Are African wages too high?

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

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.

That’s from Chris Blattman, a political science professor at Yale; here is Chris’s consistently interesting blog.


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