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The Growth
Of Nigerian Economy And Unemployment
CHAPTER ONE
1.1 THE BACKGROUND OF STUDY
Unemployment
has been one of the most persistent and un-manageable 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.
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 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.
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.
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
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 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
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).
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
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
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 unemployme 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
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 d 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
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 solving unemployment 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:
i. To determine the
relationship between unemployment and economic growth in Nigeria.
ii. To determine the short-run
impact of unemployment on output level in the Nigerian economy.
1.4 STATEMENT OF THE HYPOTHESIS
i. HO: Unemployment has no
significant impact on economic growth in Nigeria.
ii. HI: Unemployment has a
significant impact on economic growth in Nigeria.
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