2101. Are Wages and Productivity in Zimbabwe Affected by Human Capital Investment and International Trade?

Dorte Verner
(April 1999)

Education, training, and increased openness to international markets appear to improve wages and productivity, but Zimbabwe's labor market is segmented, rather than competitive. Workers with similar skills in different sectors do not earn equal wages.

To analyze what determines wages and productivity in Zimbabwe, Verner analyzes an employer/employee dataset from Zimbabwe's manufacturing sector. Verner finds that:

• Formal education, training, and experience positively affect wages and productivity positively.
• Women are paid roughly 37 percent less than men although they are not measurably less productive.
• There is no strong indication of ethnic discrimination among employees, but Europeans are being paid more in larger firms, although they are marginally less productive than workers of African origin.
• The wage premium for workers who completed secondary school does not necessarily reflect greater productivity but may indicate a shortage of educated workers.
• Workers trained in-house earn more although in-house training does not instantly affect productivity. Training by outside trainers does improve productivity but is not rewarded with higher wages.
• Apprentices are paid more than non-apprentices. Perhaps an apprentice diploma serves as a screening device, when hiring.
• Temporary workers are more productive than permanent workers, perhaps hoping to get a permanent contract.
• Union members earn less than non-union members despite being more productive. Perhaps union members fight more to have skills upgraded than for wage increases.
• Larger exporting firms are marginally less productive and pay marginally less than the average firm, but are more productive than smaller firms (and their wages match productivity). Workers in larger woods and metals firms are paid less than workers in smaller firms, although they are not less productive.
• Exporting firms benefit more than employees do from trade openness and greater productivity.
• Foreign-owned firms are more productive than other firms (perhaps because of new technology).
• Firms that employ more expatriates tend to pay more. The more expatriates there are in metals firms, the more productive the employees are, perhaps because the expatriates bring knowledge about new technology to the enterprise.
• Employees in the metal and textile sectors are paid more than those in the food sector, but employees in metals are less productive than employees from other sectors.

This paper—a product of Human Development 3, Africa Technical Families—is part of a larger effort in the region to understand how labor markets work in Africa. Copies of the paper are available free from the World Bank, 1818 H Street NW, Washington, DC 20433. Please contact Hazel Vargas, room I8-138, telephone 202-473-7871, fax 202-522-2119, Internet address hvargas@worldbank.org. The author may be contacted at dverner@worldbank.org. (49 pages)

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