Family background, education and employment in urban Ethiopia

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Abstract
A visitor to Addis Ababa is likely to remark not merely on the variety of urban employment but also on the fact that some employments such as shoe-shining seem so slight as to hardly be employment at all. This is a commonplace for any developing country and most economists have concluded that the labour market is segmented into formal and informal sectors; earnings in different sectors differ for workers of equal productivity and that entry into formal employment is rationed. Some have gone further and suggested that the informal sector is not homogenous and that it could be divided into an intermediate sector where entry is also restricted due to limited access to capital and skills and a residual free entry sector that includes shoe-shine boys'. Associated with such diversity, is the idea of differential access to jobs and that often access depends on kinship and other networks'. More casual observation by the same visitor might lead him to conclude that in a country with a very low enrolment in primary or secondary education and formal employment confined to the public sector, stringent selection must be at work restraining both education and employment. There is no excess supply of schooling; rationing is likely both through location of schools as well as through access by family background or through selective examinations. Similarly, access to employment could be limited by family connections or by selective recruitment on the part of firms. One possibility is that education is used as a screening device by firms particularly in the formal sector so that more highly educated workers are always preferred. This must result in a mis-match between occupations and skills and in the mis-allocation of labour within the formal sector. It also has an impact on the composition of the unemployed; if, as is likely, the educated are also from better-off families it will skew the distribution of the unemployed towards the better-off, educated who can afford to wait for form
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