Assessing labor market transitions in Ghana using panel data

Understanding labor market transitions is important for policymakers and researchers in developing countries. Changes in economic activity status (employed, unemployed, out of labor force) vary significantly from one country to another and also within countries from one socio-economic group to another. Below I summarize analysis from the latest Ghana Annual Household Income and Expenditure Survey (AHIES) published by the Ghana Statistical Service. The AHIES is a panel survey that has followed over 10,000 individuals since 2022Q1 to assess changes in their livelihoods. I am currently analyzing trends and show here what has happened to economic activity between Q2 and Q3. 

Transitions in Ghana labor force status, 2022Q2 - 2022Q3

Source: Own analysis using AHIES from Ghana Statistical Service.

Note: Left hand side is 2022Q2 and right side is 2022Q3

• 81 percent of working age individuals (15-64-years) who were employed in 2022Q2 were still employed in 2022Q3; 7 percent went into unemployment, and 13 percent dropped out of the labor force. Among youth (15-35-years), 72 percent who were employed in 2022Q2 were still employed in 2022Q3, while 9 percent fell into unemployment, and a further 19 percent dropped out of the labor force. The corresponding values for non-youth were 83 percent, 5 percent, and 12 percent.
• 39 percent of working age individuals who were unemployed in 2022Q2 were employed in 2022Q3; 23 percent were still unemployed and 37 percent dropped out of the labor force. Among youth, 27 percent of those who were unemployed in 2022Q2 were still unemployed in 2022Q3, while 34 percent got employment, and a further 40 percent fell out of the labor force. 
• 22 percent of those who were outside the labor force are now employed; 10 percent are unemployed; and 68 percent are still out of the labor force.

One salient observation for a country looking to create jobs for youth is that, compared to non-youth (35 years and older), youth (15-35) are close to 20ppts less likely to transition from unemployment to employment; 10ppts more likely to stay in unemployment, and 5 ppts more likely to transition from unemployment to out-of-labor force. 

Similarly, we can visualize transitions across statuses in employment.

Source: Own analysis using AHIES from Ghana Statistical Service.

Note: Left hand side is 2022Q2 and right side is 2022Q3.

Several factors affect labor market transitions in developing countries. It would be interesting to assess the role of the following: (i) economic cycles; (ii) labor market efficiency; (iii) barriers to returning to work; (iv) sectoral and occupational job mismatches; and, in the longer run, (v) structural transformation. Policymakers and researchers need to understand these factors to design effective labor market policies and services that can help individuals navigate these transitions.