Ethiopia – Rapid employment insights during a crisis

We helped Ethiopia’s government understand and respond quickly to COVID’s impact on employment in two main ways. First, we carried out a rapid labour market assessment, enabling better targeting of a wage subsidy program. And, second, our analysis of fiscal and financial policies highlighted opportunities to direct funding to more job-rich sectors.

Web page | 10 December 2021
 

At-a-glance achievements

Like many countries, the onset of the pandemic had a major impact on Ethiopia’s labour market, leaving many vulnerable, especially the poorest in informal employment. The country’s Jobs Creation Commission (JCC) asked the ILO to provide a rapid, real-time assessment of the situation and the policy options so it could determine a strategy for moving forward. Our work helped the JCC place employment at the core of the Government’s early response plan.

Key elements of our support included:
  • Rapidly assessing COVID’s labour market impacts, using a novel mobile phone survey: One of the difficulties Ethiopia faced when the pandemic struck was that it had no up-to-date employment data so it was unable to properly estimate COVID’s impact; the last labour survey was conducted more than four years ago. We filled this data gap by conducting a rapid labour market survey via mobile phone. More than 35,000 mobile numbers were randomly dialled in order to generate responses from over 2,500 people aged 18-64, in both the formal and informal economy. The survey revealed the groups hardest hit by COVID – by gender, education and other indicators. Interestingly, the survey revealed an increase in employment in the most vulnerable groups as more members of their households were required to work to meet job and income losses.

    Four waves of the mobile phone survey were carried out between 2020 and 2021. Although the data was not as robust as a full labour market survey, it proved to be fairly representative of the demographics of Ethiopia’s labour market. Significantly, the government was able to use the data to target its wage subsidy program more effectively, especially to the poorest and most in need.
  • Analysing fiscal and financial policies to identify ways to stimulate more labour-intense growth: We carried out two main analyses. First, we looked closely at the country’s commercial credit sector to understand whether banks were lending to job-rich sectors, such as agriculture, or to more non-productive areas such as housing. The Central Bank and Ministry of Finance had never done this analysis before. The analysis enabled them to identify policy reforms to reduce the risk of banks lending to job-rich sectors in order to boost employment.

    A second ILO study of fiscal policies assessed the amount of money the government invests in employability and active labour market initiatives. Typically, governments spend 1% to 5% of GDP on these types of initiatives, but Ethiopia’s government was unaware of the amount. We discovered that its funding of active labour market programs was very low, encouraging the government to rethink its approach. We also assessed and recommended adjustments to tax incentives for employment, which are normally a relatively inefficient way to stimulate jobs.