In Korea, only about five per cent of cit­i­zens to­day work in the agri­cul­ture sec­tor.”

The East African - - BUSINESS -

Man­u­fac­tur­ing as a source of em­ploy­ment

Most East Africans work in the agri­cul­ture sec­tor, where in­comes are still very low, de­spite be­ing the largest and most lu­cra­tive sec­tor of the econ­omy. This leads to the ques­tion: How does in­dus­tri­al­i­sa­tion af­fect avail­abil­ity of jobs?

In­dus­tri­al­i­sa­tion, be­cause it in­volves adding value to ba­sic ma­te­rial and pro­duc­ing so­phis­ti­cated prod­ucts, re­quires many lev­els of skilled work­ers. This can cre­ate a big base for em­ploy­ment, es­pe­cially in de­vel­op­ing na­tions with low costs of labour. In­dus­tri­al­i­sa­tion cre­ates both direct and in­di­rect em­ploy­ment.

The in­crease in em­ploy­ment in the man­u­fac­tur­ing sec­tor is a sign of in­dus­tri­al­i­sa­tion and con­fir­ma­tion that the com­po­si­tion of the econ­omy is chang­ing.

An anal­y­sis of the evo­lu­tion of sec­toral shares of em­ploy­ment rounds out the anal­y­sis on the eco­nomic changes of East Africa as com­pared with South Korea. Sec­toral em­ploy­ment is a re­flec­tion of the eco­nomic struc­ture of a nation. Where a sec­tor is a ver­i­ta­ble source of higher in­comes, the re­gion’s av­er­age in­comes should be re­flected in that sec­tor’s con­tri­bu­tion to em­ploy­ment.

In the 26 years from 1991 to date, Ethiopia’s man­u­fac­tur­ing sec­tor em­ploy­ment rose from 2.184 per cent to 9.375 per cent of all em­ploy­ment in that coun­try.

The dra­matic changes in em­ploy­ment in Rwanda’s and Ethiopia’s man­u­fac­tur­ing sec­tor em­ploy­ment can be partly ex­plained by both na­tions’ emer­gence from civil war and the sta­bil­is­ing eco­nomic re­forms that fol­lowed. Both na­tions were start­ing from a rel­a­tively low man­u­fac­tur­ing base.

Kenya’s man­u­fac­tur­ing share of em­ploy­ment grew from 15.9 per cent in 1991 to 25.73 per cent in Ethiopia 767.56 1507.81 Rwanda 748.40 Tan­za­nia 908.92 Uganda 62.31 604.04 9.69 Bu­rundi 70.35 320.09 4.55 South Korea 158.24 29,742.84 187.96 *Fac­tor growth: By how many times did the econ­omy grow? Kenya 97.62 40.57 Kenya 15.45 18.45 2017. This partly re­flects the pri­macy of Kenyan man­u­fac­tur­ing sec­tor in the re­gion, al­beit small when com­pared with South Korea’s.

In the rest of East Africa, the man­u­fac­tur­ing sec­tor share of em­ploy­ment re­mained stag­nant. On the other hand, South Korea’s em­ploy­ment share in man­u­fac­tur­ing shrank from a peak of 36 per cent in 1991 to 24.78 per cent in 2017. This calls for a closer look at other sec­toral changes.

In East Africa, Kenya’s services sec­tor em­ploys more peo­ple than hap­pens in other re­gional coun­tries. But it is ob­vi­ous that South Korea’s and Kenya’s services sec­tors are made up of very dif­fer­ent in­gre­di­ents be­cause the av­er­age services sec­tor worker in South Korea earns more than the services sec­tor worker in East Africa. This can be down to the so­phis­ti­ca­tion of prod­ucts pro­duced by each sec­tor.

A ro­bust man­u­fac­tur­ing sec­tor of­fers higher wages that at­tract work­ers from low pay­ing agri­cul­tural jobs. This is be­cause the sec­tor has a higher pro­duc­tiv­ity and cre­ates goods of higher value.

Higher in­comes then pro­mote de­mand for more do­mes­tic goods and services. This in turn leads to im­prov­ing the liv­ing stan­dards of the peo­ple and an in­crease in the over­all pro­duc­tiv­ity of the econ­omy.

So, where Korea’s man­u­fac­tur­ing sec­tor’s share of to­tal em­ploy­ment has shrunk in favour of its services sec­tor, East Africa main­tains a large agri­cul­tural sec­tor, em­ploy­ing a large pro­por­tion of the work­force but has an un­so­phis­ti­cated services sec­tor. In Korea, only about five per cent of cit­i­zens to­day work in the agri­cul­ture sec­tor. This put to­gether sug­gests that Korea’s man­u­fac­tur­ing in­dus­tries drove eco­nomic growth, raised av­er­age in­comes and added to to­tal em­ploy­ment.

The op­po­site is true of East Africa. The agri­cul­ture sec­tor is dom­i­nant, the man­u­fac­tur­ing sec­tor is stunted and pro­duces ba­sic goods and the ser­vice sec­tor is not so so­phis­ti­cated ei­ther. This ex­plains the dif­fer­ence in the in­comes and wel­fare of the peo­ple of East Africa and South Korea.

Com­ing back to the re­al­ity in East Africa, Kazuri prob­a­bly works on a farm but de­sires a job in the man­u­fac­tur­ing sec­tor. The case of a Korean of the same age as Kazuri is dif­fer­ent. Most prob­a­bly the Korean’s grand­par­ents were farm labour­ers and her par­ents toiled in fac­to­ries that pro­duced cloth­ing and other tex­tiles, but she is likely to be a lawyer, an ac­coun­tant or a banker. Her em­ployer owes the ex­is­tence of the firm to the large local man­u­fac­tur­ers to whom it of­fers services. This is the re­al­ity for many Kore­ans to­day.

An in­dus­try adds value to a ba­sic good. Let’s as­sume Kazuri owns forest­land in­her­ited from her fam­ily. Ideally, forests are con­sid­ered a fac­tor of pro­duc­tion for the agro-forestry sec­tor. Kazuri can opt to ei­ther sell the land, or har­vest the trees and sell tim­ber,

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