Unemployment and inequality in Nigeria: Assessing state level catastrophe

The design and implementation of efficient national policies for employment generation and inequality reduction require a deep understanding of the labour market structure and resource allocation implications.

Quite often, policymakers and analysts are quick to single out unemployment as a significant labour market challenge while other essential elements such as inequalities arising from the vast unemployment are overlooked. Unemployment is identified as a major economic, political, and social problem in many countries.

According to the International Labour Organisation (ILO), unemployment is a concept used to capture people in the working-age population who are jobless but available for work and actively seeking work. Income inequality is how unevenly income is distributed throughout a population.

The less equal the distribution, the higher the income inequality. Income inequality is often accompanied by wealth inequality, which is the uneven distribution of wealth.

Social vices such as prostitution, robbery, internet crime and teenage pregnancies could sometimes be blamed on unemployment and widening inequality of opportunities.

High insecurity in northeast Nigeria and the recent upheaval in North Africa have been linked to the phenomenon of unemployment. The phenomenon poses economic costs in the form of revenue and output losses. It also indicates a waste of human resources and can cause extreme personal hardship, including psychological costs for the unemployed.

Despite the global acknowledgement of the issue as a major development problem, statistical evidence seems to downplay the extent of the situation.

For instance, unemployment rates of less than four percent have been reported in countries such as Madagascar, Burkina Faso, Niger and Benin.

Unemployment figures reported by the census seem to be on the low side, and these could be misleading for policy purposes. Thus, estimates of unemployment rates in developing countries based on the international standard definition of unemployment are said to understate the true extent of unemployment consistently.

The question that remains unanswered is first that are the reported low unemployment rates in many mainly statistical problems; or second, that it has something to do with the applicability of the definition in Nigeria; or third, that the problem is more of underemployment and high level of informality or vulnerable employment rather than unemployment; or fourth, that unemployment is not an issue to worry about?

Read also: Economic and social costs of unemployment in Nigeria

It is a common procedure in economics to compare income inequality measurements of different economies or of the same economy at different points in time.

Sometimes, such comparisons are also carried out to evaluate the success or failure of policies aimed at reducing inequality. Inequality tends to be positively correlated with unemployment. Income share earned by the lowest quintile is both the most volatile and the most procyclical”, and the procyclicality of the income shares decreases monotonically until one reaches the top five percent.

While unemployment is the greatest challenge facing the Nigerian educational path, heterogeneous factors that determine the difficulties of school to work transition (unemployment) remain imperfectly understood.

This ambiguity in the structural relations between varied causative factors is more pronounced in Nigeria, where growth and development conditions remain inadequately met.

Underexplored aspects such as geographic, political, economic and macroeconomic policy determinants of unemployment in Sub Saharan Africa could have culminated in the misalignment of the nation’s employment generation strategies.

Creating jobs, reducing youth unemployment, and tackling labour market inequalities are challenges faced by developing countries. In Nigeria, graduate and youth unemployment are urgent policy issues.

The inclusion and integration of women and vulnerable groups into the labour market are also constrained due to limited opportunities and access. The school-to-work transition is a crucial stage in young people’s lives, and the successful transition is instrumental in the fight against poverty and inequality.

A vast scholarly debate implies that increases in unemployment have an aggravating impact on income inequality and vice-versa. Hence international and intertemporal inequality comparisons might be sometimes biased.

It becomes essential to establish a clear line of thought on the causative structure in the unemployment-inequality relations in Africa’s most populous black nation Nigeria to rejuvenate policy and practices that are optimal for egalitarian social redistribution and welfare.

Interest in the study of inequality (or mobility, its dynamic counterpart) is indeed soaring, as reflected in policy debates, and articles in the famous press world over. However, while it is well known that wage and earnings inequality has increased dramatically in Nigeria over the last 35 years, research on the school to work transition issues is inconclusive.

It is critical from a policy perspective to assess whether the well-documented increase in employment generation has led to an increase in disparities in welfare.

Dr Ibrahim A. Adekunle is a lecturer at the Babcock Business School (BBS), Babcock University (BU), Ogun State, Nigeria.