Hat tip: Tyler.
Chris Blattman has a conjecture, possibly high wages in Africa are holding back growth:
One thing that has always struck me in the African countries I have worked is that the real wages (i.e. wages adjusted for the cost of living) of African formal sector workers seem to be incredibly high, at least compared to that of workers in China or India. Given that firms in China and India seem to be more productive than their African counterparts, it creates a double disadvantage for African workers, and raises the question of why the situation continues. Why don’t manufacturing wages fall in Africa, stimulating more jobs for more people at wages still higher than those available in agriculture or informal business?
Why, when I run a survey in rural Uganda, do youth with the same education and experience expect a wage three to four times higher than the youth I worked with in India? I don’t begrudge anyone anywhere a living wage. It’s the relative differential that puzzles me, and that could be keeping Africa from doing business globally.
There are probably lots of plausible reasons. Perhaps we ought to consider (and get data on) the informal sector in Africa, which could be larger and have more moderate wages than the formal sector ones. It may be that all my notions and data about African wages are erroneous.
Another possibility, however, is that the largest employers of skilled workers in most African countries are international NGOs and the local government. They are competing, in many cases, for the same pool of skilled and semi-skilled workers as the manufacturers and service sector firms. Neither the government or NGOs, moreover, seem to set wages according to the local market or local conditions, and it requires little imagination to wonder whether they set their wages higher than the market would normally do.
Bonus, Tyler has now introduced me to Chris’ great blog, which I haven’t read before. Given my and Lee’s interest in the Dark Continent, I am putting it on the blogroll.
