Drivers of Manufacturing Job Growth 63
and the concentration of market power as a potential entry deterrent reinforce each other as forces inhibiting job growth.15 In addition, incumbent firms tend to have better access to infrastructure, finance, or both, compared with many potential entrants. Furthermore, there are some indications that the observed phase of job growth might be coming to an end in Ethiopia, one such indication being that wages started rising steeply for all employers beginning in 2012. This rise probably marks a turning point at which policies aimed at promoting industrial job growth would need to include tools that help promote growth in the productivity of new and young firms in addition to tools that facilitate entry. The situation in Côte d’Ivoire is one in which manufacturing job growth can no longer be sustained at current levels without policy interventions to boost poststart-up productivity. Unlike in Ethiopia, industrial wages in Côte d’Ivoire are not rising and do not show signs of picking up. Manufacturers in Côte d’Ivoire have been hiring at declining pay rates during the observation period, and average manufacturing labor productivity has been declining even faster, which has culminated in gross profit margins per worker being close to zero. Reducing the cost of entry regulations, developing an effective competition policy, and improving access to infrastructure and finance for all categories of firms should be part of the policy toolkits that Côte d’Ivoire and Ethiopia adopt. However, it seems that neither country can sustain manufacturing job growth without the use of the second set of policies targeting growth in labor productivity in new and young establishments. These policies could take a variety of forms, such as in-school and postschool skills-development programs that help increase the supply of skills to those firms, enhance their capacity to adopt improved technology or develop or diversify into higher-value products, or improve their access to more reliable and cheaper transport and logistics systems and utilities. Although all manufacturing firms would benefit from such productivity-enhancing interventions, they would likely have the maximum impact on job growth only to the extent that they have a bearing on the rate of business start-ups and investment decisions that firms make after start-up to survive and establish themselves in specific industries.
Notes 1. Probably the best known and most recent international evidence for the absence of systematic size effects in job growth at the firm level is in Haltiwanger, Jarmin, and Miranda (2013). Using US census data, the paper shows that job growth was primarily driven by start-ups and young firms, with initial size playing no role in the process. In a related paper, Decker et al. (2014) report that business start-ups account for about 20 percent of gross job growth in the United States and that, all else given, younger firms have a higher share of aggregate job growth than older firms.
