Authors: OECD and ILO
Type of publication: Report
Date of publication: 2018
Immigrants’ contribution to Ghana’s economy: Overview and policy implications
Immigration’s economic contribution to Ghana
The findings of the report suggest that immigrant workers contribute to the Ghanaian economy in several ways. The contribution of the foreign-born employed to GDP in 2010 (1.5%) was just below the commensurate share in employment (1.6%). The low proportion of foreign-born workers in overall employment indicates the limited effects on national labour markets.
Much foreign-born employment seems in accordance with the demand for labour; however, some negative employment effects for native-born workers are evident, in particular for women. Native-born wage levels are not affected at the national or the sub-national level. The net fiscal contribution of immigrants exceeded the contribution of the native-born in the two years in which this was analysed.
Economic growth has been strong, but inequality remains a concern
The economic context in Ghana has become more favourable in recent decades. Ghana’s economy contracted in the early 1980s, which prompted the adoption of an Economic Reform Program (ERP) in 1983. Following a difficult decade, economic growth rates gradually improved, and in the past 25 years Ghana has become a strong economic performer.
GDP per capita doubled from USD 1 920 in 1990 to USD 3 950 in 2015, surpassing income per capita in neighbouring countries. Important strides have also been made towards achieving the Millennium Development Goals. However, the economic situation in more recent years, in particular the lack of improvement in living standards and increasing inequality, has been generating tensions.
The net fiscal contribution of immigrants exceeded the contribution of the native-born in the two years in which this was analysed
Foreign-born workers are often well-integrated, but women face challenges
The review of the labour market indicators in this report demonstrates the differences and similarities in the labour market positions of immigrants and native-born workers. Although foreign-born workers are generally well integrated in terms of both the quantity and the quality of employment, important differences in employment and unemployment outcomes for female immigrants remain.
Female foreign-born workers face a double disadvantage: employment rates are lower for women than for men, and the female foreign-born employment rate is lower than the rate for Ghanaian-born women. Whereas official unemployment rates for native-born and immigrant men were close to 5% in 2010, immigrant women faced an unemployment rate of 8.2% compared with 5.8% for native-born women. Foreign-born employment has increased rapidly in Ghana since 2000, but the numbers remain small in comparison to the native-born.
The quality of employment, as measured by the share of workers in non-vulnerable employment, is relatively high for foreign-born workers. They are also relatively strongly represented in service sectors of the economy. Overall, and despite the strong presence of migrants in service sectors such as retail and trade but also mining and financial services, the sectoral employment distributions are fairly equal. Immigration has been stimulated by Ghana’s economic performance and also seems to be driven by employment opportunities.
The quality of employment, as measured by the share of workers in non-vulnerable employment, is relatively high for foreign-born workers
For example, foreign born workers are overrepresented in occupations with relatively high rates of growth, such as technicians and elementary occupations, while several of the slow-growing groups have relatively low proportions of foreign-born workers. Although occupational change is to an important extent driven by prime-age and older workers, new immigrant workers are more sensitive to occupational growth than new entrants into the labour market.
Immigrants’ contribution to public finance in Ghana
Increased international importance of migration has brought specific attention to questions concerning the fiscal contribution of immigrants. While foreign-born populations in many countries pay taxes and receive benefits, immigrants may not be eligible or have access to public services or benefits due to their legal status, their employment situation, or even due to discrimination. Perceptions often exist that immigrants generate higher public expenditures than they pay in taxes, but empirical evidence on the impact of migration on fiscal balances is not available outside high-income countries.
Fiscal revenue and expenditures in Ghana
In 2006, Ghana faced a primary budget deficit of 4.1% of GDP, which was a reversal of the surplus that existed in 2005. Over the following eight years, Ghana saw fluctuations in its growth rates, yet sustained a primary budget deficit throughout the period. In 2013, a 7.3% real growth rate was recorded, together with a primary budget deficit of 10.8%.
Thus, overall, a deterioration of the total fiscal budget is witnessed from 2006 to 2013. Over the period from 2006 to 2013 a steady increase in both expenditure and domestic revenue as a percentage of GDP can be observed, although expenditure grew faster. Taxes have continued to be the main source of government revenue, and tax revenues accounted for 74.6% of total government revenue in 2013.
Direct taxes include taxes on the income and property of individuals and businesses, while indirect taxes are those levied on goods and services consumed within the country (value-added tax, international trade taxes, and petroleum and excise duties). Taken together, government tax revenue as a share of total revenue rose by 1.8 percentage points from 2006 to 2013.
Total government expenditure witnessed an increase from 2006 largely due to the goal of expanding economic growth through various initiatives including the absorption of basic school fees, the implementation of the National Health Insurance Scheme (NHIS) and the Livelihood Empowerment Against Poverty (LEAP) as well as infrastructural advancements. Recurrent expenditure is the largest component of total government expenditures, especially those made on non-interest items including personal emoluments, social contributions, use of goods and services as well as government subsidies.
Taxes have continued to be the main source of government revenue, and tax revenues accounted for 74.6% of total government revenue in 2013
In 2013, non-interest expenditure amounted to around 46.0% of total government expenditure, followed by domestically-financed capital expenditure (27.1%). The latter saw a large increase from its level in 2006 partly due to the discovery of oil as well as infrastructural improvements. As expenditure exceeds revenue for both years, the per-capita net fiscal contribution across the entire (both foreign- and native-born) population is negative. This does not necessarily apply to immigrants as their share in the total population is relatively small and as their tax payment and benefit usage patterns may vary from the native-born population.
How immigrants affect labour markets in Ghana
Employment rates for Ghanaian workers have increased over time
The employment rate of native-born workers has increased over time for workers across all levels of experience with less than a completed primary level of education, achieving its highest level in 2013. The same conclusion can be drawn for the employment rate of native-born workers that have a completed primary or completed secondary education level.
The sole difference is that the increase was not gradual but rather fluctuated, which is especially pronounced for those with a completed primary education. Additionally, on average, a decline in employment rate is observed across all education groups at the edges of the experience range – there are relatively fewer employed Ghanaian-born workers with few or many years of working experience compared to workers in the middle of the range.
The effect is most evident with native-born workers that have attained a higher level of education. This may be because workers early in their careers are more likely to be cyclically unemployed as they look for the right job or continue their education, while more experienced workers may start retiring, in some cases before they leave the working-age population (particularly at higher levels of education).
The migrant share of the working-age population strongly suggests that Ghana has received higher proportions of higher educated immigrants over the past years
Immigrant workers in Ghana are to a large extent highly educated
Over time, the share of immigrants with less than primary education has dropped across all levels of experience, while those with completed primary and secondary education have roughly remained the same. In 2006, persons with less than primary education and 6 to 10 years of working experience represented about 4.6% of the immigrant population. In 2013, this share declined to 2.2%.
On average, the decline across all years of experience amounted to 1.6 percentage points of which the largest could be witnessed for individuals with 36 to 40 years of experience (4 percentage points). For primary and secondary educational levels, the differences between the years 2006 and 2013 were smaller with a respective average decrease of 0.07 and 0.38 percentage points across all levels of experience.
Concerning individuals with higher education in 2013, a gradient rise in the share can be seen for individuals under 15 years of experience, after which a gradient decline is witnessed for those with 21 to 35 years of experience. The migrant share of the working-age population strongly suggests that Ghana has received higher proportions of higher educated immigrants over the past years. This is particularly the case in 2013, in which the share of foreign-born in the working-age population is relatively low among those with secondary education or less than compared to those with higher education.
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