INCREASING LABOUR PRODUCTIVITY FOR INCLUSIVE GROWTH Panellist: Dr. Susan Kavuma Economic Growth Forum Commonwealth Resort Munyonyo, Kampala September 14-15, 2017

Uganda’s population composition Distribution of labour force Outline Introduction Uganda’s population composition Distribution of labour force Labour participation Labour productivity levels Determinants of labour productivity Key issues Policy recommendations

Introduction Micro studies have a found a negative relationship between fertility and household welfare (Joshi and Schultz, 2007; Schultz, 2009). Macro studies – evidence is not robust. Some studies found a positive relationship between population growth and economic growth (Kuznets, 1967) others negative relation (Coale and Hoover,1958; Enke, 1971; Lee and Mason, 2010). Major problem is endogeneity of population. Studies find capital input to be the most important source of growth, followed by labour and labour productivity follows(Jorgenson, 1991). Labour productivity is also endogenous in growth models. Labour productivity and employment are inversely related.

Uganda’s Population Composition Table 1: Trends in the Population Size, 1911-2014 1911 1921 1931 1948 1959 1969 1980 1991 2002 2014 Population (millions) 2.47 2.85 3.54 4.96 6.45 9.53 12.64 16.67 24.23 34.63 Size relative to 1911 (1911=100) 100 115 143 201 261 386 512 675 981 1402 Average increase per annum ('000)   39 68 83 300 262 367 647 882 Crude birth rate (CBR) per 1000 48.9 49.1 49.8 47.9 43 Crude death rate (CDR) per 1000 17.1 16.6 18.9 15.1 9.7 Annual growth rate (% p.a) 1.5 2.2 2 2.5 3.9 2.7 3.2 3 Youth Population (millions) 1.17 1.55 3.33 11.94 16.59 First took us 48 years to double population (1911 – 1959), took about 22 years to double population (1980-1959)/ (1991-2014). By 2035 our population will have doubled Source: UBOS (2016).

Uganda’s Population Composition Cont’d Key statistics Total population 34.6 million people, growing at 3% pa. Will double in 30 or less years. Fertility rate at 5.8 children down from 7 children per woman (2002 census) but above the sub-Saharan Africa average of 4.9 children. Mortality rates have declined to 9.7 per 1,000 live births from 15.1 –below SA of 9.95.

Uganda’s Population Composition Cont’d Figure 1: Uganda’s Age Structure Source: UBOS, 2014 Census 50% aged below 15years (children/consumers), 45% aged between 15-54 (workers/producers) and 5% aged above 54 (elderly/consumers).

Dependence ratio Figure 2: Age Dependence Ratio for Selected East African Countries Source: World Bank data, 2015.

Distribution of labour force Figure 3: Distribution of labour force in Uganda Source : Brownbridge and Bwire (2016) Labour is dominantly employed in agriculture – why? – low barriers of entry, low skills, abundance of land, goods demanded.

Labour force participation Labour force estimated at 17.2 million people. Labour participation rate of 82% above the sub-Saharan average of 65% Levels of inactivity highest among the youth at 25% higher than the national average of 15% (Danish study, 2016). Formal sector absorbs only 20% of the total labour force. Three-quarters of the working age population have no formal education or primary level education (UBOS, 2014: UNHS).

Labour Productivity Figure 4: Uganda’s Labour Productivity Levels by Sector Source : McCullough (2017) Industry –consists of manufacturing, mining, construction & public utilities. Less hours devoted to agriculture & industry than service Low productivity in agriculture – why? Low capital – physical or human? Derived demand – products demanded.

Determinants of Labour Productivity Three factors determine labour productivity: Human capital (Becker, 1962 & Mincer, 1974)– Education augments labour thru skills and knowledge acquisition. Health - ↑ses physical capacities. Physical capital– e.g. land, machinery, buildings, computers which varies with professionals – e.g. services are less capital intensive than manufacturing & agriculture. Technology (technological change) – use of new ideas, products, production techniques – “Creative destructive” – destroys and creates jobs. Schumpeter (1942).

Key issues Increases in labour supply tend to slow technological change. Since employers have less incentive to invest in labour-saving technology when labour is cheap. Thrives on the substitutability of labour and capital (Paul Romer, 1990). Increases in capital induce higher levels of labour productivity. An increase in the accumulation of physical capital may have no effect on the rate of technological change. Therefore firms or nations need to invest directly in technological change. Study found the probability of being observed in employment decreases with education in Uganda(Kavuma, 2015).

Policy recommendations Control population – to reduce dependence ratio, reduce pressure on financial and natural resources and attain meaningful growth. Promote human and physical capital investments – education and health, infrastructure. Design strategies to release surplus labour in agriculture to other sectors by increasing the capital per worker in agriculture – improve farming practices. Create employment opportunities for the young population (youth) - either address supply-side factors(emphasise practical skills/vocational education) or demand side – increase job opportunities for semi-skilled workers by promoting local enterprises (BUBU). Encourage innovations – invest in educational institutions and research and development.

THANK YOU FOR YOUR ATTENTION!