Economic exclusion and working poverty: the case of the informal sector workers in the MIDA intervention zone in Ghana

Abstract

There is a growing concern over working poverty, especially in nations where inequality remains very high. While scholars in the advanced economies attribute working poverty mainly to economic exclusion, there appears to be limited literature on the issue, particularly for the informal sector of the developing economies. However, surveys (various issues of GLSS) on the Ghanaian economy have identified some informal sector worker as poor. Using the data of Ghana Living Standard Survey Five Plus (GLSS 5+), both OLS and probit models were employed in estimating the incidence of working poverty in the MiDA intervention area of Ghana. Factors such as high dependency ratio, labour inefficiency and underemployment by classification of hours worked came out strongly as supporting 'working poverty'. The results seem to confirm the outcome of several studies in the developed economies that have identified factors of economic exclusion such as labour inefficiency and underemployment as the main causes of 'working poverty'. This means that poverty among informal sector workers in Ghana should not be solely attributed to joblessness. A comprehensive poverty reduction strategy is therefore needed to tone down underemployment while improving labour efficiency of the informal sector workers to ensure higher labour returns.