Accra, March 6, 2025 – Economist and Chairman of the National Development Planning Commission (NDPC), Dr. Nii Moi Thompson, has called for urgent policy measures to formalize Ghana’s informal sector, emphasizing that improving productivity rather than taxation should be the focus.
Speaking on the Citi Breakfast Show, Dr. Thompson highlighted how Ghana’s economic transformation is hindered by the low productivity of the informal sector, which significantly affects national output.
Productivity vs. Taxation
Dr. Thompson criticized the prevailing perception that discussions on the informal sector should focus primarily on taxation, arguing that the real challenge is the low level of skills, capital, and value-added per worker in the sector.
“Every time we talk about the informal sector, the first thing that comes to mind is taxes. However, a vast majority of informal workers are below the tax threshold due to low skills and capital per worker, which results in low productivity,” he explained.
He noted that Ghana’s overall productivity level is around $5–$6 per hour worked, significantly lower than in more formalized economies. To address this, he urged policymakers to prioritize formalization strategies that enhance worker productivity, which would naturally increase tax revenues in the long term.
Education and Workforce Readiness
Dr. Thompson also highlighted Ghana’s educational gap as a major obstacle to economic growth, citing a report that shows:
- 20% of the labor force has no formal education
- 54% have only up to junior high school (JHS) education
“This means that nearly two-thirds of Ghana’s workforce is not equipped for a modern economy,” he stated, stressing the need for urgent investment in education and skills development.
A Call for Policy Action
To drive economic transformation, Dr. Thompson urged the government to implement policies that:
- Encourage formalization of informal businesses through incentives and support programs.
- Invest in skills training to enhance workforce productivity.
- Improve access to capital for small businesses.
- Shift economic discussions beyond taxation to focus on long-term structural reforms.
With Ghana’s informal sector accounting for a large share of employment, experts warn that failure to address these challenges could slow down economic growth and widen income disparities.
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