Earnings, savings, and job satisfaction in a labor-intensive export sector: Evidence from the cut flower industry in Ethiopia

Abstract

While labor-intensive export-oriented industries typically bring positive economic benefits to countries through employment generation, the effects of employment in these industries on various aspects of workers’ welfare are less well-studied. This paper considers the case of the cut flower industry in Ethiopia to provide such quantitative evidences. We collected workers’ primary data and conducted incentivized experiments to measure their cognitive abilities, risk preference, and other behavioral characteristics. Based on propensity-score matching and doubly robust estimations to facilitate rigorous comparisons, we find that production workers in the cut flower sector earn significantly more than similar workers in other sectors, most probably due to the flower farms’ interest to reduce costly worker turnovers. In addition, workers in the sector save more regularly than workers in other sectors who have similar characteristics, and the amount saved relative to the income level is also higher, after controlling for the frequency of wage payment and employment status. The subjective valuation of their jobs is also higher in the cut flower sector, particularly in terms of the income level, stability, and future prospect, but workers in the sector are not necessarily more satisfied with the type of work they do. Unlike other sectors where wage payment decreases with worker’s age, wage in the flower sector does not vary with age. Risk-averse individuals are more satisfied in the cut flower sector, while work experience reduces the satisfaction level on future prospect more in this sector relative to other sectors.

Keywords

  • Labor-intensive sector;
  • Wage differential;
  • Savings;
  • Job satisfaction;
  • Sub-Saharan Africa;
  • Ethiopia