The impact of HIV/AIDS on labor markets, productivity and welfare in Southern Africa: A critical review and analysis

Abstract

Global estimates of the human immunodeficiency virus (HIV) epidemic as of 2007 shows that about 33 million people are living with HIV, the virus that causes acquired immune deficiency syndrome (AIDS). The international labor organization (ILO) estimates that at least 23 million workers in the prime labor force (aged15 to 49 years) are infected with HIV. More than 70% of the world’s HIV/AIDS infected population lives in Africa. Within the Africa region, the Southern Africa region has the largest HIV prevalence rate. It is estimated that more than 30% of total world HIV population lives in Southern Africa. In this paper, we analyze the extent to which the HIV/AIDS pandemic impacts the labor markets, productivity and welfare in Southern Africa. We hypothesize that the pandemic can reduce the labor force and productivity, consequently leading to the deterioration in welfare and stagnation of the economy. The analysis finds out that a significant proportion of the labor force has been lost to HIV. In addition to the loss of workers due to AIDS, the cost of caring for AIDS patients is enormous and has resulted into the erosion of productivity and profitability in both the formal and informal sectors. Due to the disproportionate HIV/AIDS prevalence rate between age groups and sex, the pandemic is changing the age and sex distribution of the labor force. The average age of the labor is declining due to the early entry by young and inexperienced people into the labor force. HIV is exerting negative impact on household welfare through the loss of income initially earned by a household member that is a victim of HIV/AIDS, and that through increased medical expenses by the household on the AIDS victim, most of the household income is spent on medication other than other household needs. Some economies in the region are already facing a reduction in economic growth due to the HIV pandemic and it is observed that if efforts to prevent its spread are not intensified, such economies would face stagnation at some point. Key words: Human immunodeficiency virus (HIV), acquired immune deficiency syndrome (AIDS), labor markets, productivity, welfare.