Wage and Productivity Gaps: Evidence from Ghana

August 1999 - This paper studies labor market outcomes in Ghana. The analysis focuses on the formal manufacturing wage sector and, more specifically, on the determinants of wages and productivity for various groups of workers. It tests hypotheses that relate to the impacts of individual and enterprise characteristics on wages. Furthermore, it compares the marginal impact of each of these characteristics on wages with their respective impact on labor productivity. The results may indicate whether, for example, there exists a spot labor market, discrimination, and/or structural differences among sectors and groups of workers. The paper analyzes whether experience, training, and education impact wages and productivity. In recent years, analysts have paid a lot of attention to the impacts of education and labor force training. The rationale for investing in human capital is that a more skilled and educated labor force is more productive than a less educated one. Therefore, policymakers emphasize investment in human capital because they believe that, in general, it increases labor productivity. However, there is not have much evidence of this relationship in the Africa region.11 Glewwe (1996) finds that there is no return to human capital in Ghana. This paper aims partially at filling this void by presenting evidence on the direct impact of education, training, and experience on productivity for different groups of workers using econometric regression analyses. It looks at whether Ghanaian labor markets are characterized by gender discrimination. It analyzes whether the labor markets are competitive. And it looks at whether union membership, manufacturing sector, and firm location affect labor market outcomes. This paper-a product of Human Development 3, Africa Technical Families-is part of a larger effort in the region to understand how labor markets work in Africa. The author may be contacted at dverner@worldbank.org