Jobs do not come from skills alone

What firms in sub-Saharan Africa reveal about the real drivers of sustainable employment.

Jobs are scarce across sub-Saharan Africa, and employment programming is rightly attracting renewed urgency and investment. Across this programming, employment creation is still often framed as a skills challenge, even in MSD programmes. The logic is straightforward: if young people had the right skills, firms would hire more.

But experience from programmes in diverse contexts suggests that this is only part of the story: weak labour demand, limited understanding of productivity and unclear firm level incentives often matter more than skills alone. Defaulting to skills interventions too often means training people for jobs that don’t exist or can’t last.

Weak firm demand, not weak skills

Across programmes I worked on, skills were rarely the systemic constraint to job creation. Weak firm demand was. Many markets were characterised by limited competition, high barriers to entry and poor access to markets, finance and other critical functions. In such environments, firms had little incentive to grow, innovate or hire, regardless of how capable the labour force might be.

Training more young people into stagnant or weakly competitive markets did not create jobs. It oversupplied labour in systems where demand remained constrained. If firms are not growing, why would jobs?

This points to a shift in emphasis. Rather than focusing primarily on preparing workers, programmes need to engage more directly with the factors that shape firm behaviour. This includes technology, cost structures and productivity. Without addressing these constraints, skills development alone will continue to deliver limited results.

Technology as a driver of competitiveness and jobs

Technology is often seen as a threat to employment, but what firms adopting new technologies often experience tells a more nuanced story. Investments in mechanisation and automation systems frequently reduce costs, improve quality and enable access to new markets.

Where these gains strengthen a firm’s competitiveness, they often support expansion. Jobs may change or shift, but overall employment can increase as firms grow. The key question is not whether technology destroys jobs, but under what conditions it enables firms to expand and create more sustainable employment.

From this perspective, supporting firm productivity and competitiveness, including through technology adoption, can be central to job creation.

The hidden cost of labour

A persistent challenge is that many firms do not fully understand the true cost of labour. Wages are only one component. Training, supervision, transport, benefits and operational inefficiencies significantly increase the real cost of employing staff.

This becomes particularly important in job creation models such as agent networks across sectors like agriculture, financial services and consumer goods. These roles are often promoted as viable employment pathways, but their economics are not always tested in practice.

In Mozambique, for example, an input agent earning about US$80 equivalent appeared viable. The role generated about US$120 in revenue. However, once full costs were included, total expenses reached about US$150. From a programme perspective, this counted as job creation. From the firm’s perspective, it was operating at a loss and unsustainable.

This highlights a critical gap. Jobs that look viable on paper may not hold under real business conditions. Unless roles generate value that exceeds their full cost they are unlikely to endure. Programmes need to test the economics of jobs more rigorously before scaling them.

Productivity as the missing anchor

Underlying many of these challenges is weak understanding of productivity. Firms often struggle to define what output they should expect from a given role, making it difficult to set wages, design incentives or assess performance.

Consider a 90-horsepower tractor. In Uganda, depending on skill levels and conditions, it might plough anywhere between two and 18 acres per day. Without a clear benchmark it becomes difficult to determine what constitutes fair pay or efficient performance. This is significant for both tractor owners and operators. Low productivity reduces revenue, raises operating costs and slows returns on investment for owners. For operators, unclear benchmarks create disputes over pay and performance. Over time, this uncertainty weakens the commercial viability of mechanisation services and undermines trust across the market.

More broadly, such uncertainty makes investment and hiring riskier. Without confidence in productivity, firms are less likely to invest in labour. Better understanding of productivity can therefore play a critical role in enabling firms to grow and hire more sustainably.

Jobs exist because they serve the business

A consistent lesson across contexts is simple: firms create jobs when those jobs strengthen the business. They do not hire because a programme encourages them to do so.

Roles that reduce costs, improve efficiency, or unlock new revenue streams are sustained. Those that do not tend to disappear once subsidies end. If there is no clear business case grounded in productivity and value, short-lived jobs should not come as a surprise.

Bringing the system back into view

Firm behaviour is shaped by the broader market system. Barriers to entry, limited competition and unequal access to finance and information influence how firms operate and whether they choose to grow.

In many settings, these factors encourage firms to remain small, informal or low productivity, limiting their demand for labour. Sustainable employment therefore depends not only on firm-level decisions, but also on the conditions that shape markets more broadly.

Addressing these systemic constraints can help create an environment where firm growth, and therefore job creation, becomes a rational and viable strategy.

Implications for MSD4E

These insights suggest a need to rethink how employment programmes are designed. Three questions are critical:

1. How well do programme staff understand the incentives and calculations that shape firms’ hiring decisions, including the true cost, risk and expected return of labour; and how is this shaping intervention design?
   
2. What would it look like to place productivity and profitability at the centre of employment interventions, and how might this change which job creation models are supported or scaled?
   
3. When jobs do not make economic sense for firms, what choices are programmes willing to make, and how should these trade-offs be navigated? These questions are timely as donors and implementers convene at the June 2026 DCED Global Seminar in Nairobi, where labour demand and system design remain central.

Too often, labour demand is assumed rather than properly analysed. As a result, programmes continue to invest in training without understanding whether firms actually need labour or are willing and able to hire people in the first place.

If sustainable employment is the goal, interventions need to go beyond skills development. They must engage directly with the drivers of firm growth, competitiveness and demand for labour.

Jobs do not emerge simply because people are trained. They emerge when hiring makes sense for firms.

A special thanks to Rachel Shah for her support in writing this blog.