Are There Any Reliable Data on Wages in Low-Income Countries? Observations and Lessons from Ethiopia

Administrative data from tax returns have recently become available in many African countries thanks to the modernisation of revenue authorities and the digitisation of tax records. The availability of these data has opened new opportunities for policy-relevant analysis of real-life taxpaying behaviour. However, despite the increased availability of these data, a gap remains in many countries in relation to administrative records on employment incomes. Without these records, it is very difficult to obtain a realistic picture of income distribution and its evolution, and to understand how policies and macroeconomic conditions, such as high inflation, affect the welfare of workers. In this study, we explore the current state of administrative wage data in Ethiopia and the main challenges that limit their availability and reliability, and identify three key patterns. First, the administration of employment income taxes and social security still relies heavily on hard copy records. Second, in some cases the hard copy records are summary data at an institution rather than individual level. Third, although there are various initiatives to organise individual-level digital wage data, the digital datasets stored in the various institutions (however incomplete) do not communicate with each other. This is because the datasets do not use a similar identifier for individuals due to the fact that a strikingly large proportion of employees do not have a taxpayer identification number (TIN).