Human Capital, Underemployment, and Economic Growth in Sub-Saharan Africa

Abstract

Sub-Saharan Africa is facing a problem of underemployment of human capital. Its underemployment rate is over 21% and exceeds 40% in some countries. This article analyzes the role of underemployment in the relationship between human capital and economic growth in 30 Sub-Saharan Africa countries, from 2008 to 2019. We use the double least squares method, the triple least squares method, and the seemingly unrelated regression equation method applied on panel data. The results indicate that the positive effect of human capital on economic growth diminishes as the level of underemployment increases. Nevertheless, innovation moderates the link between underemployment and economic growth. The findings also reveal that economic growth in Sub-Saharan Africa countries depends significantly on their political and economic institutions. Indeed, better governance and timely investments in health (maternal and child health, immunization and nutrition) and education (free school meals, school fee exemptions) would enable Sub-Saharan Africa countries to enhance human development, which is a source of long-term economic growth. Reducing youth underemployment must be the biggest challenge in Sub-Saharan Africa countries. Sub-Saharan Africa countries’ educational systems should ensure basic skills or the specific ones that match the demands of the labor market.