CHAPTER ONE
INTRODUCTION
BACKGROUND OF THE STUDY
Unemployment is mainly viewed as socio-economic and macro-economic problem. lt occurs due to low availability of job spaces or few amounts of jobs that will cater for a growing population which in turn affects those that are unemployed and those that are employed as well. The persons that are employed live with the fear of losing their jobs as a result of retrenchment of workers or generall y speaking insufficient job securit y. The term Unemployment could be used in regards to any factors of production that has not been properly utilized for production. Though, in terms of labour, unemployment occurs when people who are capable and willing to work could not secure a job. Labour that is not full y used in production or operating below its expected capacit y is said to be underemployed. (Anyawuocha, 1993).
U nemplo yinent could be grouped as either voluntary or involuntar y. Voluntary unemployment occurs when a person who is able to work chr›nse not to seek for ernplo yrnent due to having other means of livelihr›nd. For examples, a person who inherits large amount of rnone y from someone else, or a business person that is al ready rich due to his business. As for the involuntary, it is when a person who is willing and able to work could not secure a job.
Unemployment is viewed worldwide as an economic problem, and also a barrier to social development. Other than it being a waste of manpower resources, it also promotes the loss of welfare in the form of lower output thus leading to lower standard of living and hence less income. Unemployment is a major issue in Africa (Vandemortele, 1991 and Rama 1998)
specifically in Nigeria. The importance of preventing the negative effects of unemployment makes regulating the unemployment problem very essential in most countries that are in a developing stage. In a study conducted on unemployment in Africa, Okonkwo (2005) listed the reasons why unemployment takes place. They include; system of education adopted, and the technique of technology used which could be either capital intensiv’e or labour intensive. The lack of good education and skills required for having access to credit and capital contributes to unemployment. Also, the use of mechanical equipments to do a work which is done by labour creates unemployment. The reason is, if it takes (50) people to finish a job in an hour, with the help of a machine it is possible to let 5 workers finish the same job in a lesser time, thereby, leading (45) people lose their jobs thereby lowering the standard of living.
The main factor that pulls down the standard of living in developing countries is the large amount of unemployment rate relative to the developed countries. Unemployment rate refers to the percentage of those that are unemployed in the labour force. lt is derived by dividing the number of those that are current1 y unemployed by the number of people in the labnur force of an economy. The term labnur force can be defined as the t otal number of indis’iduals that hax’e reached working age, mostly 18 years who are employed and the total number of individuals who are unemployed, but are currently seeking for jobs.
The effects of unemployment in an economy include; the decline in national output, lower standard of living, povert y, wastage of human resources, depression, and high crime rates. These effects create the need to find possible solutions to tackle the problem of unemployment in Nigeria.
In order to determine unemployment that exists in an economy, economists’ divides unemployment into four (4) categories; frictional, seasonal, structural and cyclical unemployment.
The major factor that determines unemployment in Nigeria is the population growth increase relativ’e to the stage of development and technological growth of the countr y. Voluntar y decisions could also lead to uneinplo yinent. Voluntary unemployment occurs when individuals decide not to take a job at a particular wage rate due to one reason or another, and hence remain unemployed. This problem may be solved by increase of the wage rate and individuals reducing their expectations.
In order to reduce the issue of unemployment more employment opportunities needs to be created and also training programs provided in other to give individuals needed skills.
1J STATEMENT OF THE PROBLEM
The data from international monetary fund (1MF) and that of national bureau of statistics reveals that, the rate of unemployment in 2014 was 7.8*/c while in 2015 it increased to 10.4*/c. Furthermore in 201 6 it had a higher increase t o 14.2°/c at Q4. Moreover, the data shows that the rate of unemployment in the urban and rural area was I 8.4°/c and I 2.3°/c respectively in 201 6 compared to 10.5°/c and 25.8°/c in 2015.
Due to the increasing negative effects prised by unemployment on people and country as a whole, government has been adopting various policies to help reduce and control the issue of unemployment, but the problem seems to be increasing rather than it producing positive results. Accurate policies need to be adopted in order to solve this problem of unemployment. The statement of the problem is based on the political, social as well as economic effects of unemployment.
1J RESEARCH QUESTIONS
- Does unemployment have any relationship with economic growth’?
- 1s there any causal relationship between unemployment and economic growth in Nigeria’?
1 A OBJECTIVES OF THE RESEARCH
The broad objective of the study is to examine the impact of unemployment on N igeria’s economic growth. To achieve that, the following specific objectives were pursued:
- Investigate the relationship between the economic growth and unemployment in Nigeria.
- Determine if growth in the economy has a causal relationship with unemployment in Nigeria
1J RESEARCH HYPOTHESIS
To complete these aims hypothesis are set; I . The null hypothesis (H0) is;
H»: Unemployment has no relationship with economic growth.
And the study’s alternative hypothesis (H I ) is;
Hi: U nemplo yrnent has a relationship with economic growth.
2. The null hypothesis (H0) is;
He: Economic growth has no causal relationship with unemployment. And the study’s alternative hypothesis (H 1) is;
Hi: Economic growth has a causal relationship with unemployment.
SIC.NIFICANC E OF THE STUDY
The significance of the study is to establish the impact of GDP on unemployment in Nigeria. In view of the fact that price stabilit y and full employment are two conflicting rnacro-
economic goals, the result of this study becomes an important tool in the hands of the policy makers in Nigeria in order to achieve the two goals simultaneousl y.
As living standard of a country increases, one of the important macro-economic objectives is the attainment of full employment. So, unemployment is viewed as a failure caused by the policy makers. Hence, efforts are made by the government to control the impact of unemployment in an economy.
The study of unemployment is very important to economics students, pnlicy makers and also politicians. The stud y of the unemployment rate of an economy helps in setting up policies that would help an economy reach a desired lex’el.
SCOPE AND LIMITATION OF THE STUDY
The scope of this study is focused on the relationship between unemployment and GDP in the Nigerian economy. The study adopted OLS regression which is focused on a 32 years annual time series data (1986-20 18) that are sourced from the international monetary fund (IMF) and N igeria’s central bank statistical bulletin.
1& DEFINITIONS OF TERMS
ECONOMY: This is the activities of economic components that comprises of individuals, Government, households e.t.c, which relates to consumpt ion, productions and exchange of ds and services in a particular place.
ECONOMIC C.ROWTH: This refers to the rise in Real GDP. lt is the rise in the adjusted market inflation value of goods and services produced by a country ov’er a given period of time. Real C rnss Domestic Product (CDP): This refers to the annual total adjusted inflation value of goods and services produce by an economy.
Interest Rate: lt is the rate which is charged by a creditor in percentage over the amount lent
which is paid periodically.
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Full employment: This refers to a situation where virtually people who are willing and able to work are employed.
1.9 ORGANIZATION OF THE STUDY
The study is organized in five (5) chapters. Chapter one introduced the topic by defining unemplo yrnent, describing the t ypes, causes and effects of unemployment. lt also mentioned the objectives, significance and the limitations of the research. Chapter two (2) does review some literature, past findings and past empirical results. Chapter three (3) describes the methr›dology used in this study, describing the model adopted and the x’ariables that will be used in this research. Chapter four (4) presents the results and interpretation of the methodology explained in the third chapter, beginning from initial analysis, regression results and statistical test so as to confirm the validity of the variables. Chapter five (5) is the final chapter, and it concludes the study by summarizing the findings, stating the limitations of the study and recommending how the study could be funher enhanced.
