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Chapter 3

Manufacturing Productivity and the Prospects for Jobs Growth

Most Sub-Saharan African countries have experienced a significant increase in their manufacturing workforces over the past couple of decades. Cheap labor in these countries has spurred substantial job growth especially among new and young firms, irrespective of their size. For example, Côte d’Ivoire created about 24,000 manufacturing jobs between 2003 and 2014, and Ethiopia added 128,000 manufacturing jobs over the 1996–2016 period. These employment opportunities are mainly because of new establishments. In Côte d’Ivoire, survivors created 19,000 net jobs, entrants contributed 101,000 jobs, and exiters destroyed 96,000 jobs over 2004–14. Comparable figures for Ethiopia during 1997–2010 are 1,700, 195,000, and 130,000 jobs, respectively (Abreha et al. 2019).

Rapid expansion of the manufacturing workforce in Sub-Saharan African countries has occurred at about the same time as these countries have experienced productivity growth. Côte d’Ivoire and Ethiopia are again typical examples. A greater share of the observed productivity growth has been driven by the reallocation of markets and resources away from less productive establishments toward more productive ones through the expansion and contraction of incumbent producers as well as through the entrance of new establishments and closure of some incumbents. Put differently, the reallocation mechanism is strong enough to generate productivity growth even in the absence of sizable within-firm productivity gains. This feature of productivity dynamics is consistent with the observation that manufacturing job growth has occurred mainly because of new and young establishments.

Recently, however, the advantage that the manufacturing sector in these economies has had by hiring additional workers at roughly constant wage rates has been eroding, as illustrated in the pattern of job growth and dynamics of wages in Ethiopian manufacturing. When new and young establishments