Labor Market Witnessing new Developments

With the opening of dozens of universities and the ever-increasing graduates flooding out of these new institutions, unemployment and underemployment have been typical in Ethiopia’s labor market for more than the past decade. With new graduates continuing to rise, the labor market seems to be experiencing other developments, as well. While some sectors like education are dealing with a dwindling interest of employees, the financial sector seems to be entertaining a contrasting and dynamic interest. As the labor market continues to shape itself away from a mainly agrarian economy, new graduates are also preferring to work for themselves or as freelancers over full employment, writes Eden Teshome, EBR Staff Writer.

Yosef Girma, Deputy Director at a private school in Addis Ababa’s Akaki Kality District, is usually tasked with overseeing the school’s human resources. He writes job posts, oversees the publication of vacancies, manages the examination of incoming employees, and administers the interviews. His job doesn’t end there; he also manages them during their employment’s tenure. For years, the recruitment section was easier than managing hired staff.
“Now, both parts of my job are very hard,” Yosef told EBR.

That is because finding employees as easily as he did a couple of years back is no more the case. In August of each year, Yosef is tasked with filling every subject or class with the right teacher. That was exactly the hard part: finding a fitting teacher. With so many alternatives, selection was a headache in times gone by. Now, finding a single teacher seems to be the challenge.

“We have been looking for an English teacher for seven months now,” Yosef shares his experience. “I also remember when we hired a physics teacher to teach a music class, and a chemistry teacher to cover all natural science subjects.”

What is also growingly puzzling for Yosef and his colleagues are the deteriorating skills and talents of human resources in the market. A few years ago, the point of disagreement between incoming employees and their employers used to be remuneration, as skills, knowledge, and experience were largely similar across the board, according to Yosef.

Dawit Tessema, former chemistry Teacher and now Teller at the Saris Branch of the Commercial Bank of Ethiopia shares what could be a reason for the deteriorating interests of employees in the educational industry: “teaching doesn’t go anywhere.” Having taught chemistry for six years, he studied economics and left his teaching job once and for all in 2013. For Dawit, once one is a teacher, there is no climbing of the labor ladder.

“I remember the school owner that I once worked for telling me that he would never make me a director because I am a good teacher,” Dawit shares his story. According to his former boss, promoting a good teacher could mean losing students, the primary revenue source. It became clear for Dawit right there and then that his teaching career could go nowhere. Hence, he had to leave and never look back.

Though the teaching profession is hemorrhaging, other full-time jobs are also beginning to lose their allure. Hannan Abdulkadir, alias, a 24-year-old young woman and graduate of economics from Admas University in 2020/21 was walking around the streets of Kazanchis trying to convince people to buy homes when EBR approached her. Working for Ayat SC, the decades-old real estate company, her goal is to strike just one deal to grab the commission. When asked if she would ever consider full-time employment, she totally rejects the idea.

“I know you might wonder why I prefer to walk around in the excruciating weather when I can just settle for an office job,” she asked back. Hannan argues that it is a better life choice as she is provided with pocket money to cover her transportation and other daily expenses.

People are increasingly making conscious choices as to where and how their income should come from. As such, the labor market in the capital seems to be witnessing new developments which are frustrating employers in some industries while flooding others with ample resources.

In any economy or sector, labor is one of its most important factors of production. The labor market refers to the collection of markets in which people offer their labor services in exchange for wages or salaries. It is a key component of any economy and has a significant impact on economic growth and social welfare.

The operation of labor markets is affected by both supply and demand forces. On the supply side are individuals who are willing and able to work at the prevailing wage rate for a particular job or type of work; this includes workers who are currently employed as well as those who are unemployed but looking for work. On the demand side are firms that need workers to produce goods or services; this includes both businesses that produce final products as well as those that provide intermediate inputs used in production processes elsewhere in the economy. The interaction between these two groups determines how many jobs will be available at any given time and what wages will be paid for them.

Wage rates are one of the most important factors that affect the labor supply. Working conditions also play a role in determining how many people are willing to work. Taxes and benefits are another factor affecting the labor supply. Good benefits, such as health insurance, retirement savings plans, and paid vacation days are at play here.

Every year, the World Bank estimates that 600,000 individuals enter the Ethiopian labor force. However, the economy is not creating enough demand for jobs equivalent to the supply. This is especially true given the increasing number of young people joining the workforce as a result of the youth bulge. Ethiopian youths are facing increased and long-term unemployment as a result of this supply-demand imbalance in the labor marketplace. Rising unemployment affects university and college graduates in particular—and those with less competence, even more so.

Ethiopia is pursuing economic growth and development in order to relieve and eventually eliminate poverty. However, economic progress has not resulted in a corresponding increased job creation, and the labor market has been unable to absorb additional labor force entries. As a result, the urban unemployment rate is high, with the youth and women bearing the brunt of the burden.

In terms of new graduate skills and knowledge, there appears to be a mismatch between what they offer and what is demanded by employers. Unemployment is one of the key motivators for young people to hunt for jobs outside of their local area.

Ethiopia’s labor market is afflicted by an oversupply of labor. Due to a lack of adequate demand in the primary, secondary, and tertiary sectors, a large number of workers are deemed surplus. Because of the high rate of population increase, a large number of new workers are constantly being added to the existing workforce, resulting in a massive labor market excess.

Another key issue in Ethiopia’s labor market is the country’s expanding population of unskilled laborers. In the absence of suitable vocational institutes, skill development among the country’s workforce is extremely slow. Because of the large number of unskilled laborers, it was difficult for them to become self-employed, resulting in a large army of unemployed youth in the country.

However, certain companies, such as dereja.com and Golden Sales and Marketing Institute, are providing specialized training. The latter is dedicated to assisting young Ethiopians in realizing their potential and accomplishing their goals by educating, motivating, and empowering young people in order to help them get the momentum they need to achieve their personal, entrepreneurial, and academic objectives. Info Mind Solutions PLC’s dereja.com is a social enterprise. Founded in 2017, they are dedicated to helping over 200,000 recent graduates get their careers off to a good start. Through three interventions, one of the main goals of dereja.com is to address the obvious shortage of guidance and career tools available to university students and junior-level professionals.

The first of the three interventions is dereja.com, a digital portal that serves as an online method for connecting students with job opportunities. The second is Dereja Academy, a three-month accelerator program for graduating seniors, and the third being the Career Expo and Career Expo Clinic, which are designed to connect students with possible employers. Dereja.com’s overall goal is to bring answers to unemployment by using new and effective approaches to promote the nation’s socioeconomic well-being. The firm aims to maximize the Ethiopian youth’s potential by providing employability solutions that prepares graduates for the labor market. Its mission is to help recent grads find work.

Ethiopia’s newly founded Ministry of Labor and Skills directs and drives the country’s job creation aspirations. It coordinates and supports the work of federal and regional government agencies, private sector entities, and development partners to create jobs. It also strives to ensure pre-employment policies are adopted and implemented throughout industries. The ministry also helps start-ups, businesses, and job development programs by mobilizing resources and innovative investments. They further try to ensure the training and education sector generates qualified graduates with marketable skills and ethical values.

In Ethiopia’s current circumstances, skilled labor force absorption is very low. After completing technical education such as engineering or vocational courses, a large number of technically educated youths are finding it difficult to find work, posing a major problem. As a result, many youths no longer see the value of education and are more interested in working on things that are unrelated to their profession.

The labor market in the capital is seeing fast developments of movements across industries, from education to banking. There are a variety of factors that affect labor movement between industries. The most important factor is the availability of workers with the necessary skills in the desired location. If there are not enough workers with the required skills in a particular area, businesses will be forced to offer higher wages or better benefits to attract them. Another important factor is the cost of living in different areas. Businesses may be more likely to relocate if they can find a location where employees can afford to live on their salaries. Other factors that can influence labor movement include tax rates, government regulation, and infrastructure development.

In comparison to other sectors, the banking sector attracts a large number of young people. “The industry is getting a higher number of the labor force to join in because of the wage rate. Fresh or zero-experience bank employees are paid the same as senior employees at governmental institutions,” says Jemal Mohammed (PhD), Development Economist and Researcher at the Policy Studies Institute (PSI).

“The banking industry’s requirement for new employees has reached a saturation point. There have been a large number of financial service providers during the Growth and Transformation Plan, and the opening of various private bank branches had increased labor demand in the sector. Even though there is still demand, it is not comparable to previous times. But the labor force is continuing to rise, making it unviable because there is a labor force surplus in the market,” Jemal told EBR

Ethiopia’s labor market is in the process of transitioning from a primarily agricultural to a mixed agriculture-industrial economy. The shifting demands of the labor market for medium- and high-skilled workers reflects this. There is still a huge domestic labor pool in the country’s economy that is not well connected to jobs. To put it in another way, the country’s labor market has the capacity to absorb more low- and medium-skilled workers, as well as a growing need for highly qualified workers. Ethiopia also faces infrastructural and land access issues, as well as a skills shortage. There is also the matter of being landlocked.

Ethiopia’s transition from an agrarian to an industrial economy is aided and hampered by a number of factors. Emerging trends in government and foreign direct investment in education, job creation, and overseas employment, in particular, provide insight into existing and future options for Ethiopians who want to stay at home and work, as well as those who want to migrate. According to the World Bank’s collection of development indicators derived from officially recognized sources, Ethiopia’s total labor force, was recorded at 53,546,648 in 2020.

There are particular industries and occupations that are thought to have the most promise for wage-based employment for the young. Seasonal occupations, industrial jobs, and work in urban and peri-urban centers feature here. Construction and construction materials, light manufacturing sectors such as textiles and leather, metal and woodwork, and service sectors like hospitality and transportation offer great employment opportunities.

The manufacturing sector employs the majority of the country’s workforce in urban areas. It is dynamic, innovative, and requires new skill sets. And the small effects that occur in the manufacturing sector can act as a substantial driver of economic growth by creating job possibilities in other industries.

As Ethiopia is a developing country, the construction industry has enormous potential too. However, the sector is hampered by the country’s fragile political situation and legislative bottlenecks. Thus, it is unable to absorb labor as efficiently as it could have. However, it maintains the ability to absorb both skilled and unskilled labor.

“The fundamental reason for the disparity in supply and demand in our country is that our manufacturing sector is unable to grow, which leads to imports. Thus, when costs are high, labor demand falls. If our manufacturing sector expands, unemployment will decrease,” said Jemal.

For Hannan, avoiding full-time employment for her entire life is a matter of one good deal. “It might take five years or even longer. But once I get that lucrative deal, I will make more than an employee would ever be able to save in an entire career.”EBR

10th Year • May 2022 • No. 107