Beyond the Unemployment Figures

Proshare

Thursday, June 25, 2015 6:01AM / FDC

Djibouti, with an income per capita of $1182.52 has an unemploy-ment rate of 54%, making it the country with the highest level of people out of work. Amongst the near rich, Angola has one of the highest unemployment rates at 26%, making it the oil-producing African country with the highest number of idle people.

Unemployment in Nigeria has been a subject of controversy with an income per capita of $2676 and is the largest economy in Af-rica, Nigeria is a land of paradox. Following the recent reclassifica-tion of the employment categories by the National Bureau of Sta-tistics in May, 2014 unemployment figures were revised drasti-cally downwards from 24.3% to 6.4%.

This sharp drop in the unemployment figures can be attributed to the NBS’ reclassification into two categories of underemployment and unemployment, whereas they were both previously catego-rised as ‘unemployment’ (Table 1).

According to the new classification criteria, the labour force in-cludes

         The fully employed: persons within the ages of 15-64 years who worked a minimum of 40 hours in the seven days refer-ence period

         The underemployed: persons within the ages of 15-64 years who worked for 20-39 hours in the seven days reference pe-riod; and

         The unemployed: persons within the ages of 15-64 years who worked for 19 hours or less (0-19 hours) in the seven days reference period but are seeking and available for work.

Typically, a developing country suffers from an underdeveloped labour market with low skills, low wages and low job availability. However, with this shift, Nigeria’s unemployment rate of 2014 Q4 of 6.4% and 2015 Q1 of 7.5% is comparable to developed coun-tries such as US, UK and France which had rates of 5.4%, 5.5% and 10.30% respectively at the end of the first quarter of 2015.

This new classifications aim to strike a balance between Nigeria’s underemployment reality and the International Labour Organiza-tion (ILO) framework. The ILO framework assesses unemploy-ment as the number of people who work for less than 1 hour per week, who want to work, are available to work and are actively seeking employment. =If the NBS were to adopt the ILO’s defini-tion, Nigeria’s unemployment rate would be 2.1% (Table 1) sug-gesting a flourishing and wholesome labour market, which is far from the reality.

On the other hand, Nigeria’s old methodology identified the un-employed as those between the ages of 15-64 years who work for less than 40 hours per week but are seeking work and are in a position to assume paid employment. This high threshold did not

Table 1: Labour Statistics comparing rates under the new and old method. It shows the rela-tionship between the underemployment rate and the new unemployment.

leave space to accommodate part-time work and if applied glob-ally would render countries like France, with their 35 hour work week, almost entirely unemployed

NBS Unemployment Report

Time-based employment criteria tell a misleading story

The reclassification is a welcomed upgrade from the previously unrealistic thresholds, which required a minimum of 40 hours per week to be considered employed. Nevertheless, the change in measurements has potentially swung the pendulum too far the other way, leaving Nigeria with an overly optimistic and unrealis-tic picture of the labour market. It neither treats the main issues that cause unemployment nor contributes information to the un-derstanding of the causes and consequences of unemployment such as poverty and inequality.

This ineptitude arises from the narrow definition of unemployment that excessively focuses on the hours of work and underempha-sizes the quality of work in its measurements and analysis. The NBS labour paper in which the revised statistics where published categorized the unemployment statistics into age, educational level, gender and place of residence (urban or rural).
 
Nevertheless, these statistics do not adequately reflect the seg-mentation of the labour market and the resulting disparities in income level. While the unemployment rate might be a satisfac-tory reflection of the formal sector, it presents a highly inade-quate explanation of the existing dynamics in the informal sector. In truth, the Nigerian labour market is largely dominated by the small-scale and largely self employed activities in the production and service sectors, specifically: food production and sale, wood-work, furniture making, garment making, welding and iron works, trade, transport, repair services, and household or other personal domestic services.

The unavailability of jobs in the formal sector and the low skill level of workers, force many into the informal sector. With an ab-sence of national unemployment benefits and entrepreneurial na-ture of Nigerians as an alternative source of income coupled with the will barely permit anyone to remain idle, the average Nigerian is likely to engage in some form of work for the purpose of mak-ing ends meets, regardless of whether it fully utilizes their skills or whether the wages match their skill level. Moreover, low wages oblige most to work longer periods to earn a higher income. It is therefore a coping rationale of individuals in a harsh economic en-vironment. Regardless of the subsistent wages they earn and the low productivity (relative to skill) they possess, such workers are labelled as ‘employed’ because they meet the benchmark man hours of 40 hours per week.

Thus, while employment statistics limited to a time-related per-spective might appear healthy, they are grossly misleading

Underemployment
This brings up the issue of underemployment. Where unlike the NBS’s time-related underemployment rate, an underemployed person is one:

         Whose productive capacity is underutilised,

         Who involuntarily works less than the duration of work necessary for the activity, and/or

         Who works in an establishment with a low income or ab-normally low productivity

In other words, underemployment exists when a person’s employ-ment is inadequate in relation to specified norms or alternative employment. In sum, it not only refers to the number of persons in employment who are working fewer hours than they would like to, but also includes those engaged in employment not commen-surate with their occupational skill (training and working experi-ence). Under this definition, many of those who meet the NBS’s 40 hour requirement for the full-employment classification would, in fact, be categorized as underemployed.

Underemployment is perpetuated by a growing inflation of educa-tional requirements on job descriptions. For example, it is not un-common for a driver position to now request an OND certificate. At the same time there continues to be narrow growth levels of high-skilled positions. As a result, educated job-seekers are pushed into underemployment while less-educated or uneducated potential workers are forced out of the formal job market entirely


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