Chapter 4 summary: A pro-employment macroeconomic policy framework for Africa (provisional title). Authors: Bernd Mueller, Gilad Isaacs, Ilan Strauss

Summary of the Chapter 4 of the Global Employment Policy Review (Second edition).

Creating decent employment opportunities in developing economies is commonly (mis)conceived as only being a challenge of increasing economic growth and fixed capital investment. However, despite African countries seeing relatively strong economic growth after 2002, the improvement in employment outcomes has been less robust, and has worsened over the last decade. One of the main identified causes for this disconnect between growth and productive employment is a lack of structural transformation, i.e. the current economic structures being mostly characterised by low levels of economic diversification and high levels of commodity dependence. The COVID-19 pandemic has further weakened employment outcomes across the continent, with devastating impacts on African economies. Despite expectations that economies will rebound soon, the adverse effects of COVID-19 will reverse hard-won gains on the continent, particularly in employment.

Effective employment generation, spurred by structural and social transformation, necessitates that macroeconomic policy widens its focus from its traditionally stabilising role to a “transformative” role actively targeting decent and productive employment, inclusivity, and sustainability. Macroeconomic policy must directly aim to achieve this, in a mutually supportive relationship with labour market and sectoral policy instruments. This chapter presents such a framework. It argues that the existing market-centric macroeconomic policy regimes – focused on “stabilisation” policies – have failed, and will continue to fail, at employment generation. It demonstrates this insufficiency through unpacking existing macroeconomic policies in Africa, and the concomitant employment outcomes. It then continues to present an alternative pro-employment macroeconomic policy framework, grounded on four foundational postulates. First, achieving decent and productive employment growth requires coordination of, and integration across, macroeconomic, sectoral and labour market policies under a shared integrated employment policy framework. Second, within this, macroeconomic policy – a specific focus of this chapter - has a leading role to play. Third, and consequently, macroeconomic policy should aim to stimulate employment through both demand- and supply-side measures in the short and long run. Fourth, macroeconomic policy must directly target these employment objectives while supporting the sectoral and labour market policies that seek the same outcome.

Only through such a transformative, pro-employment macroeconomic policy framework will African countries be able to achieve sustained structural transformation and productive and decent employment for African women and men, and youth in particular.