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Monday, 25 June 2012

How do we create youth employment?

Some interesting observations from Murray Sanderson on what is needed to solve the problem of youth unemployment. The approach can perhaps be summarised as one focused on removing "regulatory constraints" e.g minimum wage, pension contribution requirements. Not in a blanket way but specifically for those employing young people  to "enable youngsters to get a foot in the employer’s door, and then to receive on-the-job training and experience". The big question of course is the extent to which such constraints are currently the "binding" ones - its an empirical question, something not addressed in the article - but one certainly hopes someone in the Ministry of Labour knows the answer. 

There is general agreement that Zambia suffers from a crisis of unemployment, and that to create enough jobs we need massive economic development.

But that is a long and difficult journey, and jobs are needed now. Zambia has countless thousands of unemployed people looking for jobs.

In particular, youngsters leaving school or college face a hopeless situation. Must they wait patiently for economic development? Is there no other way forward?

I believe there is, and that it stares us in the face, if only we open our eyes.In Zambia today there are no ‘EMPLOYEES WANTED’ signs.

However, there are, all around us, great numbers of employment opportunities.

But we actually prevent people from taking advantage of them.

Let me explain. Economists point out that supply and demand depend upon price.

This applies to all commodities and services. Zambians whose memories go back to the 1980s will recall that price controls on consumer goods, then called ‘essential commodities’, boosted demand, but greatly reduced supply. Shops became surrounded by long queues.

Ordinary people often had to wait for hours, and even then failed to obtain their needs.

Instead of making supplies more readily available, price controls had the opposite effect.

Well-intended controls caused much hardship.

A similar situation now applies to jobs. Laws which raise wages through setting minimum levels increase the demand for jobs, while reducing their supply.

This frustrates the wishes of would-be buyers and would-be-sellers, and it causes unnecessary unemployment.

To appreciate this, one has only to think of what would happen if the currently low wages of most domestic servants were greatly increased by law.

Many would lose their jobs, and few new jobs would be created.

That example suggests that the removal of legal minimum wage legislation would make many more jobs available.

But its removal would look heartless, and it would spark strong opposition.

This would come especially from the labour movement; for it is the task – indeed the duty – of trade unions to demand better wages and conditions for their members. But trade unions naturally have no interest in non-members, who include the unemployed and recent graduates from school or college.

Young people especially face great difficulty in finding jobs.

They are ‘unknowns’. They have little or no training in skills required by employers, and of course no track record, let alone testimonials from past employers. Their ability, industry and reliability are all unknown.

So potential employers are reluctant to take them on, especially at a starting wage set by law.

If, however, such young people were exempted – at least for a period – from minimum wage requirements, that would enable them to get a foot in the door.

How could this be arranged? Simply by permitting youngsters to enter employment, perhaps on an officially registered two year contract, at whatever wage was agreed between them and a potential employer.

This would enable youngsters to get a foot in the employer’s door, and then to receive on-the-job training and experience.

It would give them a chance to demonstrate aptitude, industry and reliability, and so to establish a track-record. Then, at the end of the contract period, it could well be attractive to the employer to take them on permanently at, or even above, the minimum wage.

Another possibility which deserves serious consideration is to reintroduce the apprenticeship system.

This was abolished in the Kaunda era as ‘colonial’. However, on-the-job training can be of great value, and it is appropriate to pay low rates to trainees.

It will, of course, be objected that any waiving of minimum wage requirements would open the door to the denial of decent wages, and even to outright exploitation.

Such objections are natural, but they are not realistic in a situation of mass unemployment.

Desperate job seekers regard persistent unemployment as less ‘decent’ than even the lowest wages.

Similarly with exploitation: most unemployed people would regard it as better to be exploited than to remain unexploited! We should leave the choice to them.

The minimum wage is, of course, not the only law which discourages employment.

A serious discouragement to recruiting permanent employees is the legal requirement for the employer to pay retiring employees 3 months pay for every year of service.

This entitlement can become disastrous to businesses which are not financially robust, and it remains a serious discouragement to recruiting permanent staff.

This provision was in fact made unnecessary by the establishment of NAPSA.

It should now be removed, while making appropriate provision for currently entitled employees, together perhaps with a general increase in the level of NAPSA contributions.

Another major factor which reduces job availability is the strict legal requirements of the Zambia Revenue Authority, NAPSA and the Workers Compensation Fund, which can result in heavy penalties .

Complex regulations may be appropriate for large and medium scale businesses; but they present an unsupportable burden to small enterprises which lack the supervisory staff to implement them.

This is important, because the establishment and the subsequent growth of small enterprises have tremendous potential for employment creation.

Provision should therefore be made to exempt business enterprises below a certain size from these onerous requirements.

I conclude by returning to the plight of our young people, especially school leavers, and to the need to exempt them from minimum wage requirements, at least for an initial period.

This would provide them with the opportunity to get a foot in the employment door, and it would, I believe, ‘create’ hundreds of thousands of jobs.


  1. well i wish to disagree here. removing the minimum wage and encouraging "casualization" in this way is very risky. employers may take advantage and hire on new youths after every contract ends....., especially for jobs that do not require technical expertise. this is very possible because currently 66% of zambia's population consists of people aged below 25 years old. a lasting solution to this problem of unemployment is for us as a country to use our natural resources to work for us! we need a mindset change from looking for employment to employimg ourselves. the first and easiest place we can start from is sgriculture. we have enough land and a ready market (all our neighbouring countries), there is also an opportunity to invest in bio i suggest that we stop looking at solutions that will only create further problems for us, but instead focus on how we can attain a lasting solution to this, while eradicating poverty and encouraging economic growth!!! one wonders how that can be achieved if we get our very valuable human capital into meaningless jobs, earning below the minimum wage and hence wasting such useful resource!!! God Forbid!

    1. Publisher dont make t difficult to put up identities.
      Back to business.
      Natty gud points. wat have u done abt agric or natural resources yoself? As we wait for yo brilliant ideas, what will happen from now till then? More graduates on the streets will add to the number we are already deeply alarmed. Beta smethng for now as we wait for that. Let them get smethng now n look for beta as they go on. PlZ be realistic.

  2. Murray Sanderson has had years to build up a resume of reliable and accurate advice.

    The last time I remember blogging with him, he was basically told me how dare I point out that the mining companies are at least as corrupt as the politicians who take their bribes. He went all Muzungu on me, and how dare I bring up the fact that he screwed up.

    Remember how he said that it was good for Zambia if we just abided by the corrupt development agreements, because it would be good for Zambia's reputation for abiding by the 'rule of law'?

    He never explained how it helps the rule of law to stand by corrupt agreements that steal the people's resources left and right.

    Now he wants Zambians to work for nothing by lowering their wages:

    A similar situation now applies to jobs. Laws which raise wages through setting minimum levels increase the demand for jobs, while reducing their supply.

    Actually raising wages increases jobs, because they increase demand for goods and services.

    Supply Side Economics are failing all over the world, and have failed throughout history. Supply Side Economics were at the basis of the Roaring Twenties, the Great Crash and the Great Depression. (I suggest reading up on economic history, rather than regurtitating third grade economic theory. Prof. Ha-Joon Chang would be a good place to start.)

    Zambians whose memories go back to the 1980s will recall that price controls on consumer goods, then called ‘essential commodities’, boosted demand, but greatly reduced supply. Shops became surrounded by long queues.

    Logical fallacy #1 - a) there were price controls and b) there were queues, therefore c) price controls created queues.

    Fact: the Zambian economy and people came under economic sanctions from the IMF and World Bank, to put pressure on President Kaunda, to give up the mines in privatisation, through the introduction of multi party elections. This is not unique to Zambia, in fact former World Bank chief economist Joseph Stiglitz called the riots that occur when the IMF starts messing with budgetary support the "IMF Riots".

    So, before giving anyone advice, Murray Sanderson needs to a) get his facts right, b) learn from his mistakes and c) adopt a less highhanded tone and one more in keeping with his advisory trackrecord.


  3. MrK All over the world the approach Mr Sanderson is suggestng is being tried to address youth unemployment for it is a huge global problem now (probably a demographic more than anything. Young people everywhere are working for nothing or next to nothing to get experience and earn their stripes - it is not ideal and it is exploitative but it is worth a try to get people going rather than resting on ideology which is gaining nothing - building job capacity in the economy will take time. By the way the queues started long before the IMF and World Bank were pushing for privatisation of the mines - they started in the late 1970s, I was there - and they were there because of KK's mismanagement in large part - the IMF and World Bank intervention fiasco came later. Are you sure Mr Sanderson went "Muzungu" on you, whatever that means (that all white pople think the same and it is always the opposite of what ALL black people think??) or are you being racist? Maybe Mr Sanderson is not highhanded, maybe it is a cultural difference in how he communicates and use language? I do not think we Zambians need poeple like you who bring up skin colour when you do not like somebody else opinion.

  4. MrK All over the world the approach Mr Sanderson is suggestng is being tried to address youth unemployment for it is a huge global problem now (probably a demographic more than anything. Young people everywhere are working for nothing or next to nothing

    No they don't. Even in the USA young people must earn a minimum wage.

    to get experience and earn their stripes - it is not ideal and it is exploitative but it is worth a try

    It was tried during colonialism, and was called 'forced labour'. People were forced to earn taxes, and were then made to work off their debt.

    to get people going rather than resting on ideology which is gaining nothing

    And what 'ideology' would that be? The 'people should get paid for their work' ideology? Because for the last 20 years of MMD rule, Zambia has certainly tried the 'free market' neoliberal ideology, including ever lower wages through casualisation and minimal enforcement of labour laws, and look at what it has brought. The Zambian people and economy are missing out on the biggest bull market in copper in our lifetimes because of mine privatisation.

    That is the result of your 'let's see what the markets can do' ideology. Result: two lost decades, and a lost generation.

    - building job capacity in the economy will take time.

    You have no proof that neoliberal economics works and only proof that it fails. Free labour, tha has been tried before, and it did not build 'job capacity'.

  5. they started in the late 1970s, I was there - and they were there because of KK's mismanagement in large part

    That's your opinion. I remember that there was a massive oil crisis after the end of the Vietnam War. Clearly that also influenced copper prices and production costs, along with the global economic recession that went with it.

    Also remember that when the mines were sold, copper prices were consistently around $2,000 per tonne, and the government kept them open. However, today you have lying mine owners claiming that $8000 per tonne isn't high enough for them to even start paying taxes. And Murray Sanderson is right up there supporting them - as he always is. Does he work for the mines?

    - the IMF and World Bank intervention fiasco came later. Are you sure Mr Sanderson went "Muzungu" on you, whatever that means (that all white pople think the same and it is always the opposite of what ALL black people think??) or are you being racist?

    I refuse to get shushsed when I am right and I have been proven to be right. You decide what that is. Not that I give a damn, but I don't take nonsense from anyone.

  6. Here are the words of President Kaunda, on what happened:

    (The Post) Zambia’s IMF break: Lessons for Latin America
    By Dr Kenneth D. Kaunda
    Posted by Editor on May 21, 2007

    While as our intentions were genuine and straight forward, and the results of what we planned to do and, indeed began to do, were showing some truly wonderful results, we were affected by the negative reaction from IMF, World Bank, and some donor governments.

    Economic sanctions were imposed on our government. Assistance was withheld. We were isolated. Africa and debtor governments did not come to us in support. However, at that time, we registered a record- high economic growth. But the various measures against us weakened the economy. Eventually, we had little choice but to go back onto an IMF and World Bank programme.

    And so it goes with every country that tries to develop outside of the dogmas of the New World Economy. So much for 'Mismanagement By Kaunda'. You may have lived through that period, but that doesn't mean that you automatically also know what happened behind the scenes, including at the IMF and World Bank.

    The same thing happened with President Bingu was Mutharika, whose FISP helped turn around Malawi agriculture and maize production.

    (NYT) How Malawi fed its own people
    Friday, 20 April 2012 00:00
    by Jeffrey D Sachs

    However, this didn't last long and after the death of Bingu wa Mutharika, Joyce Banda is busy trying to turn back any divergence from IMF/World Bank dogma:

    (NYASATIMES) Implementing the national austerity drive in Malawi

    Again, supply side economics or neoliberal economics have been tried again and again, and it needs armtwisting by the IMF for government leaders to implement them, because no one in their right mind would think that this is how you develop an economy.

    Tried. Failed. Next.

  7. MrK you are an angry man! With a rather large chip on your shoulder. I know several young people in South Africa, Canada, Zambia, Europe who are working as "volunteers" to gain experience as so many jobs require previous experience which they need to get soemwhere - and they get paid no wages/salary but some get travel or lunch allowances. It is not colonialism, it is not forced labour and whilst it is not part of any ideaology, I agree it may be a result of bad ideology - but the fact remains that this is how it works for some who have decided it is better to "volunteer" and get experience and make connections than stay at home getting nothing. As volunteers, they are not subject to minimum wages. Mr Sanderson is not suggesting this - he is actually suggesting paid work so hardly colonial slavery or forced labour.
    As for ZCCM, it was costing the country hudnreds of millions a year in losses at the end, money which we had to borrow. So at what cost were the mines kept open? What about the msimanagement and lack of investment and plunder at ZCCM over the decades? And we cannot compare the selling price of copper then to now unless we compare costs as well so that is a not an argument worth making about $2,000 and $8,000 per tonne.
    And you still have not explained what you mean by "went all Muzungu one me" - this is not an attempt to silence you but rather a concern that you are letting your prejudice cloud your judgment which would be sad....

  8. Anonymous,

    You have not addressed any of the issues I have raised, including pressure from the IMF and World Bank to adopt disastrous policies over the last 20 plus years. You have not shown a single example of a country that developed through free trade. And you have not addressed the fact that Murray Sanderson was advocating for the corrupt development agreements under the guise of 'respecting the rule of law'. Justifying stealing under the disguise of 'morality' is dispicable.

    So, stop the psychlogizing, because I don't need it, and I doubt you are a licensed psychiatrist. Address the issues raised.

    And remember, I have been blogging for 5 years now, so I have a good database to check any claims against.

    My blog is at

  9. Angry?

    I have no patience with dishonest debaters. First Murray Sanderson was advocating for his colleagues at the mines keep all of the value of OUR natural resources. Now he is advocating for the return to unpaid labour, because clearly casualisation did not drive down wages enough to 'ensure full employment'. Because obviously, we could only have more jobs if we abuse labour more.

    And remember, filling positions with unpaid youths also drives down wages for older workers, because at any time an employer can turn to anyone asking for a raise and say - I can hire a youth to do your job for free. SOS.

    These people have an agenda, and it is to return to colonialism, nothing less.

    Of course Murray Sanderson will NEVER advocate that the mines will take a haircut and start paying the taxes they are due. Or pay the taxes they owe from previous years. Or pay upto 50% of their real profits in taxes. No, it is 'better' to have youths work for nothing. Better for whom?

    Money from the mines will make money available to local entrepreneurs, so that they can actually hire people *AND PAY THEM* because they're making profits.

    So the solution to unemployment in Zambia is no mystery to anyone, and all these supply side tricks are there just to impoverish the people more. What good is a job that does not pay your bills??? Murray Sanderson is suggesting that youths work for food and shelter. Sound familiar? In a different place and time, that would have been called slavery.

    You bet I'm 'angry'.

    Oh, and how do we create youth employment?

    1) You collect $1.5 billion a year from the mines.
    2) You lower the liquidity gap from a 2% savings rate and a 20% plus lending rate.
    3) You create low interest loans for entrepreneurs.
    4) You start protecting local producers through import substitution.
    5) You raise people's incomes to create local demand for goods and services - local demand for local products is best, because it has the greatest multiplier effect on the Zambian economy.

    Once people can afford to buy what they or their neighbors produce, and you have yourself a highly sustainable economy. Henry Ford was famous for this, in that he paid his car workers such high wages, that they could afford to buy his own cars.

    In short, you RAISE people's incomes, you don't lower them.

  10. Mr K. You cannot assume that all debaters who disagree with you are "dishonest" and it is lazy intellectualism to lose patience with those who do not endorse your views. I have not addressed the World Bank and IMF policies or development through free trade or the morlaity of the rule of law in respect of mining development agreements because I was addressing my mind to Mr Sanderson's proposal on youth employment and your attempt to discredit his proposal by discrediting him - something you have failed to answer by not clarifying what you mean by "went all Muzungu on me". Attempting to discredit the proposer rather than logically taking apart his arguments is lazy. To add racial prejudice in your attemtpt to discredit Mr Sanderson is unpalatable at best.

  11. For the record, I agree the IMF and World Bank and the whole donor machinery are not helpful to Zambia or the developing world - but I argue that it is up to Zambia to stop blaming others, take responsibility and begin to determine our own destiny. By all means understand the causes of our problems and the role of the less-than-pure-hearted West but also accept we have been part of the problem in taking on ideology yet being schizophrenic and haphazard in the application of it, never mind the corruption(and yes others may be part of corruption but do not deny we are part of it otherwise you are arguing we have no internal morality which is condescending).
    We need to strengthen our bargaining position with the donor machinery and the external world and for that we need relevant and useful education (not just degree titles after names, but the real application of knowledge and skills). We need to come up with our own approaches or principles - I am not a great one for ideologies (that is so western) because history teaches us that they constrain us and blind so it is best to look at what one wants and then look at how one can get there. So free market neoliberalism is not for me either although there are elements that are useful. I am a socialist at heart but I do not think the average Zambian upper- and middle-class or even upper working class are at all socialist since they all want to avoid their taxes, but a BMW as soon as possible rather than invest in education of their children, build a big house, buy expensive electronic gadgets and fly to South Africa or London to do their shopping and then point the finger at somebody else for the plight of Zambia.

  12. The development agreements were not good - because we failed to negotiate them properly and so were taken advantage of and because some Zambian individuals benefitted corruptly from them. The rule of law is important but I agree that we do not need to obey immoral laws necessarily but we must choose our battles and how to fight them - and since we were part of the development agreements we must accept our part in the immorality of them. So for example we could have re-negotiated the agreements and opened them up to public scrutiny but we did not even approach the mining companies to do this and that is the problem - we just drove a tank through them when we could have had an indaba instead.
    I agree we need more money from the mines - all the mines, not just the bigger "foreign" mines so we need the manganese miners and gemstone miners to pay up as well. We need to get credit flowing at affordable rates - but we also need proper business management including a huge shift from the culture of raping income before you have set up sustainable profitability so that loans are paid back and bills are paid on time (the failure of businesses to pay on time has a huge impact on the cost of business in Zambia). And credit institutions need to shift from property-secured lending to properly assessed risk assessment based on business plans and real entrepreneurship -this will lead to employment and better wages. Import substitution, like resource nationalisation - been there done that got the T-shirt.
    Back to youth employment - whilst Mr Sanderson's suggestion is not the cure-all, it is one possible plank in the short-term if properly legislated for, it is a pragmatic approach not an ideological one and it is working for some elsewhere so why not give it a try - it is better than youths sitting doing nothing. As for the apprenticeship idea, that is a scheme that has worked well in Germany which happens to have a rather good manufacturing sector and apprentices do get paid but also get taught valuable skills which they go on to use to earn more and even set up their own businesses in some cases. As for argument that allowing youths to work on less secure conditions than permanent employees will push down wages and endanger older employee's jobs, look at the reality - older employees have greater experience and skill and employers are always willing to pay for that as the cost of using inexperienced youths does not make business sense.To assume businesses just want two sets of hands without any mental capacity is ludicrous - the mental capacity is what counts at the end of the day. Which brings me to my biggest topic - EDUCATION. We need to address education if we want to change anything - our primary schools are pathetic and our secondary education is not good, and our nutritional needs have to be addressed to ensure every child develops to their full potential.


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