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THE GROWTH OF NIGERIAN ECONOMY AND UNEMPLOYMENT

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Abstract

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1.1   THE BACKGROUND OF STUDY

Unemployment has been one of the most persistent and unmanageable problems facing all industrial countries of the world. It has been noted as a macroeconomic and social problem.

In October 1982, the 13th International Conference of Labour Statisticians adopted a new resolution concerning the statistics of the economically active employment and unemployment, they defined unemployment as persons above a specified age who during the reference  period  were  without  work  including  the  unemployed graduates, school leavers, home makers and other persons mainly those engaged in non-economic activities who are at the same time seeking for work and are available for work.

The term unemployment could be used in relation to all the factors  of  production  with  reference  to  labour.  Unemployment produces both economic and non-economic costs. This cost differs from individuals and societies.

 

 

 

 

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For individuals most economic cost of unemployment is loss of income that the persons would have received if employed. For the societies it is the goods and services that would have been produced by the unemployed.

Non-economic cost is found among unemployed persons who experience anxiety, depression and loss of self esteem. A rise in unemployment rate is associated with high incidence of alcoholism and drug abuse as well as increase in crime and suicide rate, high rate of family divorce and incidence of child abuse.

The basic economic cost of unemployment is foregone output when the economy fails to create enough jobs for all who are able and willing to work; potential production of goods and services is greatly lost thus unemployment is a waste of manpower.

Economic growth leads to a lower unemployment rate; Okun’s law indicates that every 1% point by which the actual unemployment rate exceed the natural rate a negative GDP gap of about 2% decline in real GDP below its productivity GDP occurs.

According to Briggs  (1973) unemployment is the difference

between the amount of labour employed at current wage rate and

working conditions, and the amount of labour hired at these levels.

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However, Gbosi  (1997)  defined unemployment  as a situation in

which people who are willing to work at the prevailing wage rate are

unable to find jobs. Unemployment is as a result of the inability to

develop  and  utilize  the  nations  manpower  resources  effectively

especially in the rural sector (Fadayami, 1992; Osimubi, 2006).

In another view of Jimaza  (2001) defined it as a situation whereby one has no job and is prepared to take a job at the ongoing wage rate but such job is nowhere to be found.

A rise or fall in wage rate depends on the level or variation in

the  unemployment  rate,  the  amount  of  unemployment  in  an

economy is measured by unemployment rate which is the percentage

of civilian labour force consist of people between 18years of age or

older who are unemployed or employed. People not included in the

labour force are college students who do not have job and are

looking  for  jobs;  it  is  possible  that  an  increase  in  current

unemployment   rate   alters   the   long-run   equilibrium   of

unemployment rate for instance certain unemployed persons may be

excluded from the labour market because their productivity is too

low to make it profitable to hire them even at a much lower wage

rate than the current one.

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The controversy over the problem of unemployment revolves around the distinction between voluntary, involuntary, visible and disguised unemployment.

However,  voluntary  unemployment  is  said  to  occur  when persons choose not to work or accept job for which they are qualified at ongoing wage rate because they have means of support other than employment   for   instance   affluent   individuals.   Involuntary unemployment is when persons cannot obtain work even if they are willing to accept low real wages than qualified workers who are currently in employment (Arthur, 1968). Visible unemployment exist when persons is without work but are seeking at a given wage rate. Disguised unemployment exist when persons are without work but not openly seeking for work, who will seek for work at ongoing wage rate if unemployment were much lower.

Despite the contention in the above classification the taxonomy of unemployment includes a condition of being out of work, an activity of searching for work, an attitude of desiring a job under certain situation and needing a job (Levine, 1959).

Unfortunately, there had been little or no economic growth and

development  in  Nigeria  over  the  period  depicted  by  rising

 

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unemployment;   the   need   to   avert   the   negative   effects   of unemployment has made the budget on unemployment problems to feature very prominently in the development objectives of many developing countries like Nigeria.

Englama (2001), “a person is said to be unemployed when he

or she is able and willing to work and is available for work (that is,

the person is actively searching for employment) but does not have

work.

The  international  labour  organization        (ILO)  defines  the

unemployed as numbers of the economically active population who

are without work but available for and seeking for work including

people who have lost their jobs and those who have voluntarily left

work.There are three ways to become unemployed, some people are

sacked, others are temporarily laid off and some people voluntarily

quit their existing jobs. But the inflow to unemployment can also

come from people not previously in the labour force, school-leavers

(new entrants), and people who once have a job then ceased even to

register as unemployed, and are now coming back into the labour

force in search of a job (re-entrant) (Beggs, 2000). On the other hand

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there is a situation in which a worker is employed, but not in the desired capacity where in terms of compensation hours, it is called a situation of under employment.

According to NBS, unemployment covers persons age 15 to 64 who during the reference period were currently available for work, seeking for work but were without work, person is unemployed if he or she is engaged in the production of goods and services thereby contributing to the GDP. Unemployment rate rose to 23.90% in the 2011 statistic on unemployment.

According  to  Lipsey     (1963),  unemployment  brings  about

economic waste and causes human suffering. The contributions and attitude of this economic waste were emphasized by the fact that the factor services are the least durable economic commodity.

The socio-economic effect of unemployment include fall in

national  output,  an  increase  in  rural-urban  migration,  waste  of

human resources, high rate of dependency ratio, frustration, poverty

and depression, all sort of in moral activities like criminal behaviour,

prostitution, armed robbery, and rapping. (Adebayo, 1999).

 

 

 

 

 

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According to Beggs (2000), unemployment can be generally broken down into several types that are related to different causes including:

Classical unemployment occurs where wages are too high to

employers due to the main wage laws or trade unions activity.

Frictional unemployment exist where there is lack of adjustment

between demand and supply of labour; lack of  necessary skills,

labour immobility, breakdown of plants and machinery, and shortage

of raw material; temporary unemployment arising from the normal

job search process, it includes people re-entering into the job market

after their long absence people who have quit their jobs in search for

better ones; people who have been laid off. Structural unemployment

arises when jobs are eliminated by changes in the structure of the

economy due to technological progress and shift in the demand for

goods and services for instance becoming increasingly computerized

some workers are losing their job at the same time new jobs such as

a  computer  repairs,  technicians  and  software  engineers  are

employed. Seasonal unemployment results from seasonal fluctuation

in demand for instance the employment for ice-cream factories is

only for the summer; they remain unemployed during the winter; the

 

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agricultural  workers  who  are  employed  during  harvesting  and sowing season remain idle for the rest of the year.

Again, inadequate information causes unemployment and this is a source of unemployment that cannot be neglected; if people do not know that jobs are available they will not take them. The major economic  shocks  such  as  the  problem  of  great  depression, unemployment,  and  under-employment  can  be  avoided  through policy changes; government will stabilize the economy and maintain continuous economic growth.

 

 

 

1.2   STATEMENT OF THE PROBLEM

The  problem  of  unemployment  has  occupied  the  mind  of

scholars, economists, policy makers and international organizations

for many years with an increased tension in the last decade. Even

though there are different perspectives to unemployment, there is a

general consensus that reduction in unemployment will lead to good

economic growth and development that will lead to good change

manifested in increased capacity of people to have control over

 

 

 

 

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material assets, and obtain physical necessities of life such as food, clothing and shelter.

According  to  John  Maynard  Keynes  the  progressive adjustment  of  wage  involves  a  negative  relationship  between nominal wage changes and unemployment rate known as Philip’s curve (1958). The simplest interpretation of this curve is to consider that unemployment exerts downward pressure on nominal wage when there are few unemployed; workers are in a position to obtain higher  unemployment  because  competition  among  employers  to attract workers is intensified by low unemployment.

Following  the  oil  doom  in  the  economy  in  the  1980,  the

problem of unemployment started to escalate with the introduction

of monetary exchange rates and the inability of most industries to

import the raw materials required to improve their output level.In the depression phase demand for goods and services is the

minimum, construction of all types of capital goods is at stand still;

there  is  massive  unemployment  and  the  economic  growth  and

development of the country suffer. Also the generous unemployment

benefit may hinder individuals to look for a job in order to gain

access  to  unemployment  benefits.  Rapid  population  growth

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accompanied by un-precedented inflow of rural migrants generate massive urban problem of rural unemployment. The main aim of government  is  to  attain  full  employment  level  but  it  failed  to materialize.

In  Lewis  model  rural  to  urban  migration  is  one  of  the

demographic  characteristic  of  developing  countries  and  the

mechanism theory which revealed that labour transfers physically

from agriculture to city based industrial employment thus enhancing

the expansion of the modern sector and integration  of the two

sectors of the dual economy; inward migration to urban area will

continue as long as the expected value of earnings of the urban wage

exceeds the rural wages. Many people especially those living in rural

areas were frustrated by lack of job opportunities, also they include

those without work and who have job but want to work for longer

hour. A very little attention has been paid to self employment scheme

in Nigeria not until in the 1980’s during the period of great recession;

they adopted the structural adjustment programme (SAP).To provide a permanent solution to this problem arouse a

universal conviction that unemployment is inevitable and it created

pessimism that government has no power to bring unemployment

 

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trend to a halt; it is not only a  severe problem but also has a disquieting effect on the economic, political and society as a whole.

According   to   Damachi (2001)   the   task   of   solvingunemployment  problem  is  anchored  on  better  utilization  of

manpower through policies that  promote economic  growth. The

manpower   board   and   national   directorate   of   employment

established by the government have not reduced unemployment.

 

 

 

 

1.3   OBJECTIVE OF THE STUDY

 

The objectives of this study are as follows:

 

1. To determine the relationship between unemployment and

 

economic growth in Nigeria.

 

1. To determine  the  short-run  impact  of  unemployment  on

 

output level in the Nigerian economy.

 

 

 

1.4   STATEMENT OF THE HYPOTHESIS

 

1. HO: Unemployment has no significant impact on economic

 

growth in Nigeria.

 

 

 

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1. HI: Unemployment  has a  significant  impact  on  economic

 

growth in Nigeria.

 

 

 

1.5   SIGNIFICANCE OF THE STUDY

Unemployment causes misery, social unrest and hopelessness for the unemployed. In Nigeria, the existence of high unemployment is a source of concern to policy makers as well as the general citizenry, because employment provisions can be used to check the performance of the economy.

If unemployment is left unchecked, it will go along way

hindering any economic development plans of the country. It is on

this note that unemployment in Nigeria with its resulted effect has

been treated in this study. This work will be of valuable help to policy

makers.The  policy  makers  use  different  strategies  to  prevent

unemployment  in  Nigeria,  they  include  changing  the  pattern  of

production in order to create employment through entrepreneur

innovation known as Youth Enterprise With Innovation (YOUWIN)

programmes;  emphasis  should  be  placed  on  the  production  of

essential goods which use the labour intensive techniques.

 

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The study will help each leader to have bold initiative and

quickly tackle the terrible economic crisis by making wise economic

policy and encourage large scale borrowing for public expenditures.It  helps  the  leaders  to  realize  that  rapid  full  employment

desired by every country can only be possible if it was combined

with wage and price controls, so as to recognize the nation’s social,

political, cultural and educational life in commensuration with the

national socialist principles. Through this findings and subsequent

recommendations of this study, unemployment will be eradicated. It

will provide an insight into the relevant literature and help to lay

bare the causes and effects of unemployment in Nigeria.

It is the opinion of the researcher that the study will be of immense benefit to fellow student researcher because it will serve as a spring board especially for those who will want to research further on the subject matter in future.

It therefore shall be of usefulness to subsequent researchers as a reference material.

 

 

 

 

 

 

 

 

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1.6   SCOPE AND LIMITATIONS OF THE STUDY

This research work is restricted to Nigerian economy only; the

focus is on the growth of the Nigerian economy and unemployment.

The period covered by the research is 31 years from (1980-

2010).

There are some limitations of this work; mostly the secondary data are used in the study because of the difficulties encountered in the gathering of the primary data given the nature of the study which is the aggregate level of the economy.

The absence of information caused a lot of hindrance; some

relevant variables may not be included in the research model due to

lack of reliable data on them. This study cannot be said to have

exhausted all the relevant details on the nature of the relationship

between unemployment and economic growth as a result of the

above reasons. This work has a number of challenges which include

inadequate  finance  and  shortage  in  the  availability  of  relevant

materials.