Where will they all work? Making markets work for the poor

Photo: Ethiopian leather factory (courtesy of Pittards Leather)

Although I’m not a particularly visual person, I do like a compelling graphic from time to time. The pyramids below show the age profile of Ethiopia’s population against that of the United Kingdom.

The one of the UK is reminiscent of a stack of Pirelli tyres (and might even provoke thoughts of ‘muffin top’) while Ethiopia’s is a sleek pyramid. Whereas in the UK (and even more so in countries like Italy and Spain) we often fret about the insufficient entry of young people to the workforce who can provide the future tax base on which our social services depend, the visual beauty of the Ethiopian pyramid hides another, and arguably greater problem: where will all the young people work?

There will be some 3 million young people entering the workforce in Ethiopia over the next 5 years: who will employ them? Very separate from the frenzied debate in the rich world about AI and robots taking over our jobs, people in Ethiopia are still wondering how to create these jobs in the first place.

Some think the solution lies in industrialisation. Creating millions of new jobs require employers who need millions of new people, and throughout history that has usually meant factories and production of goods on a mass scale. In Ethiopia, this means shifting a largely agriculture-based economy to one that can manufacture shoes, textiles and horticulture products. The country has the resource base in the form of millions (50 million to be more precise) of cows, some 16 million hectares of arable land and a large and growing population.

I recently caught a glimpse of the UK Government’s efforts to support Ethiopia’s journey towards creating a market-based industrial economy. The framework they employ is called Making Markets Work for the Poor (M4P) and in simplified terms it seeks to identify constraints in the economy and to undo those in order to release the potential growth and employment opportunities in a given sector. In the leather industry – which I got to see (and smell!) first-hand - those constraints include the poor quality of raw hides used to produce leather goods and a shortage of foreign currency to pay for imported accessories. If these constraints can be undone, orders from large consumer markets in Europe and in the US loom tantalisingly on the horizon.

For an economist who’s been around the block and is somewhat jaded by the experience, there is something refreshing and intuitive about watching private sector development like this in the making. It is back to first principles: creating economic growth and employing young people. I wish you well, Ethiopia.