declines and school participation increases with higher levels of household welfare. The high cost of schooling - both official and unofficial fees - pushes children into labor market to enable them to afford school or pulls them away from school as they can not afford it. The quality of education and its relevance to labor market needs to be given priority in future education reform to ensure that parents send their children to school. The current rates of child labor and non-school attendance are not conducive to meet Ghana's growth challenge for the twenty-first century.

# 6. **Rural-Urban Earnings Difference**

The subject of the last two sections was the nature and determination of labor earnings in the formal sector of Ghana's labor market. We now turn to the important topic of differences in the levels of earnings between the rural and urban labor markets. In the discussions of African labor markets this topic has been given the pride of places. The alleged bias towards the urban economy and the maintenance of labor earnings in the urban sector at a relatively high level have been singled out as one of the chief distortions in the functioning of labor markets in Africa-causing welfare loss both in terms of equity and efficiency (see, for example the long discussion of the literature in Jamal and Weeks).

# **6.1 The Pre-Crisis Economy**

Unlike East Africa, Ghana was not distinguished by a spectacular rural-urban difference in income or labor earnings before the economy began its long slide downwards. An early report comes from Knight (1972) who presented data from a national sample survey of household expenditure survey conducted in different regions of Ghana in 1961-2. Some selected data from this source are given in Table 4.1. It is seen that consumption per household was highest in Accra-about a third higher than the hinterland rural areas. The rural-urban difference was somewhat lower when we look at smaller towns in the individual administrative regions and compare them with their rural hinterlands, and non-existent in the Volta and Western regions. The average size of households was lower in towns partly because of the greater proportion of singlemember households in town. Thus the level of urban consumption per capita exceeded the rural level by as much as one half. Part of this difference was, of course, accounted for the difference in the cost-of-living between town and country. Knight made an attempt to estimate the latter using the data from the sample survey, and estimated that the urban price level was 112 per cent of the rural price level using rural weights, and 104 per cent using urban weights (Knight, Table 4, p.209). Thus both the extent of the nominal income difference in favor of the urban sector, and of the cost-of-living difference were quite small in Ghana compared to what was prevalent in other parts of Africa. In Kenya, for example, the urban-rural differential was as high as 3:1, or even 4:1, and the cost-of-living was estimated to have been 60 per cent higher (Mazumdar 1993). There were two reasons for this difference. First, although we have mentioned that single member households were more important in the urban economy of Ghana, the 36