Ethiopia’s rapid economic growth since the millennium contrasts with its lack of structural transformation and modest employment growth in the formal sector. High youth unemployment rate in urban areas (above 25 % on average) and relatively low real wages among the employed remain important policy challenges. Unfortunately, only a few studies have attempted to characterise the urban labour market in Ethiopia, and they often lack the scope and detail needed to inform policy decisions.
This project uses unique administrative panel data provided by the Private Organizations’ Employees Social Security Agency (POESSA) of Ethiopia to examine the dynamics of the formal urban labour market. Because this dataset provides matched employer-employee observations bi-annually from 2012-2018 with unique employer and employee IDs, employment changes and labour mobility can be estimated much more accurately than before.
The key indicators of labour market dynamics that the study would provide are:
- Gross job creation and destruction rates at the employer and sector level (as opposed to only sector - level measurements in most previous studies).
- The movement of individual workers across employers and sectors.
- Measure the extent to which such movement of workers across firms and sectors is driven by the employer’s decisions to create or destroy jobs, or by the decisions of the employer, employee, or both to terminate an employment contract without any change in the number of jobs.
- The relationship between firm size and the above-‐mentioned indicators of the labour market
- Gender differences in hiring and separation rates, wages and worker mobility.
- The probability that a worker would lose a formal sector job and the duration of remaining unemployed in this sector.
By estimating these and related indicators of labour market dynamics, the project will contribute to a better understanding of the urban labour market in Ethiopia and inform policy discussions. For instance, the results of this study would help understand the extent to which sectors prioritised by the Ethiopian government for overall economic growth - including export-oriented and FDI driven manufacturing - are aligned with the objective of expanding well-paying and stable jobs in urban areas for the growing labour force.