The labour heterogeneity argument c

The labour heterogeneity argument claims that differences in human capital and other worker characteristics explain income differentials. The segmentation argument shifts the focus to the product markets with a shortage of good jobs, and rationing of these jobs. It is important to ascertain which of these two explanations is relatively more
important in Africa, although of course both likely have some validity. If higher wages depend
on raising human capital then the focus of poverty-reduction strategies on education and health
in Africa is appropriate. If, however, low demand for labour originates in the product market,
improved educational attainments and health outcomes may not be sufficient to boost formal
employment, and the focus instead should be on the business climate.