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QUESTION: Please Explain Five Critical Shortfalls Of Unemployment In Nigeria [Solved]

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Mathew Oluwaseun
University of Ilorin (Unilorin)
Mechanical Engineering
500Level, Nigeria.

“Nigeria as a country is often described as a rich country majority of poor citizens where 50% of the Citizens live below poverty level. Unemployment has been a problem in Nigeria, especially since 1980, when the nation's economy took a turn for the worse as world petroleum prices tumbled, the Nigerian currency became devalued, corruption became rampant, and the population of Nigeria ballooned at a breathtaking pace. The resultant poverty has posed questions about the wisdom of conventional strategies for national development.

Nigeria has sufficient land mass and labor resources to become a great location for labor-intensive industries, and thereby provide employment for the masses. Cost cognizant industries could easily be developed and located in places with the most poverty stricken people in order to take advantage of low-cost of labor and land, and as a means of economic development.

Nigeria has a total land mass of 923,768 square kilometers, which comprises of 13,000 square kilometers of water and 910,768 square kilometers of land, however, the climate varies from equatorial in the south of Nigeria, to tropical in the center, and arid in northern Nigeria. This results in much of the land not being arable, and such makes the agricultural sector unappealing as a viable source of employment opportunities for Nigerians. Hence, the country is not as agriculturally blessed, as it would seem from a review of the pre-oil boom history.

In addition, the estimated population of Nigeria in 2002 was 129,934,911, which makes it difficult for a significant proportion of such a large population to earn a living by farming in an area of 923,768 square kilometers. Therefore, land cultivation is not a viable means of providing economic opportunities for many Nigerians.

The oil sector of Nigeria provides 20% of Gross Domestic Product, and 95% of foreign exchange earnings, and about 65% of budgetary revenues. Other industries in Nigeria include: coal, tin, palm oil, peanuts, cotton, rubber, wood, hides and skins, textiles, cement, food products, footwear, chemicals, fertilizer, printing, ceramics, and steel, however these industries have minimal impact on the foreign exchange earnings of Nigeria, because potential for utilization of such industries has not been maximized.

As an alternative to dependence on the oil sector of Nigeria to provide 20% of Gross Domestic Product and about 65% of budgetary revenues, it would seem logical that cost conscious industries should be developed and located in economically depressed areas of Nigeria to take advantage of low cost labor and land, and as a means of national economic development. The poor people in such areas would then have the opportunity to develop skills that would make them employable by industries, and this would ultimately alleviate poverty in Nigeria.

Another drawback regarding utilizing agriculture as a means of providing employment opportunities for considerable number of the underprivileged Nigerians is that a great proportion of land in rural Nigeria where agriculture primarily occurs is not easily accessible or not fully utilizable because such are lineage, sacred land, privately held by large landowners, etc. In addition, land is usually loaned or rented in rural communities in Nigeria, so many poor rural residents do not own sufficient land to make farming a profitable undertaking, and do not have the opportunity to accrue capital on loaned or rented land.

Governmental organizations and businesses in Nigeria are yet to invest in significant amounts in development of non-petroleum industries in Nigeria, as a strategy for economic development. In addition, many poverty stricken Nigerians lack skills, knowledge, tools, beliefs, and values to seek employment opportunities in non-petroleum industries.

People who lack skills, knowledge, tools, beliefs, and values to perform financially rewarded activities are not usually employable. This results in a lack of employment opportunities, as employers tend to locate their businesses where appropriate human resources are available. The vicious cycle of poverty and unemployment therefore continues unabated.

Provision of employment opportunities to the masses is a means of ensuring participation of all citizens in the national development process. Lack of employment opportunities for many Nigerians has resulted in large number of Nigerians living in poverty. In turn, poverty leads to alienation of poor people (who are often rural residents) from political-economic functioning of their society. This cycle is complete when alienation further decreases these citizens interest in developing the skills, knowledge, tools, beliefs, and values to perform financially rewarded activities.

In order to eradicate unemployment and poverty in Nigeria, innovative methods need to be used to successfully tackle unemployment and poverty. In Nigeria, tackling unemployment requires development and implementation of programs that will directly benefit the poor, by restructuring sources of Nigeria's gross domestic product to significantly include variety of industries that are labor intensive, such as cottage industries.

Making land available to private and public organizations to set up industries in the most economically depressed areas of Nigeria, and providing training in setting up industries (especially cottage industries) to unskilled or economically deprived Nigerians would make ownership of small scale industries a viable source of employment opportunities and building wealth for many Nigerians. In addition, businesses and governmental entities can also be encouraged via incentives to locate industries that are labor intensive in areas with the highest incidences of poverty, which will usually be the rural areas of Nigeria, as a means of providing employment opportunities to these citizens.

Development of varied industries in Nigeria would diversify the country's sources of revenue, and effectively utilize the abundant labor supply of poverty stricken and unemployed Nigerians, and thereby reduce the reliance of the majority of Nigerians on oil revenue handouts. Such reliance fosters a culture of dependence on the government and institutionalizes poverty. In turn, poverty leads to alienation of poor people (who are often rural residents) from the political-economic functioning of the society. In, summary, effectively decreasing the number of Nigerians, especially rural residents living in poverty by creating varied industries in Nigeria, would revitalize the Nigerian economy by providing viable options to combat unemployment and poverty in Nigeria.

Causes of Unemployment
Unemployment stems from plenty of factors. It might be the economic condition of a country or an individual's decision to remain unemployed. We have explained you the most common causes of unemployment over here.

A man willing to work, and unable to find work, is perhaps the saddest sight that fortune's inequality exhibits under this sun ~Thomas Carlyle

The definition of unemployment as explained in the dictionary of economics is 'the state of an individual looking for a paying job but not having one'. Unemployment occurs when people face crisis in job opportunities due to the unpredictable nature of the economy. It's not a problem that has recently hit the economy, rather it was largely evident during the 16th century. Despite coming from a good educational background and being eligible for jobs, people still remain unemployed. Why does this happen? Let's find out.

The exact cause of unemployment will always be disputed because there are numerous predictions, theories and explanations put forth by economists. Here we shall consider the Keynesian theory (of macroeconomics) explained by the renowned British economist John Maynard Keynes. This theory states that, unemployment is resulted from increase in demand rates while the economy operates below its growth rate and potential output. Henceforth, the economy faces a great blow under this circumstance.

Economic Inflation
Inflation is one of the oldest causes of unemployment. A state's economy faces a steep rise in prices as compared to other economies of the world. This leads to failure in exports as companies are not able to compete with others due to rise in price. Incomes suffer, people's savings fall and gradually companies start firing people, being unable to pay them on due time. Thus, the rate of unemployment increases.

Economic Recession
Recession became one of the prime causes of unemployment in the United States in the year 2007. It became a global crisis wherein the rate of unemployment knew no bounds. A severe financial crisis hit almost all countries throughout the world. Rise in unemployment and sine die of established companies became a regular affair. People remained unemployed till the economies regained stability.

Welfare Payments
Welfare payments although are security measures for people, cause unemployment to some extent. The aids given by government to the unemployed people actually reduce their willingness to work. This is an indirect negative impact of extended unemployment benefits because people become more dependent on the grants they receive. They register for government grants even if they are not looking for jobs, and the incentives they get are enough to fulfill their daily requirements. This way people remain deliberately unemployed.

Changing Technology
Since technology keeps advancing with passing days, most companies look for a change in workforce. Although, they do not fire people randomly, they hire people having specialization in the advanced techniques. A kind of imbalance is caused when they stop involving their own employees in major areas of production and development. This gives rise to frustration in work and many tend to resign. Thus old employees get substituted by the new and the former remains unemployed either temporary or permanently. In short we can say that, job cuts due to changing technology elevates rate of seasonal unemployment.

Job Dissatisfaction
Job satisfaction is quintessential for self progress and gaining stability in work. There are many people who take up jobs on temporary basis. The reasons being family pressure, financial crisis and for experience. However, a person who is not contented with his job can never continue it in the long run, because he is either making a compromise with his pay scale or his job profile. Thus, job dissatisfaction becomes one of the primary causes behind unemployment.

Employee Values
Often employees are not given the due recognition for their good performance and dedication. This creates an unfavorable work environment, which further demotivates employees. When values of employees are neglected by the organization, they lose interest in their work. It becomes an indirect way of compelling employees to leave their jobs. People remain unemployed until they find a good job.

Racial Discrimination
Racial discrimination still prevails in many organizations. It's one of the most serious cause of unemployment. People who are not citizens of that particular country remain unemployed due to discrimination on grounds of race, religion, caste and ethnicity. It becomes very difficult to find out a decent job under such circumstances. Thus, earning money for survival becomes difficult and ultimately they are forced to leave the country.

These were the most probable reasons behind unemployment. It's important to note that an individual's approach towards finding a job or to remain unemployed matters a lot. People who are unemployed for genuine reasons can register for the unemployment insurances planned by the government and enjoy the benefits till they find a job.

Unemployment types and causes
There are several types of unemployment, each one defined in terms of cause and severity.

Cyclical unemployment exists when individuals lose their jobs as a result of a downturn in aggregate demand (AD). If the decline in aggregate demand is persistent, and the unemployment long-term, it is called either demand deficient, general, or Keynesian unemployment. For example, unemployment levels of 3 million were reached in the UK in the last two recessions, between 1980 and 1982, and between 1990 and 1992. In the most recent recession of 2008-2010, unemployment levels rose to 2.4m in the last quarter of 2009, and are likely to peak at over 2.5m during 2010. (Source: ONS).

Demand deficienct unemployment
This is caused by a lack of aggregate demand, with insufficient demand to generate full employment.

Structural unemployment occurs when certain industries decline because of long term changes in market conditions. For example, over the last 20 years UK motor vehicle production has declined while car production in the Far East has increased, creating structurally unemployed car workers. Globalisation is an increasingly significant cause of structural unemployment in many countries.

When structural unemployment affects local areas of an economy, it is called ‘regional’ unemployment. For example, unemployed coal miners in South Wales and ship workers in the North East add to regional unemployment in these areas.

Classical unemployment is caused when wages are ‘too’ high. This explanation of unemployment dominated economic theory before the 1930s, when workers themselves were blamed for not accepting lower wages, or for asking for too high wages. Classical unemployment is also called real wage unemployment.

Seasonal unemployment exists because certain industries only produce or distribute their products at certain times of the year. Industries where seasonal unemployment is common include farming, tourism, and construction.

Frictional unemployment, also called search unemployment, occurs when workers lose their current job and are in the process of finding another one. There may be little that can be done to reduce this type of unemployment, other than provide better information to reduce the search time. This suggests that full employment is impossible at any one time because some workers will always be in the process of changing jobs.

Voluntary unemployment is defined as a situation when workers choose not to work at the current equilibrium wage rate. For one reason or another, workers may elect not to participate in the labour market. There are several reasons for the existence of voluntary unemployment including excessively generous welfare benefits and high rates of income tax. Voluntary unemployment is likely to occur when
the equilibrium wage rate is below the wage necessary to encourage individuals to supply their labour.

The natural rate of unemployment
This is a term associated with new Classical and monetarist economists. It is defined as the rate of unemployment that still exists when the labour market it in equilibrium, and includes seasonal, frictional and voluntary unemployment. The US economist Milton Friedman first used the concept to help explain the connection between unemployment and inflation. Friedman argued that if unemployment fell below the natural rate there would be an increase in the rate of inflation.

Over the last 30 years, employment in the service sector has increased to over 70% of total employment, while employment in manufacturing has decreased to under 20%. Since the 1940s employment in the primary sector, including agriculture, has been less that 3% of the workforce.
Recent changes have created two speed economy, with a relatively bouyant service sector and a declining manufacturing one.

The main reasons are:
1. Globalisation and the rise of new ‘low cost’ overseas competitor countries.
2. Increased competition within the domestic product market.
3. The increasing comparative advantage of the UK as an international supplier of financial services.

Structural unemployment and labour mobility

Labour immobility is likely to increase structural unemployment. This is because those industries that are growing and need labour, often called sunrise industries, are not necessarily able to employ the same workers who have been displaced in the declining, sunset industries.
There are three types of labour immobility:
Geographical immobility
Geographical immobility occurs when workers are not willing or able to move from region to region, or town to town. Geographical mobility is made worse by immense house price variation between regions. It may be extremely difficult for workers in Yorkshire to sell their home and buy an equivalent one in London.

Other factors also contribute to geographical immobility, such as strong social and family ties, and parents being unwilling to disrupt their children’s education by changing schools. The stresses of moving home can also be a deterrent to mobility for some.

Industrial immobility
Industrial immobility occurs when workers do not move between industries, such as moving from employment in motor industry to employment in the insurance industry. Industrial immobility has affected the UK, and many other industrial countries, as the growth of service industries, and the decline of manufacturing industries, has increased the need for mobility.

Occupational immobility
Occupational immobility occurs when workers find it difficult to change jobs within an industry. For example, it may be very difficult for a doctor to retrain to be a dentist.
Industrial and occupation immobility are most likely to happen when skills are not transferable between industry and job.

Information failure also contributes to labour immobility because workers may be immobile because they do not know where all the suitable jobs for them are.

A resulting problem with labour market immobility is that it can create regional unemployment, which is a type of structural unemployment. This means that a change in the structure of industry leaves some people unable to respond by changing job, industry, or location and as a result, they remain temporarily or permanently unemployed.

Immobility can also lead to rising labour costs, as firms have to increase wages to encourage workers to re-locate.

Labour market or government failure?
New Classical economists would tend to see structural unemployment as an example of government failure. Labour markets do not clear, they argue, because wages are not allowed to adjust effectively, and the price mechanism is distorted. By removing distortions and imperfections in the labour market workers would move more quickly from job to job.

For example, by keeping welfare benefits to a minimum there is an incentive to retrain and look for paid work. Welfare benefits can trap individuals into a life of unemployment because of the effects of moral hazard and the disincentive effect it creates. This increases labour immobility, and hence contributes to structural unemployment.

However, labour immobility can also be addressed from the perspective of labour market failure. Training and re-training are regarded as merit goods, where individuals under perceive the long term benefit to themselves. They also fail to appreciate the positive externalities that training and re-training generate for the wider community. This means that there is a significant role for the state in providing free or subsidised training and retraining programmes.

In addition, there is the potential situation of labour market poaching. Why should a firm in the booming service sector provide free training to a displaced worker from the manufacturing sector if the worker will leave for another job shortly after training? Why should firms do any training at all if they believe that workers will be poached by higher wages? The poacher can, of course, afford to pay higher wages because of savings in training costs.

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