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

2. 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

3. 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.

4. Uganda’s Population Composition
Table 1: Trends in the Population Size,
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 ( )/ ( ). By 2035 our population will have doubled
Source: UBOS (2016).

5. 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.

6. 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 (workers/producers) and 5% aged above 54 (elderly/consumers).

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

8. 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.

9. 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).

10. 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.

11. 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).

12. 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).

13. 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.

14. THANK YOU FOR YOUR ATTENTION!