Interest in economic transformation ultimately stems from its potential to improve people’s lives. Human well-being is a broad and complex topic involving many factors, including per capita incomes; employment; poverty; inequality in income and wealth; access to affordable health care, education, and other social services; equal economic opportunities for all; gender equality; justice; peace; security; the environment; and so on. If GDP per capita is rising, and remunerative employment opportunities are expanding, economic transformation will result in shared prosperity, and income inequality will be reduced or at least controlled. The United Nations Development Programme’s Human Development Index tracks human well-being using a broad range of variables. Here, we confine ourselves to variables closely related to economic transformation.
GDP per capita and the share of formal employment in the labor force are summary indicators of human economic well-being associated with economic transformation. High rates of economic growth (given the rate of population growth) lead to higher levels of GDP per capita. A high GDP per capita indicates that the economy could in principle support each citizen at a high income.11 Whether the income is widely shared, however, depends on the nature of economic growth and factor payments, the underlying distribution of assets and political power, and the social policies of the country. But a high rate of well remunerated employment is the most effective way for a high GDP per capita to translate into improvement in people’s lives. If opportunities for well remunerated employment (in jobs or self-employment) are expanding with rising GDP per capita, economic growth will be inclusive, prosperity will be widely shared, and poverty and inequality will be reduced.
Ranking African Countries on Human Economic Well-Being
The human well-being index comprises GDP per capita and the share of formal employment in the labor force. Mauritius, Botswana, South Africa, and Gabon stand out mainly because of their high GDP per capita. Although Gabon has the highest per capita GDP, it is number 4 on the index due to its low share of formal employment in the labor force. Although Botswana’s GDP per capita is higher than Mauritius’s, it is second to Mauritius on human well-being, again because of its low share of formal employment. The biggest improvements were for Uganda and Tanzania. Although Ghana revalued its GDP upward by 60% in 2006, it moved up only one place on the index between 2000 and 2010 partly because of its large informal sector, which by one estimate contributes nearly 86% of total employment in 2010. The steepest falls were for Madagascar, Gabon, Mozambique, and Ethiopia.