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Uganda's increased economic dependency: More poor people than the employed
Enock Nyorekwa ...
Posted: 4 days 9 hours
Dr Enock Nyorekwa Twinoburyo

By Dr Enock Nyorekwa Twinoburyo

The Uganda National Household Survey (UNHS) 2016/17 released on September 27th, 2017 has interesting and perplexing statistics that reveal the weight of the development challenges Uganda faces. The survey was conducted and issued with a one year lag. Drawing from historical trend (1999/00, 2002/03, 2005/06, 2009/10, 2012/13), the next household survey should have been in 2015/16. 

As expected, slowing economic growth has negative ramifications for poverty reduction and unemployment. With lower growth, the pace of poverty reduction has also slowed and 27% of the population (10.1 million) were categorised as poor in 2016/17 compared to 19.7% in 2012/13 (6.6 million). Additionally, while Uganda remains within the 2015 Millennium Development Goal target of halving the 1990 poverty rate (56%), in absolute numbers, there are approximately 700,000 more poor people in 2016/17 when compared to 1990 poor people.

Again while 1 in 4 Ugandans is poor, the level of inequality has decreased suggesting that the non-poor particularly the small middle-income class endured the fast reduction in their incomes than the poor. And yes the middle-income class is small – for example an average NSSF member (now estimated at 1.4 million) earns a gross salary of UGX 850,000. This is consistent with a survey that found that persons with an education of a degree or more earned a monthly median income of UGX 780,000.

The survey further reveals that the average monthly wage of an employee was UGX 168,000. A median rural wage employee who earns UGX 120,000 monthly is essentially poor (earns less than 135,000 which is equal to USD 1.25 times 30days times 3600 exchange rate). Juxtaposing the average wage increment since 2012/13 and inflation suggests that real wages have reduced.

The struggles of the non-poor are in part exacerbated by the level of dependency. One way to look at it is that nearly 1 in 4 Ugandans are employed implying the 3 depend on the 1 employed. This weight of dependency is discounted in the conventional definition of age dependency which is defined as the ratio of the dependent population (0 to 13 and 65+ years) to the proportion of the economically productive population (15 to 64 years).

The working-age population (15 to 64 years) is now at 51% (19 million), meaning the age dependency ratio of 97 and declining from 107 in 2012/13. The age dependency was 103 in 2014/15 according to the 2014 Uganda National Household Census.

Additionally, 21.2% of the population (4 million) of work-age population are not working and therefore the working population, defined as persons of any sex and age who produce goods or provide services for use by others or for own use, is estimated at 15.1 million. Labour force which includes the employed and unemployed persons is estimated at 10 million, out of which the total population in employment was estimated at 9.07 million.

This means 918,000 were unemployed – translating into a 9.2% unemployment rate. This also discounts the unemployment magnitude since only 60% of the working are employed. The remaining 40% ( the difference between the working and labour force) are simply doing voluntary work.   This added to the unemployment of 918,000 would defacto mean approximately 7 million are not employed. 21% of the population are considered youth (between 18 and 30 years) and the respective youth unemployment stands at 13%.

If the government was to offer poverty transfer payments or safety nets, it would need to spend UGX 79,300 per month (minimum consumption per adult equivalent) on each of the 10.1m poor people. This translates into UGX 800,930,000,000 per month and UGX 9.6 trillion per annum (about 40% of the budget or 70% of domestic revenue).

This would be seemingly unaffordable. To address the poverty and employment challenges, targeting the basic factors of production remains critical. Land is the primary factor of production and requires institutional reforms to backstop the needed structural reforms. The recent poverty surge is attributed to climatic and drought conditions that affected the agriculture sector over this period.

There were more frequent droughts - 2009/10, 2011/12 and 2016/17.  Agriculture remains the largest employer of the labour force, with the highest potential to reduce the number of poor people; hence addressing the entire value chain linked with agro-processing industrialisation is Omni-warranted.

Revamping growth to its historical averages is not only essential for middle-income status attainment but necessary for poverty reduction and employment creation. The Uganda Growth Forum held on the 14th and 15th September 2017 underscored areas necessary for growth recovery including an improvement in public investment management.

 

Dr Enock Nyorekwa Twinoburyo is an Economist.