Labor Market Regulations in Sub-Saharan Africa, With a Focus on Senegal

Disappointing job creation in Sub-Saharan Africa (SSA), despite improved economic growth, is drawing greater attention to the labor market. Recent research has highlighted the paucity of formal employment and large disparities between formal and informal sector incomes. Formal private sector wage employment has grown too slowly to offset declines in public sector employment and to keep up with labor force growth, so employment remains overwhelmingly informal, with very low wages, no benefits or job security, and hazardous working conditions. The question arises as to whether labor market regulations play a role in limiting formal sector employment creation. We combine quantitative and qualitative assessments of labor-market regulations in SSA, and compare them to countries in other regions, particularly Asia, using indicators of labor market restrictions around the world, and conducting case studies of selected countries. We carried out an in-depth study of Senegal based on interviews and original data collection, and less detailed studies of Ethiopia and Ghana in SSA and Bangladesh and China in Asia. Our main conclusion is that labor market regulations are a less important obstacle than lack of infrastructure and general weaknesses in the business climate, but do contribute to holding back formal employment growth in Senegal and other SSA countries.