Mounting tax burdens and Ethiopia’s worsening economic downturn are driving a wave of layoffs and job insecurity across the private sector, as highlighted at the 22nd International Ethiopian Economic Conference convened by the Ethiopian Economic Association (EEA). Business leaders and experts at the gathering warned that unless sweeping reforms and safeguards are implemented, continued staff reductions may become the norm as companies fight to remain afloat.
The conference, which focused on the theme of “minimum wage productivity” and the need for a robust legal framework for a national minimum wage, brought together government officials, academics, labor leaders, and private sector representatives to address the economic challenges affecting businesses and workers alike.
Addis Kasahun (PhD), Vice President of the EEA and managing director of Kilimanjaro Consulting, described the situation as a “struggle for survival” rather than progress. “Those of us in the private sector are not in a growth phase. We are in the survival phase,” Addis told participants. He explained that many businesses are being crippled by what he described as “heavy taxes imposed every year,” which, combined with sluggish economic activity, have forced companies to continuously downsize in order to meet their tax liabilities and stave off closure.
Addis argued that Ethiopia is currently experiencing the adverse effects of a “war economy”—referring to the residual economic instability stemming from conflict and macroeconomic shocks. “The pressure to pay these taxes is so severe that we are constantly reducing our staff in order to cover the fees,” he said.
He called for the urgent creation of a clear legal framework for implementing a national living wage. According to Addis, the 2019 Labor Act only provides a general structure for the wage board but falls short of setting a defined minimum wage for the private sector. He emphasized the need for reliable data collection, rigorous social dialogue, and strong implementation mechanisms to inform new wage policy.
Martha Kibru (PhD), another panelist, pointed out the disconnect between the country’s strong headline GDP growth—reported at over 6%—and the realities faced by the majority of Ethiopian workers. She noted the economy has not succeeded in generating enough productive jobs for the country’s rapidly expanding and youthful population. High youth and women’s unemployment rates in urban areas continue to exceed 25% in some years, she said, and inflation has eroded workers’ purchasing power, pushing many employees deeper into poverty.
“Despite rapid growth, the economy is not creating enough jobs for new people entering the labor market,” Martha explained. She further highlighted the absence of a national minimum wage, weak wage systems, and minimal job and social protection—especially in the informal sector, which employs the majority of Ethiopians.
On the government side, Tiumezgi Berhe from the Ministry of Labour and Skills said that a study on the minimum wage had been completed and a legal framework is in development for establishing a minimum wage board. To avoid unintended consequences, he recommended implementing minimum wage policies in a gradual, sector-specific manner. Tiumezgi also stressed the importance of parallel policies that encourage job creation, investment, and consideration of inflation and foreign exchange realities.
