Ghana’s informal sector, which employs nearly 80% of the workforce, contributes only 27% of the country’s Gross Domestic Product (GDP), revealing a significant productivity gap. This was highlighted in the first edition of the National Report on Productivity, Employment, and Growth, released by the Ghana Statistical Service (GSS).
The findings raise concerns about the long-term sustainability of the country’s economic structure, as a majority of workers remain engaged in low-productivity jobs with limited income growth.
The report warns that while the informal sector provides employment opportunities for millions of Ghanaians, it is burdened with inefficiencies such as low productivity, widespread underemployment, and stagnant wages. These challenges have created a situation where economic growth does not translate into improved living standards for the majority of workers. The imbalance between the size of the workforce in the informal sector and its relatively small contribution to GDP underscores the urgent need for structural reforms to boost productivity.
Labour productivity in Ghana has grown at an average rate of 3.2% per year between 1991 and 2019, with the most significant gains occurring in capital-intensive industries such as mining and finance. While these sectors have recorded impressive productivity improvements, their contributions to employment generation remain minimal. The report indicates that manufacturing, a sector crucial for industrialization, recorded a 14% increase in productivity between 2013 and 2022. However, job creation in the sector grew by only 2.5% over the same period, illustrating the slow pace of industrial expansion.
Similarly, the mining sector experienced high productivity growth but created few employment opportunities. This trend highlights Ghana’s dependence on resource-intensive industries that do not generate enough jobs to absorb the country’s growing workforce. As a result, many workers remain trapped in low-wage, low-productivity employment, with limited opportunities for advancement.
The report also sheds light on a widening gap between productivity and wages. While sectors such as finance, insurance, and professional services have seen notable wage increases, industries like household agriculture, trade, and repair services continue to experience slow or stagnant wage growth, despite some productivity improvements. This disparity indicates that workers in high-productivity industries tend to benefit more from economic growth, while those in lower-tier sectors struggle to see meaningful financial gains.
A sectoral breakdown of Ghana’s labour market shows that commercial agriculture, transportation, utilities, and manufacturing are among the industries that contribute to both job creation and productivity growth. However, the report notes that the pace of economic transformation remains slow. Many workers are moving from traditional occupations into urban service jobs with low productivity, limiting the overall benefits of economic growth. Without significant improvements in the structure of employment, Ghana risks remaining trapped in a cycle of slow economic expansion, where the bulk of the workforce remains in low-income jobs.
To address these challenges, the report calls for increased investment in industrialization, the expansion of commercial agriculture, and policies aimed at integrating informal businesses into the formal economy. The transformation of Ghana’s economic structure requires strategic reforms that encourage the transition of workers from low-productivity jobs to higher-value industries. Enhancing productivity across all sectors, particularly in labour-intensive industries, will be essential to achieving sustainable economic growth and reducing income inequality.
The report emphasizes the importance of technology adoption and workforce upskilling to boost productivity. Investing in digital transformation, automation, and modern production techniques can help businesses improve efficiency and competitiveness. Additionally, equipping workers with the necessary skills to thrive in an evolving economy will be critical to closing the productivity gap between different sectors.
Targeted fiscal policies, including incentives for businesses to expand operations and hire more workers, are also recommended. By creating a business-friendly environment that supports entrepreneurship and innovation, Ghana can drive job creation in key industries. Addressing the structural challenges of the informal sector will require a coordinated effort from both the government and the private sector to implement policies that promote sustainable employment opportunities.
Ghana is at a critical economic turning point, where strategic interventions are needed to drive long-term growth. Analysts warn that without bold policy reforms, the country risks deepening income inequality, slowing productivity growth, and failing to create sustainable jobs for its workforce. While the informal sector remains an essential part of Ghana’s economy, ensuring that it becomes more productive will be key to improving overall economic performance.
As the government seeks to implement policies that promote industrialization and economic diversification, it must prioritize initiatives that create a more balanced and inclusive labour market. Strengthening education and vocational training programs, enhancing access to financial resources for small businesses, and modernizing infrastructure will play a crucial role in shaping Ghana’s economic future.
The findings of the GSS report serve as a wake-up call for policymakers, businesses, and other stakeholders to take decisive action in addressing the country’s productivity challenges. By fostering an environment that supports innovation, investment, and job creation, Ghana can unlock its full economic potential and ensure that growth benefits all segments of society.
