THE IMPACT OF UNEMPLOYMENT ON ECONOMIC GROWTH IN NIGERIA (1982-2010)

CHAPTER ONE

THE IMPACT OF UNEMPLOYMENT ON ECONOMIC GROWTH IN NIGERIA

1.1 Introduction

Unemployment is defined as an economic condition marked by the fact that individuals actively seeking jobs remain unhired. Unemployment is expressed as a percentage of the total available work force. It is seen as a macroeconomic and sociological problem which arises as a result of insufficient and non-availability of jobs to correspond with the growing population. Even those who are employed, sometimes live with the fear of retrenchment. The term unemployment could be used in relation to all the factors of production. But in reference to labour, there is unemployment if it is not possible to find jobs for all those who are eligible and able to work. Labour is said to be underemployed, if it is working below capacity or not utilized in production employment can either be ‘voluntary’ or ‘involuntary’.

Voluntary unemployment is a situation where somebody chooses not to work because they have means of support other than employment e.g. idle rich man. Voluntary unemployment is attributed to the individuals decision; it includes workers who reject low wage jobs, whereas2

involuntary unemployment exist because of socio-economic environment (including market structures, government intervention and the level of aggregate demand) in which individuals operate, involuntary unemployment include workers who are fired due to an economic crises, industrial decline, company bankruptcy or organization restructuring unemployment is seen as a worldwide economic problem and has been categorized as one of the serious impediments to social progress. Unemployment is a very serious issue in Africa (VandeMoortele, 1991 and Rama, 1998) and particularly in Nigeria (Oladeji, 1994, Umo, 1996). The need to avert the negative effects of unemployment has made the tacking of unemployment problem to feature very prominently in the development objective of many developing countries.

In the study of unemployment in Africa, Okonkwo (2005) identified three causes of unemployment; the educational system, the choice of technology which can be either be labour intensive or capital intensive and inadequate attention to agriculture. The use of machines to replace work done by labour and computerization has contributed to these social problem. Moreso, lack of enough education and skills to have access to credit and capital.

3One peculiar feature of the unemployment problem in Nigeria is that it was more endemic in the early 1980s than any other period. It becomes an acute problem in Nigeria, immediately after independence. The major factor contributing to low standard of living in underdeveloped countries is their relative inadequate on advanced nations. Unemployment rate is given by the proportion of the labour force that is employed divided by the total number of the labour force. The total labour force was projected at 61,249,485 in 2007 indicating an increase of 3.9%. total employment in 2007 stood at 52,326,923 compared with 50,886,836 in 2006. This represents an annual increase of 2.8%. The labour force consists of the number of the people aged 18 and more, who are employed (i.e. those who do not have jobs but are actively looking, for work). Individuals who do not fall into either of these groups such as retired people and discouraged workers are not included in the calculation of labour force.

The International Labour Organization (I.L.O) defines unemployment as the proportion of the labour force which was available for work but did not work for at least one hour in the week preceding the survey period. National Bureau of Statistics (NBS) Nigeria defines unemployment as the proportion of the labour force that is available for work but did not work

4for at least 37hours in the week preceding the survey period. Unemployment, according to Lipsey (1963:456) brings out economic waste and cause human suffering.

Unemployment is as a result of the inability to develop and utilize the nation’s manpower sources effectively, especially in the rural sector says Dayomi, 1992; Osinubi, 2006. The socio-economic effect of unemployment include fall in national output, increase rural-urban migration, waste of human resources, high rate of dependency ratio, poverty depression, frustration, all sorts of immoral acts and criminal behavior like robbery, prostitution, etc. The socio-effect of unemployment brings to limelight the need to proffer possible solutions to salvage our nation Nigeria. In Nigeria, the ability and willingness to work is not sufficient. It is necessary for the employed, to be registered with an employment, bureau in order to be recognized as unemployed. The unregistered unemployment are part of the labour force and are therefore technically unemployed. Unemployment data are obtained in Nigeria through labour force sample survey.

The International Labour Organization (I.L.O), realize the short-comings of the labour survey as it effects developing economies such a Nigeria, with a large informal sector, has encouraged a review of the

5methodology to incorporate further disaggregation of respondents’ responses to bring out the true rate of unemployment. In order to establish the type of unemployment existing in an economy, economists have classified unemployment as ‘frictional, seasonal, structural or cyclical unemployment’. Frictional unemployment is when people are temporarily out of work because they are changing jobs. This is unavoidable in an economy in which both the labour force and the jobs on offer are continually changing. Seasonal unemployment is said to occur in a situation in which people are laid off seasonally, due to the nature of the jobs they do, e.g. agriculture, workers in developing countries may be laid off during the growing season. Structural unemployment is the unemployment that exist when an economy is in more declining industries is falling. It is as a result of movement in the natural employment rate itself, which can result from changes in labour market institutions, demographic shift, etc, this situation is brought about by economic variables, such a the level of aggregate demand and the actual or expected real wage rate. Cyclical unemployment is as a result of fluctuations around the natural employment, which can be attributed to changes in aggregate demand.

6The main cause of unemployment in Nigeria is the outburst of population growth in the country compared to technological growth and development in the country. The economic growth in Nigeria has been stunted by the years of corruption, civil war, military rule and mismanagement. It is suggested that the main reason there is such an extent of unemployment in Nigeria is the under utilization of the resources available. Nigeria has a number of abundance of diverse human and natural resources but the inefficient utilization of these resources in order to gain the maximum economic benefits has led to the vast amount of unemployed citizens. This unemployment has affected the country of Nigeria and its economic climate in a number of ways. Economic: The reduction in employment has left citizens without purchasing power. This means that there is less of a demand for product and services and in turn, the production and economic growth has been hindered. Social: Within the social effect of unemployment in Nigeria is an increase in the rate of crime. Recent graduates have accounted for some of the largest percentages of unemployed people who have turned to a life in crime. Many believe that economic growth is not

7going to be the solution for the unemployment in Nigeria. Unemployment should be addressed by providing the necessary training for people to gain the right skill for work. Also, the concept of having a prosperous life is something that should be worked towards and seen as a positive thing. Experts have recommended a number of ways that Nigerians can try to decrease the rate of unemployment.

Lack of information also causes unemployment which is a source of unemployment that cannot be overlooked. If people don’t know that Jobs are there, then they will not take them, the obvious solution for this problem is to be able make information available to the people who need it.