Poverty and labour market response to reforms in Uganda

Abstract

Abstract
Using the nationally representative household surveys data for 1992/93, 1999/00 and 2002/03, the study seeks to explore the effects of economic reforms on the labour market outcomes in Uganda. More specifically, how are these labour market outcomes linked to poverty? To what extent have they led to creation of employment opportunities in various sectors? Have the factors influencing labour market employment choice changed during
the reform period? How about the factors influencing wages in paid employment in private and public sectors? What explains the wage differentials between these sectors? The major finding of the study is that the labour market in Uganda has been to some extent responsive to the economic reforms. Although the nature and magnitude of responsiveness has been mixed. There has been growth in employment opportunities but the level of growth remains below that of labour supply. While the reforms led to a reduction in the public employment in the earlier years followed with a rise in real wages, the latter years experienced growth in employment of nearly 4.8 percent. On the other hand, the growth in private sector employment was followed by a drastic fall in real wages. This resulted into widening of the wage gap between the private and public sectors. The returns to education increased during the period 1992-2002 but declined between 1999 and 2002. The only exception was the returns to post secondary education
that increased through the reform period in the case of the private sector. More importantly, the demand for better educated employees increased in the private sector. On the employment sector choice, education still comes out as a key factor plus local community access to infrastructure.
The key policy implications arising from the study are that though there has been an increase in private sector employment over the reform period, government needs to provide further incentives to the private sector so as to create more and better paying jobs. This is important if the private sector-led growth is to be realised. Second, there is need to address the burgeoning public sector employment, which definitely has implications for the government’s budget. Third, more investment both public and private in education is important to move the masses from less productive sectors to more productive ones. There is also a need to ensure that the education system provides skills relevant for the development of the private sector and also useful for those opting to get self employed in non-agricultural activities. Fourth, there is a growing geographical dimension in the growth of employment that needs policy consideration. Fifth, more investment in the infrastructural development will not only enhance the growth in real wages but also provide incentives for employment creation. Lastly, the high growth in labour supply relative to labour demand calls for measures aimed at controlling the rapid population growth.