The 2018 Hanke’s Annual Misery Index which measures the world’s saddest (and happiest) countries was released at the end of March by Steve Hanke, a professor of applied economics at Johns Hopkins University. Hanke’s misery index is an adaptation of Robert Barro’s modification of the original construction by Art Okun in the 1960s. Hanke’s is the sum of unemployment, inflation and bank lending rates, minus the percentage change in real GDP per capita. Higher readings on the first three elements are “bad” and make people more miserable. These are offset by a “good” (GDP per capita growth), which is subtracted from the sum of the “bads.” A higher Misery Index score reflects a higher level of “misery.”
With the National Bureau of Statistics’ release of its 2018-Q3 labour survey results last Friday, which reports the jobless (unemployment) and near jobless (underemployment) rates at 23.1% and 20% respectively, the misery index has escalated from the 43 that Hanke gave Nigeria to more than 55 (adding national unemployment rate of 23%, inflation rate of 11%, to average lending rate of 22% and subtracting the change in real GDP per capita of -0.5%).
In Hanke’s Annual Misery Index – 2018, Nigeria was ranked 6th most miserable country in the world with a score of 43 behind Venezuela (no. 1 with a score of 1,746,439), Argentina (no.2 with a score of 105.6), Iran (no.3 with a score of 75.7%), Brazil (no. 4, with a score of 53.6) and Turkey (no. 5 with a score of 53.3). South Africa enters at no.7 with an index score of 42. But if we revise Hanke’s computation with recent data, Nigeria’s misery is at about 55, displacing Brazil at number 4 in the world. Nigeria is presently Africa’s most miserable country according to the Hanke list.
Consumer prices and lending rates appear to be the “major contributory factors” to the high level of misery in the countries higher than Nigerian on the list. Nigeria’s is reported to be chiefly driven by unemployment. Certainly, all the factors in the misery index computation are important for growth. Low unemployment rate is a reflection of a growing economy because output (or GDP) directly depends on the amount of labour used. Ordinarily, if unemployment is high, invariably, output will be low. Low inflation, i.e. low prices, improves welfare since it preserves purchasing power and positively impacts overall growth andlower lending rate is certainly a boost to investment and capital utilization.
However, experience shows that what affects people the most in any economy is whether or not they have a job. Inflation and lending rates may be high, but what appears to have the most damaging impact on the average consumer’s welfare, and therefore her mood, is definitely the job question: no job, no income, no food and we do know that a hungry man is an angry man! The ferocious increase in the rate of violent crimes in Nigeria today and the gradual erosion of social order cannot be far removed from this high level of unemployment.
Note also that the NBS labour survey reports unemployment and underemployment rate but does not consider (neither can it, though) the hidden group of disguised unemployment. Official unemployment statistics reports the number of individuals who are actively looking for jobs during the reference period, but cannot find any as a proportion of the total labour force (population aged 15 to 64). Underemployment rate counts the number of individuals who work less than 40 hours in a week, but work at least 20 hours on average a week and or if they work full time but are engaged in an activity that underutilizes their skills, time and educational qualifications.
The labour statistics does not usually include disguised unemployment, a situation prevalent in developing economies like Nigeria where part of the labour force is either left without work or works in a redundant manner with zero or near zero productivity which does not contribute to aggregate output. An economy demonstrates disguised unemployment when productivity is low and too many workers are filling too few jobs. Supposing that this is measured in the labour statistics, there is no doubt that the jobless rate would increase beyond the reported figures of both NBS and the Hanke’s index, implying that situations could be even worse than reported.
While we are still trying to come to terms with the labour statistics and the Hanke’s index, the UNFP broke the news that Nigeria’s population has hit 201 million this week. Unemployment is 23% while GDP is barely growing at a miserly 2% while population is exploding. The challenge before policy makers is gradually acquiring the tenets of a nightmare. Add to the above scenario the delicate fiscal position where expenditures have outstripped sustainable revenues. The bulk of salaries, overheads and debt service currently borne by the government is greater than independent revenues — a situation which will definitely further deteriorate with the new minimum wage. There is therefore no doubt that the fiscal gap will continue to widen beyond tolerable levels especially with this exploding population bomb. Our next edition will deal with this delicate fiscal position and potential ways out of it.
Bongo Adi
