A new pattern of structural change is emerging in Africa, characterized by higher growth rates in the services sectors relative to manufacturing—a pattern in contrast to the manufacturing-led transformation of East Asia. With the advent of technology and the trend toward a completely integrated global economy, certain sectors have risen to the fore in terms of relative importance for economic development in African countries. These industries—dubbed “industries without smokestacks” (IWOSS)—include, for example, information and communications technology (ICT)-based services, tourism, and transport.
Research Analyst, Development Policy Research Unit - University of Cape Town
Senior Research Analyst, Development Policy Research Unit - University of Cape Town
These industries present an opportunity for African economies to address their high youth unemployment rates. The ability of IWOSS to create jobs is dependent not only on their ability to grow, but also on whether African youth will be able to access the employment opportunities that these sectors may present.
Thus, as part of the Brookings Africa Growth Initiative and partners’ work on the job creation potential of IWOSS, in a recent working paper, we present a methodological framework for assessing the extent to which youth unemployment can be addressed through employment creation in IWOSS in individual countries, as well as the skill gaps in the youth population that need to be addressed for this potential to be reached. A summary of the paper is below.
There are two components to the method: (i) estimating skill demand, and (ii) identifying skill gaps in the target youth population. On the labor demand side, the framework seeks to identify the skills required for a sector to reach its employment potential. On the supply side, the methodology ultimately aims to answer the question: Do the skills to meet the demand in the sector exist in the population; and if not, where are the gaps?
Figure 1. Representation of methodological framework
The methodological framework for ascertaining skills requirements for IWOSS
The first step of the framework involves estimating the employment potential of IWOSS sectors. We propose that this can be done in two ways. The first approach aims to make use of measures of labor force intensity for a sector, such as labor-value-added ratios and employment elasticities, to provide an assessment of employment potential. We also present an alternative global value chain-based approach that considers how future employment in a sector may be greater than projected employment in a sector. This approach, however, requires the extensive use of surveys and in-depth sectoral research.
Our framework puts a strong emphasis on the occupational requirements of sectors. Based on the assessment of potential employment in the sector, we then present methods for determining the occupational requirement profile of the sector. In the case of the first approach, we propose using trends in the occupational distribution of the sector to obtain a distribution of occupations for the projected employment. In the case of the second approach, we propose using the results of the survey to adjust the current occupational profile of the sector accordingly—and obtain a list of occupations in the sector, or a list of occupations and number of individuals required for each identified occupation.
A skill requirement profile should then be obtained, using this occupational profile. This profile relates the set of occupations required for the sector to reach its employment potential to a measure of skill, such as education, through the use of an occupational skills mapping standard, such as the Occupational Information Network (O*NET).
The final step of the framework uses the skill requirement profile for the sector to consider whether the necessary skills exist in the youth population, and where the youth may currently lack the skills required by the sector. We identify two types of skill gaps. The first is a sectoral skill gap—an indication of the gap between the set of skills available in the population, and the set of skills required by the sector. The second is an occupational skill gap identified for key occupations, that relates the skill requirement for each occupation to the skill level of the average unemployed youth. Both these gaps are important for assessing the extent to which there is currently a skill deficit in the target population for any particular sector, and for taking appropriate action to address that gap so that the youth can attain the skills needed to participate in the sector, as well as to enable sectors to reach their potential.
IWOSS presents opportunities for youth unemployment to be addressed in countries with high rates of unemployment. We have presented a framework that lays out how the potential of IWOSS to address youth unemployment can be thought about through a consideration of the employment potential of these sectors, and the skills requirements for this potential to be realized. This framework has been applied to a number of countries, including South Africa. Preliminary results from a forthcoming paper on the potential of IWOSS to address youth unemployment suggest that IWOSS do have an important role to play.
For more on the Brookings Africa Growth Initiative’s Youth Unemployment in Industries without Smokestacks project, read the summaries of Workshop 1 and Workshop 2, as well as the relevant Foresight Africa 2020 essay, “Exploring new sources of large-scale job creation: The potential role of Industries Without Smokestacks.” You can also read the first framework paper, which conducts a comparative assessment of the employment elasticities for IWOSS and other sectors in the economy here. Framework 2 presents a methodology to identify constraints to growth in industries without smokestacks.