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When Good Is Not Good Enough for 40 Million Tanzanians

Jacques Morisset's picture

Laborer working on an irrigation project. TanzaniaTanzania has undoubtedly performed well over the past decade, with growth that has averaged approximately 7% per year, thanks to the emergence of a few strategic areas such as communication, finance, construction and transport. However, this remarkable performance may not be enough to provide a sufficient number of decent or productive jobs to a fast-growing population that will double in the next 15 years. With a current workforce of about 20 million workers and an official unemployment rate of only 2%, the challenge for Tanzanians clearly does not lie with securing a job. Rather, it is to secure a job with decent earnings.


In 2012, the average working Tanzanian earned the equivalent of $1,200, which is lower than the average for sub-Saharan Africa, and ranks Tanzania only ten places above economies with the lowest output per worker in 2012. Most workers, about 85%, are employed in traditionally low-productivity sectors such as agriculture, retail trade, and small-scale mining, where the output per worker averages only $700 per year. In emerging industries, however, output by worker averaged $4,500.
 
By 2030, Tanzania’s workforce will grow to 40 million workers who will need productive jobs. International experience suggests that the workforce will have to shift from traditional toward emerging sectors to create them. In Thailand, for example, agriculture represented 80% of the employment force in 1990, while it was only 50% by 2005; and in Indonesia, the share of agriculture in total employment declined by almost 20 percentage points, from approximately 64 to 45%between 1990 and 2010.
 
Can Tanzania replicate such structural shifts in the next 15 years? The response is negative if the economy continues on its recent trajectory. Indeed, at current growth rates, the share of the population employed in emerging sectors will marginally increase from 14 to 22% between 2012 and 2030. Perhaps not so bad, but the average annual income per worker will only increase to $1900 by 2030 –approximately the level reported by Senegal today (see Figure 1).

Source: 2013 World Development Indicators, Tanzania National Bureau of Statistics and authors' own calculations

This modest structural transformation of the Tanzania employment force is not explained by the lack of dynamism in emerging businesses. Their average annual growth rate has been close 10% per year since 2008, which is higher than in Indonesia (8%) or Thailand (6%) during the same period. Arguably, it will be difficult for Tanzania to do much better in the foreseeable future.  
 
Everything else equal, it will take simply more time for Tanzania to increase her share of the labor force working in emerging businesses, where currently only 15% of Tanzanians are employed. The starting point was more than 20% and almost 40% in Thailand and Indonesia. Another explanation is that the rapid growth of modern businesses has not been accompanied by a similar increase in jobs. This is expected for low-labor intensive areas such as finance and communication, but it also happened to some extent for construction and tourism. While growth in the construction industry surged at a cumulative rate of more than 50% in the last five years, employment in this sector only increased by 25%.   
 
What needs to be done for creating productive jobs in Tanzania?
 
The answer to this question is at the center of the World Bank’s recent Tanzania Country Economic Memorandum: Productive Jobs Wanted (CEM). To succeed, productivity will need to increase in traditional areas, which will continue to employ the majority of Tanzanian in the coming years. In parallel, the economy will need to extend and diversify toward new industries and markets.
 
While cross-cutting actions are central, policy-making might require some degree of specificity – otherwise there is a risk of diluting implementation and wasting scarce public resources. For this reason, the analyses identify some industries on the basis of the country’s comparative advantage, their potential for growth, and for their ability to create multiple jobs. Along those lines, the movie industry, or “Swahiliwood,” can create multiple jobs in the right environment. Short-term opportunities also exist in the leather industry, high-value vegetables and tourism. Such drive can be encouraged by a focus on quality (raising standards and skills), improving access to regional and global markets (port efficiency), and possibly pro-active promotion policies in selected areas.
 
Where will Tanzania be in 2030?
 
Business as usual will bring Tanzania at the current level of income per worker in Senegal, hardly the kind of progress that Tanzanians expect in the next 15 years. Yet, with the right policies, one can expect Tanzania to become the Vietnam, Indonesia or even the Thailand of tomorrow.
 
Let’s assume that the implementation of the CEM action plan will lead to an increase in additional productivity of 1-2% per year compared to historical rates. In that case, the average income per worker will reach almost $3,000 (in 2012 dollars) by 2030 or close to the levels reported by Vietnam today. If Tanzania can generate additional productivity gains in the range of 5%, over the recent historical trend, the average income per capita will reach almost $6,000 by 2030! This is Thailand today. Such a goal might appear very ambitious, but possible if the above mentioned action plan is implemented with a sense of urgency and the country adequately manages its resources derived from natural gas. Such performance was achieved by China over the past decade and by other emerging economies during shorter of periods of time. Of course, to replicate these successes, Tanzania’s performance will need to be not just good, but very good. 
 

Comments

Submitted by FMR on

An official unemployment rate of only 2%? and I respect the text and explanation that follows but How can we believe that?

Submitted by Jacques on

This official number comes from the latest household survey in 2012. It is low, but low unemployment rate is a reality in many African countries, including Tanzania. This reflects that the vast majority of workers cannot afford not to work at all. They have no other financial resources and, very often, there is no formal or informal unemployment insurance scheme. It is therefore not surprising that the only category of workers reporting a relativelty high unemployment rate (close to 20 percent) are young workers with post secondary education - they can afford to wait as most of them (or their family) are in the highest wealthiest quintile of the population. The main challenge for Tanzanian workers is to find a job with decent earnings and some stability over time.

Submitted by Jamaal Jeffers on

Meaningful work = optimistic planning = stability. When we ignore the formula the result is chaos anywhere and everywhere.

Submitted by Manongi C. Ntimbwa on

What should be done? I think more information is needed this is because Tanzania has got more natural resources which has not been extracted and most of its economic activities have not been formalized. Both been done, income and qualitable jobs will be in rise.

Submitted by Louise Fox, UC Berkeley on

Are the projections realistic?

Nice blog Jacques. Benchmarking Tanzania against E. Asia helps to frame the questions on inclusive development policy. But you neglected one point.

In 2012, Tanzania's fertility rate was 5.5 births per female. In 1990, Viet Nam's was 3.6 in 1990; Indonesia's was 3.1. With Tanzania's labor force growing at least 40% faster than your E. Asia comparators, it will take 40% more investment in physical and human capital, finance and technology for Tanzania to reach the rate of labor productivity growth that Indonesia and Viet Nam had. Yet the investment rates in Tanzania are lower.

Only if Tanzania invests now in better reproductive health, efforts to delay marriage and childbirth among adolescent girls, and other measures to lower fertility can the country hope to raise the quality of workers and workplaces up to the productivity levels you project.

Submitted by Jacques on

Thank you. Yes, reducing the fertility rate will matter, but only in the long term. Indeed, there is not much flexbility to change the projected labor force of approximately 40 million in 2030. Most of these workers are alredy born to today. The Tanzanian population is young, very young, and this explains that almost one million new entrants are expected to emerge on the labor market every year.

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