Government Labour Policy, Graduate Unemployment and Labour Productivity in Government Labour Policy, Graduate Unemployment and Labour Productivity in Nigeria (1987-2017)

ABSTRACT

The study evaluates government labour/employment policy, graduate unemployment and labour productivity in Nigeria. It spanned the period between 1987 and 2017. The model was built on the combination of Keynesian framework and modern labour market theory and the various channels through which labour policy can impact on graduate unemployment and labour productivity in Nigeria. The study employed Ordinary least square method of estimation, co-integration and error correction techniques in estimating the model. Data were sourced from Central Bank of Nigeria annual statistical bulletin/reports (various years) and National Bureau of statistics annual statistical reports. The econometric software used for the study was E-views. The result from trend analysis showed that labour productivity proxied by growth in Gross Domestic Product (GDP) maintained steady and near horizontal movement while graduate unemployment has been on the increase over the years. Co-integration result showed that there exists a long-run linear relationship among the variables used for the study, hence adopting an error correction model. The result clearly indicated that government employment policy proxied in this study by the total number of graduates that have benefited (TNA) from National Directorate of Employment (NDE) since its inception in 1986 have positive and significant influence on labour productivity and negative significant influence on graduate unemployment. The study also found insignificant relationships between graduate unemployment, gross secondary school enrolment and total factor productivity in Nigeria. The study went further to establish unidirectional causal link between government labour policy, graduate unemployment and labour productivity in Nigeria. The study recommends that holistic programme should be established to arrest high trending unemployment in Nigeria. The programme should capture those who are heavily underutilized and grossly underpaid, in order to have a fair representation of the unemployment situation in the country. Government spending pattern should be checked, since the rising government total spending has not translated to increase in labour productivity.

CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

There is no doubt that unemployment is one of the major challenges facing economies of the world (developed and developing). This exerts more distorting impacts on the developing economy. According to Ekpo (2008), a developing economy such as Nigeria’s is faced with poor growth performance which manifests in the rising incidence of poverty, massive graduate unemployment, skyrocketing inflation, worsening balance of payments disequilibrium, monumental external debt burden, widening income disparity and growing fiscal imbalances, which taken together can be said to constitute major causes of underdevelopment. In all, rising graduate unemployment poses the most pervasive and devastative effect which threatens the productivity of the Nigerian economy (Ake, 2010).

Graduate unemployment is defined as the unemployment among people with academic degrees. It is a situation where tertiary institution graduates do not get jobs after going through the academic ladder successfully. It is the greatest component of aggregate unemployment.

According to the International Labour Organization (1982), the unemployed are persons that area available and willing to work but without work in the past 39 weeks. One is forced to ask how many Nigerians are willing and available to work but are currently without job.

On the other hand, Frank and Bernard (2001) noted that the rising unemployment rate in a nation is too significant to be ignored as it is necessary in assessing the level of economic activity in such nations. Thus, besides real GDP, unemployment and growth in labour productivity remains economic statistics that receives a great deal of attention from both economists and the general  public.

The unemployment rate is a sensitive indicator of the conditions of the labour market. When the unemployment rate is low, jobs are secured and relatively easier to find. Low unemployment is often associated with improving wages and working conditions as well as employers competing to attract and retain workers.

In the recent past, Nigeria has experienced low labour demand and productivity, a sign which is widely blamed on the failure of government policies and programmes over the years.

Specifically, since the mid 1980s, there has been an alarming increase in the rate of graduate unemployment, low labour productivity and its attendant’s social and economic consequences.

Just like some other developing nations in Africa, the Nigerian government and policy makers are increasingly finding it difficult to deal with graduate unemployment successfully.

The high rate of graduate unemployment in Nigeria according to Adeyeye et. al. (2012),can be associated with lack of adequate provision for job creation in the development plans, the ever expanding educational growth and the desperate desire on the part of youths to acquire tertiary education irrespective of the social and economic reality. Consequently, a number of skills acquired from these tertiary institutions appear dysfunctional and irrelevant since most of the skills and knowledge acquired in tertiary institutions are kept redundant through unemployment and sometimes skills are not fully utilized.

On the other hand, as the graduate population in Nigeria increases without being absorbed in the active market, labour productivity does not increase at its full potentials, this could be as a result of the failure of government to control this phenomenon over the years in spite of numerous programmes and policies on this issue. Without denying the impact of other factors, unemployment has exacerbated social ills and delinquent behavior among youths (most of whom are graduates) especially armed robbery, political thuggery, advanced fee fraud and the recent spate of terrorism (Boko Haram) in Nigeria, which has been on rampage for the past 4years, forcing the government to be spending a lot of money on crime control. Recent statistics released by the National Bureau of Statistics (NBS) showed that about 10 million Nigerians were unemployed. In fact, this number swells by 120,000 graduates each year, which are produced with little or no jobs waiting for them. (NBS 2017).

In a bid to address the menace of unemployment, various policies have been put in place by the Federal Government of Nigeria. Notably, the Small and Medium Enterprise Development Agency of Nigeria (SMEDAN) was established in 2003 to promote the development of Micro, Small and Medium Enterprises (MSME) sector of the Nigerian economy. It is to source, process and disseminate business information, develop policy, establish business support programmes, build capacity and promote services, enhance MSME access to finance. Others are the Bank of Agriculture (BOA)  which is dedicated to financing agriculture at both micro and macro levels. They are to provide affordable financial and advisory services to the farm and non-farm enterprises of the Nigerian economy using well trained and highly motivated staff, backed by appropriate technology. Those that were established but later scrapped include: the Directorate for food Roads and Rural Infrastructures otherwise known as (DFRRI), Mass Mobilization for Self Reliance and Economic Reconstruction (MAMSER) and the National Agricultural Land Development Project(NALDA). These were created by the Babangida regime but scrapped by the Abacha regime.

Among all, the most innovative of these programmes is the National Open Apprenticeship Scheme (NOAS) introduced by the Federal Government in 1987. The NOAS is an attempt to link education with training and labour demand. It was managed by the National Directorate of Employment (NDE) under the Ministry of Labour and Productivity. The NDE is a policy document that addresses the provision of graduate level of employment; the essence of this is to know how government policy should be used effectively in the reduction of graduate unemployment and enhances productivity in Nigeria. This was also meant to provide vocational education and training to unemployed youth in over 100 occupations. The main objective of these government programmes and policies is to provide means of livelihood to able but idle army of unemployed youths, especially the graduates and give assurance to the private sector through the services of the youths.

Unfortunately, the observable low labour productivity and high level of graduate unemployment over the years in the country have shown that no meaningful progress has been made by these programmes and policies. It is against this background that this study is designed to examine the nexus between government policy, graduate unemployment and labour productivity in Nigeria and its attendant consequences to the social and economic wellbeing of the nation.

1.2 Statement of the Problem

Tackling graduate unemployment and low labour productivity in Nigeria has remained twin problems facing the country for some decades now. The Nigerian total labour force is made up of all persons aged 15-64 years excluding students, home keepers, retired persons and stay-at home to work or those that are not interested. Nigeria’s unemployment can best be defined as the proportion of labour force that was available for work but did not work in the week preceding the survey period for at least 39hours (Asoluka & Okezie, 2009). The 2017 official figures from the Bureau of Statistics put the unemployed figure at 19.70 per cent, about 30 million. Though, this figure still did not include more than 40 million other Nigerian youths (some graduates of various degrees) captured in World Bank statistics in 2009. By implication, it means that if Nigeria’s population is 167 million, according to World Bank figure, then 50 percent of Nigerians are without employment (unemployed). Viewing this from the perspective of the recent events in the Middle East where unemployment and poverty among others played a key role in the uprising, one can only conclude that Nigeria’s unemployment poses a threat to not only productivity and output growth, security and peaceful co-existence.

The rising trend of unemployment assumed a doomsday scenario in Nigeria a decade after political independence. As noted by Akintoye (2008), between 1970 and 1980, national unemployment rate rose from 4.3 to 6.4% and further rose to 7.1% in 1987. This, according to Akintoye, is attributed to the economic depression which engulfed the nation from 1980,resulting in massive closure of businesses and retrenchment of workers. This was followed by the placement of embargo on recruitment which further worsened the unemployment situation.

The Structural Adjustment Programme (SAP) established in 1986 had on its part, a positive effect on job creation leading to a sharp fall in unemployment rate from 7.1% in 1987 to1.8% in 1995. Thereafter, unemployment figure hovered around 4% between 1996 and 2000.

One worrisome trend in the Nigeria labour market of recent has been the growing incidence of unemployment among professionals such as accountants, engineers and other graduates from universities and other tertiary institutions. Graduate unemployment accounted for 32% of the total unemployed labour force between 1992 and 1997 (Akintoye,2008).

This growing incidence of graduate unemployment in the face of acute skill shortages presents a paradox which further complicates the analysis of labour market distortions in Nigeria. (Dabalen et al., 2000).

Expectedly, unemployment reduction has remained the central focus of macroeconomic goals in Nigeria. It is a continuing policy and responsibility of the federal government to use all practical means to promote higher level of employment, production and purchasing power (Essien & Atan, 2006). The most critical factor explaining the rising unemployment in the country is the failure of government policies to consciously tackle graduate unemployment among others. The need to avert the negative effects of unemployment and improve labour productivity through effective government policies will make the tackling of unemployment problems to feature prominently in the development objectives of the Nigerian government.

The primary cause of graduate unemployment and low productivity is the absence of an appropriate and well articulated government policy to guide the strategies and programmes of the various institutions operating in all sectors of the economy (Asoluka & Okezie, 2015).However, efforts by different regimes in Nigeria such as Federal Ministry of Labour and Productivity, the National Directorate of Employment (NDE), Small and Medium Scale Enterprise (SMEs) and National Poverty Eradication Programme (NAPEP) in 2001 to generate more employment and improve labour productivity to a large extent have not yielded there required results (Essien & Atan, 2006).

Apart from representing a colossal waste of a country’s manpower resources, graduate unemployment and low productivity generates welfare loss in terms of lower output thereby leading to lower income and wellbeing (Ibrahim, 2006). In 2005 the unemployment rate as recorded by the NDE was 11.9% in 2006, 14.6% in 2007, and 10.9% in 2008 while as at December 2017 the Bureau of Statistics gave the unemployment rate as 19.7%. Predictably, this has also been accompanied by a high rate of social vices in Nigeria.

In view of the unfolding reality coupled with the protracted debates in the literature, this study is built to examine the nexus between government policy, graduate unemployment and labour productivity in Nigeria. In doing this, the study will be guided by the following research questions.

1.3 Research Questions

1. What is the nexus between government labour policy, graduate unemployment and labour productivity in Nigeria?
2. What is the long-run impact of graduate unemployment on total factor productivity in Nigeria?
3. What are the causality between government policy, graduate unemployment and labour productivity in Nigeria?

Based on the above research questions the following objectives are drawn for this study.

1.4 Objective of the Study

The broad objective of this study is to examine government labour policy, graduate unemployment and labour productivity in Nigeria. In view of this, the specific objectives of the

Studies are;

1. To examine the nexus between of government labour policy, graduate unemployment and labour productivity in Nigeria.
2. To examine the long-run impact of graduate unemployment on total factor productivity in Nigeria.
3. To examine the causality between government labour policy, graduate unemployment and labour productivity in Nigeria.

1.5 Research Hypotheses

Based on the objectives of this study, the following research hypotheses are formulated:

1. Ho: Government policy on labour has no significant impact on the rate of graduate unemployment and labour productivity in Nigeria.
2. Ho: There is no long-run relationship between graduate unemployment and total factor productivity in Nigeria.
3. Ho: There is no causal link between government labour policy, graduate unemployment and labour productivity in Nigeria.

1.6 Significant of the Study

The findings of this study will aid the government efforts in addressing the protracted unemployment, especially graduate unemployment and low labour productivity in Nigeria.

Firstly, identification of the nexus between government labour policy, graduate unemployment and labour productivity in Nigeria will assist policy-makers in formulating the right policies to addressing protracted rising unemployment trend in Nigeria. Policy-makers will therefore find the study very relevant for drawing policy issues in line with the challenges of ensuring an improved labour productivity and reducing general unemployment rate, irrespective of gender and level of education, in line with the development agenda of the present administration.

Secondly, investigating the long-run impact of graduate unemployment on total factor productivity will be informative in predicting how total factor productivity will change if policymakers are to change in reducing the rising trend of graduate unemployment status.

Finally, providing an insight towards understanding the causal relationship between graduate unemployment, government labour policy and low productivity in the Nigerian economy, will be an important tool in designing effective policy interventions that addresses graduate

unemployment and labour productivity issues and achieving the new policy framework (mass employment for the youths).

1.7 Scope of the Study

This study is an empirical analysis of the nexus between government labour policy, graduate unemployment and labour productivity with evidence from the Nigerian economy. It is important to note in this study that the connection between government policy and macroeconomic phenomenon such as unemployment is not well developed. In principle, a computable general equilibrium model (CGE) should be developed; however, unemployment sensitive CGE models have not been developed and face many problems (Fontana & Wood, Lofgren et al., 2008). Hence these are beyond the scope of this study. Instead, this study addresses three graduate unemployment issues that are thought to affect both the demand as well as supply of labour in Nigeria. These are the interaction between employment rate, labour demand and the number of graduates produced in the economy every year.

This study considered the effective government labour/employment policies instruments targeted at graduate unemployment in National Directorate of Employment (NDE) scheme.

These include the start your Own Business (SYOB) under the small Scale Enterprise programme(SSE), the sensitization of National Youth Service Corps (NYSC) on Entrepreneurship development, the Graduate Attachment Programme (GAP) and the Solar Energy Training Scheme (SETS) which was recently introduced. However, the study estimated the government labour policy with the total number of persons that benefited from NDE graduate programmes annually (TNA).

Total Factor Productivity (TFP) is a notion linked to the aggregate production function.

Hence total factor productivity was measured in this study as the ratio of output and weighted input factors (to be specified in the methodology). Productivity, on the other hand, is a technical concept which refers to a ratio of output to input and a measure of efficiency. (view Classical Ricardian labour theory of value).

Finally, graduate unemployment is referred to as graduates who were available for work and looking for jobs, but unable to find employment. Again, this study covers a reasonable range of observations, ranging from 1987 to 2013 in order to have a clear picture of the nexus between government labour policy, the rate of graduate unemployment and labour productivity growth in Nigeria.

This period was chosen due to the fact that government labour/employment policy considered in this study is captured from the National Directorate of Employment which was established on November 22, 1986 and its initial core programmes were formally launched on 30th January 1987.

Pages:  81

Category: Project

Format:  Word & PDF

Chapters: 1-5

Material contains Table of Content, Abstract and References