ZHUWAO BRIEF: Tackling under-employment in a skewed economy

15 Feb, 2015 - 00:02 0 Views

The Sunday Mail

Economic development is meaningless if growth cannot provide the majority with the opportunity to engage in productive economic activities and improve their living standards.

The Zhuwao Brief started the series on “Dialogues for an Empowered Society and a Growing Economy” last week with a brief summary of Professor Guy Mhone’s thesis on “Enclavity and the Constrained Labour Absorptive Capacity of Southern African Economies”.

The Zhuwao Brief supports Prof Mhone’s assertion that the trickle-down effect expected from FDI will never result in high levels of employment.

Whilst Zim-Asset recognised human resources as a key economic driver, it is important to acknowledge that Prof Mhone defined the economic problem in Southern Africa as one of underemployment and unemployment.

Pursuant to that, the Zhuwao Brief will interrogate the concept of underemployment.

Underemployment represents lost opportunity in that Zimbabwe could be producing more from its labour force. That higher level of production will result in higher incomes and greater aggregate demand. This will ultimately lead to a more empowered society and a growing economy. Prof Mhone observed that most of Southern Africa’s labour force is engaged in non-formal economic activities which are primarily of a subsistence nature.

These non-formal economic activities are largely within subsistence agriculture and the so-called informal sector.

ZimStat’s latest Labour Force Survey indicates that 84 percent of the 5,4 million employed people work within subsistence agriculture and the so-called informal sector.

Mhone noted that after over a century of exposure to the wealth accumulative ethos during colonialism and four decades of independence, the majority of the labour force in all African economies, notably Southern Africa, remains unemployed or underemployed.

The formal sector, which is the most productive and dynamic part of African economies, accounts for less than 20 percent of the labour force. ZimStat places the figure of those in formal employment in Zimbabwe at 11 percent.

In Africa, able-bodied individuals are rarely openly unemployed.

Although they are involved in some activity that enables them to make a living, they are not fully employed.

They are persistently and pervasively under-employed.

Under-employment is a fundamental problem for both economic and social reasons. At the economic level, the fact that a significant part of the labour force remains under-utilised represents a drag on economic growth and development.

This represents a significant level of economic inefficiency.

Economic development is meaningless if growth cannot provide the majority with the opportunity to engage in productive economic activities and improve their living standards.

Socially, the underemployed individuals do not produce and earn enough to ensure decent standards of living. This manifests itself in the low life expectancy and the high incidence of health and social maladies. I am sure you can relate to seeing one of your fellow classmates who now looks as old as your parents just because they have remained in the village.

Underemployment may first be defined in a substantive sense as an aspect of the wealth accumulation mode of production.

From the viewpoint of wealth accumulation as a driver of production, non-accumulative forms of work, even if to some degree market-related, primarily constitute non-productive labour in the sense that labour is not aimed at profit-making or the continuous expansion of wealth for its own sake.

Labour that is not subsumed under the profit-making and wealth creation imperative may be regarded as non-productive in that it does not continuously contribute to dynamic growth at the microeconomic and macroeconomic levels.

You will note that most smallholder cattle farmers hardly harvest their cattle preferring to maintain herds. This in essence makes the herds non-productive assets.

In developing countries, particularly in Africa, social formations comprise the co-existence of wealth accumulation and non-accumulative modes of production, which are fused together in an uneasy and seemingly tenuous co-existence dominated by the accumulation mode.

Historically, the general expectation has been that the progressive nature of wealth accumulation and the market would gradually overwhelm, transform and absorb non-accumulative forms of production into its sphere. This means underemployment manifests itself as non-productive labour from the point of view of the wealth accumulation perspective since it is not embraced and captured by wealth accumulation.

If we refer to the wealth accumulation part of a country’s economy as the formal sector, and to its non-accumulative part as the non-formal, we may include in the non-formal sector the subsistence and informal sectors of a survival nature.

The non-formal sector then constitutes the remnants of non-accumulative forms of production, comprised of non-productive labour from the point of view of wealth accumulation.

A wider definition of non-productive labour would also include any labour or work that is primarily used for consumption purposes, such as housework and servants.

Thus an important requirement for development under wealth accumulation model is the need to capture non-productive labour into its realm of operation.

It is one thing if such labour only represents a small proportion of the labour force, but quite another when it constitutes the majority of the labour force.

Indeed, both developed and developing countries have some degree of non-productive labour.

The major difference is that while such labour is a small and declining proportion in developed economies, it is large and increasing in many developing countries.

Secondly, Mhone defined underemployment in a technical economic sense as it relates to production per se.

Here, underemployment refers to labour for which an additional unit of effort contributes little or nothing in terms of additional output. Alternatively, we can say underemployment is labour for which marginal productivity is low, zero or even negative.

On a normative level, labour can be said to be underemployed if, under known techniques of production, it is possible to reallocate it such that its average and marginal productivity could be increased.

Alternatively, labour could be said to be underemployed if the withdrawal of some labour or effort could leave total output the same or increase it, even if some reorganisation of work and effort among the remaining workforce might be needed.

Mhone went on to say that underemployment is generally obfuscated by the fact that it is shared among those who are underemployed. Thus, for instance, a household engaged in subsistence farming may share the workload involved in producing the same amount of output regardless of the size of the household merely by varying the number of hours worked per person.

Similarly, informal sector participants may continue to enter a stagnant or shrinking market for survival reasons, without adding to total output or revenue for the group as a whole. This is quite visible in the extension of Mupedzanhamo in Mbare by the introduction of the “Kotama Boutiques” at the corner of Cripps Road and Remembrance Drive.

In both these cases, output per head would rise if numbers were reduced, even if the remaining labour may have to work more.

That proportion of the participants, in the activity that is redundant, is in effect in disguised unemployment, and therefore underemployed. However, given that such underemployment is shared, the underemployment may be generalised to the group as a whole.

This technical form of underemployment is typical of the non-formal sectors and was given analytical prominence by Arthur Lewis in his analysis of the implications for growth and development of an underdeveloped country being transformed by capitalism and the market.

Mhone submitted the approach proposed by Lewis attempts to demonstrate two issues that have been underplayed in the conventional analysis of the African economic crisis.

First, it attempts to demonstrate the requirements for a wealth accumulation growth process that can lead to the transformation of non-productive labour processes into productive ones driven by wealth creation imperatives.

Second, it attempts to show how, under certain conditions, the majority of the labour force may be relegated to a self-reproducing and self-reinforcing destiny of underemployment in the context of an enclave and dynamic capitalist economy.

In conclusion, these two aspects of underemployment pose a problem for a developing country.

The first relates to the fact that the majority of the labour force is trapped in non-accumulative production.

The second aspect concerns the fact that underemployment represents low levels of productivity relative to what could be obtained if labour were captured under work processes driven by the wealth accumulation imperative.

While these two aspects are interrelated, it is important to appreciate their implications.

Underemployment as defined by non-accumulative forms of production is a social relation that requires both economic and non-economic agents and factors for its transformation and resolution.

This is a political economy issue that market forces alone cannot resolve.

It relates to how non-accumulative social formations need to be re-arranged to accommodate wealth accumulation.

This represents an eventuality that is often tumultuous at the political, social and economic levels and rarely involves the type of marginal changes often assumed by economists.

We can see this in the manner that Zimbabwe’s Land Reform Programme was tumultuous at the political, social and economic levels.

The land reform was drastic and revolutionary. It was by no means incremental nor was it evolutionary.

Underemployment as a technical issue requires an appreciation of factors that underpin the low levels of productivity.

It raises the question as to whether market forces on their own can resolve such constraints.

Mhone seeks to address this by focussing mainly on the technical dimensions of the problem of underemployment, while by no means downplaying the political economy issue.

In future instalments of this series, the Zhuwao Brief will explore the concept of enclavity and the dual nature of Zimbabwe’s economy; Prof Mhone’s models of the enclave economy; how enclavity and dualism were further entrenched by liberalisation and opening up of the economy; highlights of how the post-Independence conflations of the dual economies resulted in flawed economic analyses and erroneous economic prescriptions; and then question what Zimbabwe has done to resolve enclavity, reduce underemployment and enhance the labour absorptive capacity of the economy.

Icho!

 

Honourable Patrick Zhuwao is chair of Zhuwao Institute, an economics, development and research think tank focused on integrating socio-political dimensions into business and economic decision-making, particularly strategic planning. He can be reached at [email protected] and [email protected]

Share This:

Survey


We value your opinion! Take a moment to complete our survey

This will close in 20 seconds