# **1. Introduction**

Sub-Saharan Africa is urbanizing, with profound implications for its labor markets. SubSaharan Africa’s (SSA’s) urban population, as a percentage of total population was 42 percent in 2021, following a steady upward trend since 1960 when it was only 15 percent (UN Population Division, 2018).<sup>1</sup> The urban population in SSA is expected to surpass the rural by 2036 (Lam et al. 2019). Rural to urban migration is necessarily accompanied by a shift out of agricultural work and into urban services and manufacturing jobs (De Vreyer and Roubaud 2013).<sup>2</sup> The general consensus is that urban jobs can be a source of inclusive productivity, namely better jobs for the poor or vulnerable characterized by higher earnings and well-being than in rural areas, due to the many benefits offered in urban areas.<sup>3</sup> At the same time, if not well managed, migration to urban areas can be a source of constraints – overcrowding, increased crime, weak land tenure – leading to jobs that are no more welfare improving nor more productive than the agricultural jobs that were left behind (Lall et al. 2017).

The formal private sector in Sub-Saharan Africa is unlikely to grow sufficiently fast in the short run to absorb migrants, new labor market entrants, and existing informal sector workers in urban areas. A myriad of entrenched institutional and economic factors hinders the rapid development of a jobs-intensive formal sector.<sup>4</sup> The East Asian Miracle, driven by the rapid expansion of foreign investment in manufacturing that employed masses of lowskilled people, does not seem feasible in the short term in today’s African economies. Instead, SSA will need to undertake a long-term process of institutional and economic reform to bring growth and better jobs to the region.

Instead, the informal sector – broadly defined – is the main source of jobs in urban SSA. The informal economy can be characterized as “small-scale, semi-legal, often lowproductivity, frequently family-based, perhaps pre-capitalistic enterprises” (Maloney 2004) and the jobs within.<sup>5</sup> Drawing from Bandiera et al (2022), we might define them as being less-organized and operating in low value-added sectors. De Vreyer and Roubaud (2013) use data from 2000-2001 from eight principle Sub-Saharan African cities to estimate that 70

> 1 The percentage varies widely between 14 percent in Burundi to 90 percent in Gabon.

> 2 Urban population growth in Sub-Saharan Africa can be attributed to high birth rates as well as urban to rural migration (Lam et al 2019).

> 3 The literature on the economic benefits of urban agglomerations is well established. For example, urban areas provide more access to public and private infrastructure (water, electricity, sewerage) and services (security forces, banks, schools), greater diversity in production and thus opportunities for trade, larger markets of suppliers and clients, and knowledge spillovers. However, as argued in Lall et al (2017), the economic benefits characteristic of urban zones are often absent in African cities.

> 4 See, for example, Calderon (2022), Coulibaly et al. (2022), Abreha et al. (2021).

> 5 ILO (2018) finds that 5.5% of the African labor force is classified as informal employees (not receiving legally mandated social benefits) working in formal sector firms (registered with authorities). The statistic includes data from SSA and Northern Africa and uses national data (rural and urban).

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