By the Blouin News Business staff

Where will Africa’s 125M new jobs be created?

by in Africa.

Source: World Bank

Source: World Bank

The world’s youngest continent still needs to create tens of thousands of jobs to ensure social and economic stability in the decades to come. Two main reasons should drive the urge to create jobs and tackle the problem of underemployment: more than half of Sub-Saharan Africa’s population is currently under the age of 25 and as many as 11 million young Africans are expected to join the labor market every year for the next decade. The continent, especially in the North, is dealing with an enormous youth unemployment problem. The combination of an expanding young society and the lack of jobs could have devastating effects for generations to come, even if the continent’s economic growth remains at the high pace it’s on.

Yet this is contextualized in a period of commodity-export-based economic growth and higher domestic demand, which hasn’t led to a transformation in employment. What to expect in the future? A new World Bank report delves into this question. It presents different projections and different circumstances for what to expect in the job creation field. We take a look at the first estimate, where the Bank “projects what might happen if the growth remains robust, following its present course.” The graph above shows what the Washington-based multilateral organization predicts will occur in this scenario:

Although industrial wage employment is projected to increase through continued modest diversification of output and exports, service employment is projected to keep growing faster than industrial employment because the mining sector will not directly create very many jobs. By 2020, wage and salary jobs will account for 29% of the net new jobs but only 25% of the total jobs taken by new entrants (some new entrants will replace workers leaving the labor force). In other words, at best one in four African youth will find a wage job, and only a small fraction of such jobs will be “formal” jobs in modern enterprises. Unemployment is assumed to remain low in the low- income and lower-middle-income countries, and we project that it will fall slightly in the upper-middle-income countries if high growth rates are realized. The household enterprise sector is projected to create even more jobs than the wage sector, accounting for 45% of the net new jobs and employing 37% of new entrants through the start-up of new businesses. This sector feeds off demand for goods and services created by employment and earnings growth in the wage and agricultural sectors, so balanced growth is necessary to realize this part of the projection.

However, the positive economic growth path is a risky one as well — it’s projected to accelerate to 4.7% this year and 5% in 2015. While gross domestic product is rising in most countries within the continent, it hasn’t had as many positive effects on the labor front. More economic growth doesn’t mean more jobs and less poverty. The United Nations recently stated in its world economic situation 2014 report:

Positive growth in many African countries has had a limited impact on employment; the informal sector is still large and opportunities remain limited for many of those seeking to enter the labour  market, as manifested in high youth unemployment rates and wide gender disparities in earnings. In addition, continual pressure on labour markets from a steady stream of new entrants has meant that even solid GDP growth rates have not been sufficient to make measurable impacts.

The U.N. estimates that in 2015 Sub-Saharan Africa will have 193 million people between the ages of 15 and 24; by 2035, it will have 295 million, and by 2050, 362 million. Which means different and new ways to create new jobs should be on the top of every policy-making agenda. The World Bank has a few ideas: governments “need to hasten overall business climate reforms, strengthen basic education, and make land, infrastructure, training and financing more accessible.” Much easier said than done.