By the time you read this column the first half of the elections will be over. We may not yet know who won depending on how quickly INEC is able to announce the results. Regardless, it will be time for the winning candidates to get to work after what has been months of electioneering. High on the list of issues to tackle is the jobs issue.
The jobs problem needs little introduction. But just in case you have forgotten, as at last count we had over 20 million people actively looking but unable to find work. For context this is more than the entire population of Benin Republic and Togo combined. If you add those who are underemployed, that is those who are doing something but not working near their full capacity then the numbers rise even more. Staggering. The question then is what are all those people going to do? Can we create enough jobs and where will those jobs come from?
There is a common misconception about job creation that is apparent in the way we have gone about our various job creation initiatives. The assumption is that if you give people skills or give them capital then jobs will be created. As a result, the bulk of the initiatives have been focused on these kinds of initiatives. There has been a plethora of trainings, financing programs, “youth empowerment” schemes and all that. If you are one of the lucky few to participate then you may get some benefits. To be fair, some of these programs have been shown to lead to some employment benefits for those who benefit. Winners of the Youwin programme for instance were shown to employ more people for longer than similar applicants who did not scale through the competition. The LSETF in Lagos will hopefully do a proper evaluation and the numbers might be similar. Same for the N-Power and GEEP and so on.
Unfortunately, there are two issues. The first is a bit easy to grasp. Given the scale of the challenge, over 20 million unemployed and more coming into the labour market, it is not clear that any of these programs are scalable. If the numbers from the youwin program are correct, then it cost $50,000 dollars to create 6 new jobs which isn’t really practical. I don’t know the numbers for LSETF or N-Power so I can’t comment on that but just thinking of the size of unemployed I would be sceptical on their scalability.
The second issue is a bit technical and one that is often ignored by some economists. Just because a program has been shown to create more jobs than a control group, does not mean that in the aggregate it has created more jobs than would have been created without the program. You can observe significantly different outcomes between groups receiving a treatment versus groups who don’t and still have no effects on aggregate. Evaluations typically assume that the treatment is too small to indirectly influence control groups but if you scale these programs up then that condition is unlikely to hold.
So, what should be the path to job creation? We often forget that jobs are but a part of the process of creating value. Or to use medical parlance, jobs are a symptom of value creation. If there is no expansion in economic activity, then systematically there will be no expansion in jobs, regardless of how many job creation initiatives are put in place. The first step therefore is to focus on growth. Growth is a necessary condition for job creation. But not just growth. Some sectors of the economy are capital intensive and use very little labour, or jobs. Others are labour intensive. As you can guess when talking about jobs you need growth in labour intensive sectors. Finally, given the current low-skilled nature of our workforce, you need growth in labour intensive sectors that use low-skilled workers. Where will that growth come from? Probably only exports, given that demand for most products in Nigeria outside basic food and beverages is very small.
To summarize, to create jobs we need to engineer growth in low-skilled labour-intensive sectors of the economy. Without doing that, all the token job creation initiatives are unlikely to move the needle.
Nonso Obikili
Dr. Obikili is chief economist at BusinessDay.
