Skill Returns and Labor Market Mismatches - Exploring Workforce Potential in Urban Ghana and Kenya

Abstract: Ghana and Kenya have both made significant efforts to strengthen the skills profile of their young and growing workforces. Raising skill levels and matching workers correctly to jobs is believed to increase productivity and reduce unemployment. The purpose of this thesis is to explore the skills potential within the urban workforces of Ghana and Kenya using data from the Skills Towards Employment and Productivity (STEP) measurement program. In order to encircle unexploited potential, present skills and educational mismatches were mapped out and described. The profitability of skills investments was predicted by estimating the wage returns and occupational opportunities associated with each skill domain using ordinary least squares (OLS) and probability regressions. The study found that Ghana had a higher employment rate than Kenya, but a larger number of mismatched workers in terms of education. While the Ghanaian workers generally had higher education than what was required at their jobs, mismatched Kenyans generally worked below the job’s requirements. In both countries, workers reported an underutilization of cognitive and computer skills. The results also showed that schooling, computer skills and solving & learning abilities predicted higher earnings and labor market opportunities, while personality traits and cognitive skills generally were not rewarded in the labor market.