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Since the 1990s Uganda, a small, landlocked country, has experienced the initial phases of economic transformation, accompanied by important employment progress. The country has seen a significant expansion in the share of wage employment, particularly during the 2000s, with private, non-agricultural wage employment experiencing one of the fastest growth rates in Africa. Overall labour productivity has more than doubled from 1990 to 2010. This study, written in collaboration with ECDPM, aims to explain this progress.

Rural households, representing the majority of the population, are still primarily engaged in agriculture but increasingly have been able to diversify activities, access new markets and thereby increase their productivity and incomes, illustrating that economic transformation can start at the household level, with non-farm enterprises representing an intermediate step on the path to productive formal employment. While progress is partly due to a low post-conflict starting point, policies to promote macroeconomic stability have also been important, helping to increase private investment and export diversification. Public investment in health, education and entrepreneurship has also transformed the labour force, with implications for both urban and rural employment outcomes. Given the current demographic pressures from a rapidly growing, mainly young, educated and increasingly urban population, achieving broader economic development with more and better employment will require Uganda to sustain and build on its recent progress.