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
globally.

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.

Comments

Efficiency wages, perhaps?

Damn, I'm an idiot: posted to the wrong entry. Please ignore (or delete).

I agree with the post in that skilled Africans are surprisingly highly paid. The reason is in the level of education. There are very few educated people in many african states and a high level of demand from local government, NGOs, and (often foreign owned) business. Pushing the price up. The other ditorting factor is the brain drain of outward migration.

I've noticed the same phenomenon here in Yemen. The workers at NGOs and the government do FAR better than the typical workers. I've always assumed that it has something to do with the ruling class keeping power. Mix that in with tribal alliances, and you get a significant population with higher than usual wages. The private companies that do well here tend to be cozy with the government. Construction, travel, import/export, etc. all have to go through many governmental hoops. My guess is that they are welcomed by those companies in order to keep competition at bay... It's starting to wear thin on the disenfranchised southerners. The country was supposedly "unified" back in 1994 I think, but what has happened looks the same as if the north had conquered the south. "The south will rise again!" may well be true here...

Isaac Crawford
Blogging in Yemen
www.isaharr.com

Another reason is that Africans' reference points are either too high (corrupt politicians, foreigners and connected business men) or too low (the rest of the people). Since there are few "middle-class" reference points, aspirations aim high. Anyone with an education wants a lot of money -- legal or not -- and they will keep moving until they get it.

thank you for this excelent article

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