Ethiopia's economy has been experiencing growth, driven by investment, industrialization, and structural transformation. However, this growth has raised questions about its impact on the lives of workers. The International Trade Union Confederation's Collective Voices podcast recently explored the idea that economic growth does not necessarily translate to improved living standards for workers. This question is particularly relevant for Ethiopia, where a rapidly growing population requires the creation of prosperity through expanded productive economic activity and employment.
Policymakers often measure economic performance using GDP growth, investment, exports, and other macroeconomic indicators. However, workers experience the economy differently, through the price of food, rent, transportation, and other essential expenses. A worker's purchasing power is affected by inflation, which can erode the value of their income. The distinction between nominal income and real income is crucial, as a worker's salary may increase on paper, but their purchasing power may decrease if prices rise faster.
Ethiopia's employment challenge is significant, with many young people entering the labor market and the economy struggling to create enough productive opportunities. Having a job is not the same as having secure employment, as workers may face unstable income, inadequate social protection, and poor working conditions. The scarcity of jobs should not become an excuse for the scarcity of rights, and Ethiopia needs to ask not only how many jobs it is creating but also what kind of employment those jobs represent.
As Ethiopia seeks to industrialize and attract investment, it must consider the type of labor it wants to offer. Low labor costs can make an economy attractive to investors, but there is a crucial distinction between competitive labor and cheap labor. Competitive labor is productive, supported by skills, technology, and infrastructure, while cheap labor is simply inexpensive. Relying indefinitely on low wages risks building competitiveness around a factor that should change as development progresses.
Ethiopia's industrial strategy should prioritize increasing productivity and moving into higher-value production. As productivity rises, workers should have a reasonable opportunity to benefit from the value they help create. This is not an argument that businesses should absorb unsustainable labor costs, but rather that the answer cannot simply be to keep labor cheap. The goal is to make labor more productive and beneficial for both workers and businesses.
The question of whether Ethiopia's economy is growing, and how its workers are living, is not an argument against growth but rather about what growth is supposed to accomplish. Economic growth needs a human dimension, visible not only in national accounts and investment figures but also in the ability of working households to live with greater security and dignity. GDP growth tells us how much the economy produces, but it does not tell us how the people producing that wealth are living.
Ultimately, Ethiopia's economic growth must be accompanied by improved living standards for workers. The country needs to prioritize creating secure and productive employment opportunities that provide a sustainable livelihood. By doing so, Ethiopia can ensure that its economic growth benefits both the national economy and the households of its workers.
Key points
- Ethiopia's economic growth must be accompanied by improved living standards for workers.
