The Malawi structural adjustment program : an investigation of its socio-economic impact on employment, rural-urban wage gap and migration

ABSTRACT Since 1981, Malawi like other developing nations had been implementing a series of economic policy interventions supported by the World Bank (WB) and the International Monetary Fund (IMF) known as Structural Adjustment Programs (SAPs). The purpose was to revive the county’s declining economy and to adjust it to attain sustainable growth (Harvard Institute for International Development 1994).. Despite these efforts, poverty in Malawi has continued to rise. Current estimates show that about 65% of the 12 million Malawians are poor (United Nations Development Program (UNDP) 2006).. There is now growing evidence to suggest that SAPs have contributed to the worsening of the economy and people’s living conditions in general within Malawi and elsewhere. Little is however documented to assess SAPs impact on employment, the rural-urban wage gap and, migration in Malawi. The present study was therefore conducted using Harris- Todaro model in attempt to fill this knowledge gap. The study’s specific objectives were the following: • To find out whether the wage gap between the rural and urban informal sectors has been increasing, decreasing or is constant. • To determine how this wage gap has affected migration between these sectors. • To advise the policy makers on how to allocate resources for development in the country targeting at poverty reduction. Time series data for the whole Malawi was obtained from the Malawi National Statistical Office (NSO) covering the period between 1964 through 1998. This was then analyzed using Microsoft Excel software. The initial plan was to run econometrics analyses using Stata program. However, because the data that came through contained limited variables and was also already aggregated, this was not possible. This study is the first of its kind since SAPs implementation in Malawi. This is because it has mainly been based on review of several literatures on SAPs in Malawi. Therefore, it still gives a valid picture about Malawi’s situation during and after the SAPs. The study results have revealed that, during the SAPs period, there has been increased employment levels in all sectors which contradict the predictions of the model used. Furthermore, the internal migration has continued to take place although at low levels. The rural-urban wage-gap again has been widening but not that the poor have been getting poorer than before; instead the rich are becoming richer at faster rate than the poor. In general, the poor are also getting rich though slowly. The above results should however be interpreted with caution because regression analysis was not done, hence making it difficult to establish the specific causality relationships between the SAPs and the variables under study. The other important point is that population change and sector compositions due to mortality, birth and migration were not controlled for in the data provided hence making the results more susceptible to a lot of influences. There were other socio-economic changes which were also taking place alongside the SAPs which would as well explain the above observations. These include among others, uplifting of rural-urban migration restriction and change of governance from autocratic rule to multiparty democracy. It is therefore recommended that a large scale study be done to help run the regression analyses in order to establish the true cause-effect relationships of the variables under investigation. This can also be done on both micro and macro level