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Labour markets and the rebuilding of human capital
Godfrey Kanyenze, United Nations Development Program (UNDP)
July 24, 2009

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This paper is part of the Comprehensive Economic Recovery in Zimbabwe Working Paper Series

Executive Summary

After more than two decades in which purely economic objectives tended to dominate the mainstream of development discourse, social considerations and a more nuanced understanding of the nature of poverty came to the fore in the latter half of the 1990s, most evident in the rise of multidimensional poverty reduction strategies papers in which growth was seen as a necessary, but not sufficient condition, for a reduction in global poverty levels. This shift was also felt in the area of employment. While, for example, under the so-called Washington Consensus1 the focus had been on the need to ensure maximum labour market flexibility, in the new millennium this was replaced by recognition of the importance of employment in national development processes and poverty reduction efforts. While the crucial role of rapid and sustained growth in reducing poverty levels was not disputed, at the same time there was also a deeper understanding of the importance of the quality of growth, and more specifically the extent to which it created employment opportunities.

In the specific case of Zimbabwe, an evaluation of developments in the labour market and performance in terms of human capital formation since independence in 1980 suggests that even before the onset of the crisis in 1997, growth rates were not only erratic but were also insufficiently robust to absorb new entrants into the labour market. Since 1999, the relationship between growth and employment weakened substantially, resulting in huge 'decent work' deficits and endemic poverty. 2 Women and youth, as well as people with disabilities, all of whom had tenuous links with formal employment at the best of times and are found predominantly in the marginalised and vulnerable non-formal sectors of the economy, experienced the worst forms of deprivation and poverty.

Rather than the formalization of the non-formal sectors of the economy that one would expect from any development process, it is the informalisation of the formal sector that has occurred in Zimbabwe, such that by 2004, four out of every five jobs in Zimbabwe were to be found in the informal economy. The country's education and training system, which should play the role of creating the requisite capabilities to enable the majority of Zimbabweans, especially in the non-formal segments of the economy, to participate in, and benefit from growth, experienced reversals of the gains that had been made in the 1980s and early 1990s. More fundamentally, education and training provision remained supply-driven, resulting in a mismatch between the demand and supply of skills in the economy. Over the last two years, and as the economy descended into freefall with worsening negative growth rates, both labour markets and the country's human capital base suffered from rapid shrinkage. Going forward, credible policies that help to trigger employment-intensive recovery and pro-poor growth, including labour-intensive rehabilitation and maintenance of infrastructure, are required. A revisiting of the country's approach to education and training, based on consultations between all stakeholders, should help to ensure greater flexibility of those systems to respond to the needs of the economy. Measures that facilitate return migration and use of diaspora skills are also critical in leveraging human capital for recovery.

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