Ghana’s Informal Sector: Major Employment Source, but Low Productivity and Slow Economic Growth

Ghana’s informal sector plays a vital role in the economy, employing nearly 80% of the workforce. However, it contributes only 27% to the nation’s GDP, highlighting a significant productivity gap, according to the Ghana Statistical Service’s (GSS) first National Report on Productivity, Employment, and Growth. The report reveals that, while the informal sector provides livelihoods for the majority, it faces challenges like low productivity, underemployment, and stagnant wages, all of which hinder broader economic development.

The report further details that Ghana’s labor productivity grew at an average annual rate of 3.2% between 1991 and 2019, with most gains occurring in capital-intensive sectors like mining and finance. Despite some industries, such as manufacturing, showing productivity improvements, the overall employment rate in these sectors has been sluggish. For example, manufacturing saw a 14% productivity increase from 2013 to 2022, but employment grew by only 2.5%, indicating slow industrial expansion.

Additionally, the mining sector exhibited high productivity but did not generate significant job creation, emphasizing the country’s reliance on industries that do not create widespread employment opportunities. A concerning trend identified in the report is the growing gap between productivity and wages, where industries such as agriculture, trade, and repair services experienced slow or stagnant wage growth, despite productivity increases.

To address these economic challenges, the report urges the government to focus on industrialization, expand commercial agriculture, and integrate informal businesses into the formal economy. It also highlights the importance of adopting technology, enhancing workforce skills, and implementing targeted fiscal measures to boost productivity. Without bold policy changes, Ghana risks widening income inequality and missing opportunities for sustainable job creation and economic growth.

SOURCE: CITI NEWSROOM