youth is and institutional frameworks to support private
directly related to the development of the indus- business.
trial sector of the economy. The low level of It is understandable that growth is central
development in the industrial sector of the econ- to employment creation. According to the
omy therefore is one of the major issues that 2007/2008 Population and Housing Census,
explain urban youth unemployment problem. employment grew by a mere 2.2% between 1995
Ethiopia terminated the structural adjustment and 2008, while unemployment grew by 4.4%
program in 2002/2003 and since then has over the same period. This suggests that growth
achieved a remarkable economic growth for has not generated adequate employment opportu-
which she received complementary report from nities. A more recent urban employment and
the World Bank and International Monetary unemployment survey, however, shows that the
Fund (Woldehanna et al. 2008). The remarkable urban unemployment rate declined from 26.2% in
economic growth rate performance of double digit 2007/2008 to 18% in 2010/2011. The expansion
in recent years is because of the implementation of in employment opportunities in major urban areas
pro-poor growth policies leading to significant is attributed to, among others, the boom in con-
reduction in poverty level. The average economic struction activities and expansion in public sector
growth rate between 2003/2004 and 2012 is about employment. Growth has certainly helped gener-
10%, a figure well above the planned target of ate employment, but not sufficiently. Despite its
growth. The economic growth record is attribut- remarkable growth performance, the country
able to congenial pro-poor growth policies. In faces major challenges in terms of providing ade-
recent years, the government has adopted a robust quate employment opportunities for the growing
growth and poverty reduction strategy, focusing labor force in general and for young people in
on infrastructure development, commercialization particular. According to the 2007/2008 census,
of agriculture, improvements in access to basic youth, defined as those between 15 and 24 years
services, as well as private sector development, of age, accounted for 20.5% of the total popula-
including the creation of appropriate regulatory tion. Youth activity rate was 64% in 2007/2008,
yet young people accounted for only 27% of
Employment Creation for Youth in Urban Areas 7

60.00%
50.00%
40.00%
Aagriculture % GDP
30.00%
Iindustry % GDP
20.00% Sservice% GDP
10.00%
0.00%
1998 2000 2002 2004 2006 2008 2010 2012 2014

20.00%

15.00%

10.00%

5.00%

0.00%
1998 2000 2002 2004 2006 2008 2010 2012 2014
-5.00%

-10.00%

-15.00%

Real GDP growth Service growth

Indusstry growth Agriculture growth

Employment Creation for Youth in Urban Areas of Developing Economies: The Ethiopian Experience,
Fig. 2 Sectoral Gross Domestic Product (GDP) composition and Sectoral Gross Domestic Product (GDP) growth rate.
(Source: National Bank of Ethiopia, 2014)

the total employed population (ibid.). From the the agricultural sector in pursuing economic
total employed youth population, a significant growth under the agricultural development-led
proportion were in the agricultural sector, dis- industrialization policy umbrella. Between 2004
tantly followed by wholesale and retail trade, and 2013, the service sector exhibited remarkable
suggesting that young people are mainly engaged performance (far more than planned); however,
in sectors with low productivity and, hence, low the industrial sector under-performed and even
incomes. failed to hit its base case scenario in the
Figure 2 above using data from the National Five-Year Plan target. This is one more clear fact
Bank of Ethiopia depicts the annual growth rates to evidence the existence of substantial structural
of GDP and for each sector. Since about 2005, the weakness in the economy as success in the indus-
service and the industrial sector since 2007 have trial sector is believed to be the key for sustainable
outgrown the agricultural sector constantly. Yet employment and growth of the economy. The
while most of the country’s growth potential demand-side problems of the labour market in
appears to come from the industry and services African economies is attributable to the structural
sectors, the government has chosen to emphasize weakness of the economies, saturated public
8 Employment Creation for Youth in Urban Areas

services, and small private sector bases that are economy demands. This is attributable to the the-
unable to employ large numbers of people. ory orientation of the general education system of
the country in the 1980s and early 1990s. Theory-
The Supply Side of the Labour Market oriented education system ignores the develop-
The supply side of the labour market is concerned ment of skills which are essential to be effective
with whether or not the skill levels of available at the workplace and is neither good at develop-
work force match with the type of skill that the ment of entrepreneurial and innovative capabili-
economy requires. Primarily, it is concerned with ties. The theory orientation of the education
enhancing and increasing labor productivity, system in Ethiopia without due emphasis on voca-
which can be achieved mainly through education tional and technical trainings failed to improve the
and training. For Martha Kibru (2012), access to cognitive skills of students and their aspiration for
relevant and quality education plays a substantial success. Hence, the analysis in this paper culmi-
role in explaining the incidence of unemploy- nates with the conclusion that the fundamental
ment. According to, the literacy status of the sur- problem with the supply side of youth unemploy-
veyed urban population of the country aged ment lies with mismatch between the skill that the
10 years and above was found to be that 80.2% training and education institutions entrust in their
and 19.8% are illiterate. The proportion of liter- students and the skill that the labour marker
ates among the males (89.4%) is higher than that requires. Mismatch between educational systems
of the females (72.0%). The lowest proportion of and the skills needed in the labour market is one
illiterate has been observed for males (10.6%) of the fundamental and noticeable causes of
against (28.0%) females. However, the unem- youth unemployment in sub-Saharan African
ployment rate among the urban areas for the economies.
four recent survey periods shows that the unem-
ployment rate of literate persons is higher than
The Labour Market Information System
illiterate persons. Nonetheless, the level of unem-
Labour-market information system refers to the
ployment for young people with technical and
manner in which information in the supply side
vocational training (TVET) is very low, which
of the labour interacts with the demand side of
indicates that the expansion of technical and voca-
the labour market. Labour market information
tional education and training (TVET) is central to
system can be defined as a set of institutional
reducing youth unemployment. Furthermore, the
arrangements, procedures, and mechanisms that
result illustrates that the unemployment rate of
are designed to coordinate the collection, pro-
literate and illiterate persons declined during the
cessing, storage, retrieval, and dissemination of
four survey periods. Among the literate group, the
labour market information (Sparraboom 1999). It
highest rate of unemployment is found for
is the system with which job seekers and
those who did not complete secondary, secondary
employers get access about the labour market
completed and preparatory education level. The
performance. That means institutional mechanism
lowest unemployment rate is reported those who
should be in place to collect, analyze, and report
had degree and above about 7.3%. Of the total
the performance of the labour market to job
employed youth population, a significant propor-
seekers and potential employers. Lack of labour
tion were in the agricultural sector, distantly
market information system is one of the major
followed by wholesale and retail trade, suggesting
impediments to the desired matching between
that young people are mainly engaged in sectors
the supply side and the demand side of the labour
with low productivity and, hence, low incomes.
market. That means employment services are very
The surprising result in this analysis is that
important to properly align both sides of the
unemployment is adversely affecting more the
labour market. Such services include but are not
literate relative to the illiterate. This implies that
limited to registration of job seekers into a data-
there is mismatch between the skills developed by
base system, counseling and guidance services,
education curriculum and the skill that the
Employment Creation for Youth in Urban Areas 9

job matching, and labor exchange referral to Although labour market information is useful
active labour market programs. in matching the demand and supply side of the
Employment services managers need general labour market as well as in supplementing the
information on vacancies, job seekers, changes in design and execution of labour market interven-
skill and occupational requirements, career pros- tion policies, the scenario in Ethiopia shows that
pects in various industries and occupations, and the labour market information system is weak
education and training programs in planning for even to provide the basic employment services
employment services delivery. Employment ser- (Kibru 2012). A labour market study by the
vices placement staff need rather specific infor- World Bank proved that both the private sector
mation on both job vacancies and job seekers to be brokers and the public sector labour market infor-
able to successfully match vacancies with job mation providers are weak to serve the market
seekers. As far as job vacancies are concerned, function properly (World Bank 2007). This fact
they need to know the location, title, description, leads to failure of employers to attract the most
skill and experience requirements, remuneration qualified. In a similar fashion, qualified job
levels, and working conditions associated with seekers cannot find sufficient jobs and revert to
each vacancy. In the case of job seekers, place- personal networks to get employed. That means
ment staff requires specific information on each lack of the informal networks would lead to unem-
individual’s education, training, and work experi- ployment causality for qualified urban youth.
ence. This information allows the staff to select Currently, the labour market information system
the appropriate occupational codes for each in Ethiopia is insufficiently developed to provide
vacancy and each job seeker so that matching information for both job seekers and employers.
can take place. Vocational guidance and career Moreover, the available information on labour
counselors need occupational outlook informa- market developments in the country is often
tion that provides them with a sound understand- fragmented and limited in scope or out-of-date.
ing of changes taking place in the occupation and The relevant labour market institutions which are
skill requirements of the labour market. In causes of youth unemployment in Africa include
addition, they need access to information on the labour demand barriers, such as observed discrim-
location, timing, entrance requirements, and ination by employers toward young people on the
availability of education and training programs. grounds of lack of experience; information gaps
This type of information can provide guidance between job seekers and potential employers.
and counseling staff with insights and information Hence, strengthening the labour-market informa-
that allow them to help clients make and pursue tion system is therefore very important so that it
realistic career choices. can play its intermediation role between the sup-
Ethiopia has documented an employment pol- ply side and the demand side of the labour market.
icy, and the Ministry of Labour and Social Affairs
is in charge of the collection, analysis, documen-
tation, and distribution of the labour market infor- Government Intervention Policies and
mation at the country level. Congruously, the Practices
Ministry of Labour and Social Affairs has been
publishing the Labour Market Information It is the nature of holistic employment creation
Bulletin meant for dissemination of the labour policy to address the problems of the demand side
market information to stakeholders on an annual and the supply side of the labour markets. The
basis. The publication incorporates varieties of Ethiopian government has been implementing
information collected and analyzed from such programs which provide unskilled young people
sources as census repots, labor force survey, with short-term employment that can serve as
employment survey, and educational statistics of work experience in fields such as road construc-
the federal ministry of education. tion, maintenance, irrigation infrastructure, refor-
estation, soil conservation, and urban sanitation
10 Employment Creation for Youth in Urban Areas

programs. The Ethiopian government develop- The policy environment of the pre-1991
ment policy has been based on the use of labor- Ethiopia significantly restricted private sector
intensive technologies owing to the labor force investment if not considered totally banned
endowment of the country. The government has under the Marxist-Leninist social policies of that
maintained significant intervention in the key eco- regime. In that regime, the maximum capital
nomic sectors such as the sugar industry, the tel- investment allowable for private owners was lim-
ecom services, cement production, banking ited to Br 250,000. With the complete demise of
services, and energy generation and distribution the socialist era in 1991, there have been signifi-
which are employment intensive. The government cant economic reform measures undertaken to
of Ethiopia has been investing a significant por- make the business environment congenial to
tion of its budget to infrastructure development entrepreneurship and private sector investment.
and poverty-targeted programs specifically the The government implemented extensive deregu-
social sector development and economic develop- lation and liberalization policies with proper pro-
ment programs. In its investment to infrastructure active actions. The aim being the creation of
development, the government deliberately cordial business environment for the promotion
pursued labor-intensive approach with the view of private sector investment, the government has
to create job opportunity for thousands of unem- been providing supports of diverse form to entre-
ployed youth. However, the employment gain in preneurs and industrialists that yielded significant
Ethiopia from public infrastructure investments is and progressive record development in promotion
limited (Kibru 2012). Nonetheless the contribu- of private investment both domestic and foreign
tion of the construction industry has been enor- investments.
mous to the employment creation efforts of the Cognizant of the social and political conse-
government. This sector is foreseen to continue to quences of youth unemployment, the government
generate significant level of jobs as stipulated in has designed and implemented programs which
the Growth and Transformation Plan crafted for targeted job creation for the youth over the last
5 years from 2010 to 2014. According to the decade (Serneels 2004). The most noticeable pol-
Growth and Transformation Plan, the basic infra- icy actions were the introduction of Micro and
structure development construction could gener- Small Businesses Development Strategy and
ate 1,264,598 employment opportunities over the Industrial Development Strategy with the purpose
plan period, the target beneficiaries being of promotion of private sector development so
the youth. that it plays a significant role as engine of eco-
Private sector development is instrumental and nomic growth and development. Since the Micro
a major employer in a civilized society with cap- and Small Enterprises Development Strategy was
italist economic system. The recent development crafted in 2004, the youth has been encouraged to
in Ethiopia also follows this pattern. In transition enter into micro and small enterprises in an orga-
economies like Ethiopian economy, the develop- nized way with special support rendered from the
ment of the private sector requires support from government. The support includes provision of
the government. Policies conducive to enhance- entrepreneurship and business management train-
ment of the productivity of the private sector are ing, mutual guarantee credit services through
important for this purpose. Equally important is micro-finance institutions, market linkage ser-
the improvement of the linkage between the for- vices, relevant technology research, business
mal and informal sectors of the economy. The development services, and basic infrastructure
prevalence of informal economic activities is nat- deemed necessary for their operation. The gov-
ural in Ethiopia as it is in transition economies. ernment has shown its commitment to continue
That means improving the complementarities supporting the development of micro and small
between the informal and formal sectors of the enterprises in an institutional and coordinated
economy can enlarge the business activities mak- approach by the established Federal Micro and
ing more job opportunity. Small Enterprises Development Agency, and
Employment Creation for Youth in Urban Areas 11

state governments stepped in by establishing sim- being locked into the market linkage established
ilar agencies at regional levels. Ethiopia’s policy by the government. Although the sector has
of generating employment for the youth through shown its contribution to economic growth and
enhanced skill development in the economically development, there are a number of constraining
active population is similar to what is in practice factors that hinder its growth. The basic
in its counterparts of sub-Saharan African econo- constraining factors are associated with inade-
mies (UNECA 2011). As part of the efforts to quacy of the provision of working premises, pro-
boost job opportunities for young people, coun- totype development trainings, and infrastructure
tries such as South Africa, Kenya, Tanzania, and and credit facilities (Kibru 2012). These
Tunisia have developed young entrepreneurship constraining factors explain the challenges of
programs and business start-up schemes youth employment in sub-Sharan African econo-
supported by Small Business Development orga- mies. Biers to the creation and development of
nizations, which provide technical skills for new business opportunities, particularly in gaining
businesses. Another strategy used by other Afri- access to financial, physical, and social capital,
can economies not introduced by Ethiopian policy are basic problems for job creation for the youth
makers so far is provision of incentives to firms (UNECA 2011). This implies that periodic evalu-
for the hiring of young people. Such efforts have ation of the working policies and strategies with
yielded some positive results; for example, 1.27 the aim of innovative amendment is vital to
million jobs were created in Tanzania over the last exploit the contribution of the private sector
3 years as a result of these programs according to development to employment creation and poverty
the evidence from the 2011 fact sheet of the reduction.
United Nations Economic Commission for To supplement the demand side of the labour
Africa. market, the government of Ethiopia introduced
The implementation of Micro and Small Busi- specific and youth-targeted programs. One of
nesses Development Strategy and Industrial such programs is the cobblestone project in
Development Strategy has recorded enormous urban Ethiopia which was initiated by the Engi-
achievements in the creation of employment neering Capacity Building Program supported by
opportunity for the youth in urban areas. It has the German Development Cooperative (GTZ).
benefited millions of youth in Ethiopian urban Since 2007, the Engineering Capacity Building
areas since its inception. Statistical evidence Program has been training the youth in traditional
from the Federal Micro and Small Enterprises crafting of cobblestone paving with the dual
Development Agency revealed that the sector objective of creating jobs for youth and creating
created employment opportunity for more than clean, attractive pavement roads in Ethiopian
1,150,000 unemployed youth in 2011 in towns. It is based on the principle of local resource
Ethiopian urban areas. The Micro and Small utilization in a labor-intensive manner to pave
Enterprises Development Agency has managed roads and public spaces using environmentally
to achieve encouraging results in supporting the amicable approach adopted from the German
development of enterprises that are employment experiences. The project created jobs for the
intensive so far. There are large numbers of micro youth organized to operate micro and small enter-
and small-scale enterprises graduated from their prises. This means construction of pavements in
original level and transformed to medium-scale towns and cities enabled creation of new micro
industries. This could be proving for the success- and small enterprises thereby boosting housing
ful support rendered from the government to the investment. Available evidence shows that the
development of the sector on the one hand and the project has resulted in the creation of more than
capacity of the sector in employment generation 2,240 micro and small enterprises and employed
and poverty reduction on the other hand. more than 489,000 (40% of the beneficiaries are
However, critics argue that the micro enterprise women) youth in urban areas of Ethiopia by the
operators are developing dependency syndrome end of 2013.
12 Employment Creation for Youth in Urban Areas

Also the integration of the employment strat- schools. At the end of the 12th grade, students
egy to Urban Housing Development Policy has were given Ethiopian school leaving certificate
contributed to employment creation, most of the examination to qualify for tertiary education. But
beneficiaries of which are unemployed urban a few of the examinees go for university study
youth. The integrated urban hosing development owing to the limited number of higher learning
program ultimately targets the unemployed poor education institutions leaving the rest without
particularly the unemployed youth, in that the opportunity for higher-level skill development.
micro and small enterprises in the construction According to an urban employment survey by
sector tend to be labor intensive and employ the Central Statistical Agency in March 2012,
low-skilled workers. The participating micro and those with general education are substantially vic-
small enterprises are usually established by youth tims of unemployment.
who either graduated from a TVET or have had Amid the education sector reform, Ethiopia has
certain experience in the construction sector. The recorded remarkable development in access to
federal as well as the regional housing develop- primary education and literacy. There has also
ment offices provide different forms of assistance been evidence for significant improvement in
to the firms participating in the program. The access to primary education and literacy across
program commissioned in 2004 set up an ambi- Africa in the last decade (UN 2010). According
tious goal of constructing 400,000 low-cost con- to the United Nations 2010 Millennium Develop-
dominium houses, creating job opportunities for ment Goals Report, However, the increase in pri-
200,000 people, and promoting more than 10,000 mary education enrolment rates has not
micro and small enterprises all over the country necessarily been followed by an equivalent
between 2005 and 2010 (Un-Habitat 2011). By increase in secondary and tertiary education
2013, the program had constructed about 280,000 rates, especially for young women and girls. The
houses, created 500,000 new jobs, boosted the 2011 African Youth Report confirmed that when it
technical capacity of the construction sector, and comes to tertiary education among youth
enhanced the number and capacity of micro and populations, the increase in primary education
small enterprises. enrolment has not been accompanied by an equiv-
As discussed earlier in the supply-side prob- alent rise in secondary and tertiary education
lems of the labour market, the youth are chal- enrolment. The participation of women and
lenged due to unemployment because of the young girls is significantly lower at the tertiary
mismatch between their skills and the skill the level compared with the participations in primary
economy requires. The most noticeable reaction education. Increased provision of post-primary
from the government to this problem was the education could provide the youth with the hard
policy reform introduced to the education system and soft skills that will enable them to compete
of the country to transform the century-long effectively in the labour market both domestic and
theory-oriented education into practice orienta- global. This education deficit particularly affects
tion and skill development. Up to the middle of socially excluded youth people especially young
the 1990s, the orientation of the education system women. Ethiopia like many African countries has
of Ethiopia was on theory rather than develop- achieved gender parity at the primary education
ment of skills essential for effective practical exer- level. However, disparity remains significant,
cise and entrepreneurial innovation. especially at the tertiary education level.
Comprehensive education system reform was The new education system introduced in Ethi-
introduced in 1994 with due consideration of the opia after the reform classified the phases of the
deficiency in the previous education system. The education cycles in the following manner: grades
phases of education cycle classification in the 1–8 are primary schools, and grades 9–10 are the
previous system were as follows: grades 1–6 are first cycle of the secondary school. The policy
primary school, grades 7–8 junior secondary stipulates that these levels provide general aca-
school, and grades 9–12 secondary or high demic education that prepares the students for
Employment Creation for Youth in Urban Areas 13

further education and skill development. Grades started to challenge the literate is evident (Kibru
11–12 are second cycle secondary schools or pre- 2012). This is partly attributable to the lower
paratory schools for college and university educa- quality of education and of course to the mismatch
tions. Only those who scored qualifying results on in skills desired by the economy and skills embed-
the national exam offered at the end of the 10th ded in the graduates. The lower quality of educa-
grade would be promoted to the preparatory tion is because of the capacity constraint of the
schools. Those who do not achieve the necessary poor government of a poor country to equally
results for admission to the preparatory schools pursue expansion of access to education and
are provided with the opportunity to pursue for- assurance of the quality of education. However,
mal education thorough Technical and Vocational the government has shown its commitment to
Education and Training (TVET) which ranges ensure the quality of education in an institutional-
from 1 to 5 years based on the level of competency ized approach and established Higher Education
the trainees want and the nature of the field of Relevance and Quality Agency (HERQA) affili-
study chosen. For this purpose, a great number of ated with the Ministry of Education so as to
polytechnics and technical training institutes were enforce quality standards of higher education to
established to provide technical training in differ- remedy the quality problems.
ent trades and at various levels in a bid to
strengthen the employability of the youth. This
is the landmark departure of the current education Conclusions and Policy Implications
system from the previous education system of the
country in which most of the secondary school The principal reasons for Ethiopia’s youth unem-
complete remain helpless for further skill devel- ployment rates are a mismatch between educa-
opment. The positive impact of the Technical and tional systems and the skills needed in the labour
Vocational Education and Training programs in market and small private sector bases that are
enhancing employability of the youth in Ethiopia unable to employ large numbers of people
has been documented in various studies although coupled with the structural weakness of the econ-
comprehensive evaluation of the impact of the omy that is dominated by the agricultural and
policy reform is yet to come. The impact of par- service sectors with the contribution of the indus-
ticipating in training programs increases the prob- trial sector limited to about 13% in the gross
ability of being employed by 25% in urban areas domestic product.
of Ethiopia and by about 13% in rural areas The finding of the study implies that current
(Guarcello and Rosati 2007). efforts have gone into building young Ethiopian’s
In a bid to improve the employability of knowledge and skills through the provision of
the youth, the government has been investing basic levels of education and vocational training.
substantial portion of the public budget to the However, in the new global economy, young peo-
expansion of universities that accept qualified ple need to acquire more than just basic education,
candidates from the preparatory schools. There and curricula should be influenced by the current
have been enormous achievements with this rate of globalization and regional integration.
respect, and the number of universities just like Investing in education and skills development
the polytechnics and technical training institutes for young people should therefore go beyond
has been considerably increased from as low as increasing basic literacy rates to assure dynamic,
2 in 1991 to 31 in 2012. Moreover, the govern- multifaceted knowledge building at higher and
ment devised modes of linkage between higher tertiary levels. This will go a long way in prepar-
education institutions and the industry and initi- ing young people for the evolving labour market.
ated curricula reforms to ensure relevance of Investment into education has to be focused on the
higher education to Ethiopian economy. In spite development of skills and innovative powers of
of all these efforts, the fact that the economy could the youth so that they can effectively compete in
not absorb the graduates and unemployment the labour market. For this reason, it is
14 Employment Creation for Youth in Urban Areas

commendable to strengthen the technical and government offices in charge of this responsibility
vocational education and training (TVET) and because the sector practically proved to be one of
polytechnics that entrust practical skills into grad- the fundamental solutions to urban youth unem-
uates thereby improving the employability of the ployment in Ethiopia.
youth. Enhancing the labour market information sys-
Demand-driven investment into human capital tem through investments to improve information
through education and skills development for resources for youth is essential to avoid the mis-
young people remains of paramount importance match between skills that educators entrust to their
to Ethiopia because of the return on education and graduates and the skill that the economy requires.
the contribution to poverty reduction. To this end, In a poorly developed labour market information
it is important to ensure the participation of the system, many young people inevitably stumble in
industry operators in the design and implementa- their initial career steps due to poor information
tion of educational curricula. Employers have about the world of work, leading to poor choices
an important role to play in improving the about education and careers. High-quality labour
profile of vocational education for young people. market information and career guidance can help
Unemployment, underemployment, decent work, youth make better informed decisions about their
and integration into the mainstream of develop- future including the selection of academic/voca-
ment remain priority concerns for young tional programs, a decision to complete high
Ethiopians. school, and an optimal combination of education
In establishing policies for youth employment, and work. Thus, it is important to enhance the
emphasis has to be given to the demand side of the capacity of the labour market institutions.
labour market specifically concentrating on pro-
moting economic growth and job creation. With
this regard, the recent double-digit economic
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