Unemployment crisis worse than NBS new statistics — Expert

 Picture of Job-seekers

Says it ‘s a time-bomb about to explode

By Prof. Akpan Ekpo

The former Federal Office of Statistics, now National Bureau of Statistics (NBS) has been calculating employment/unemployment statistics to guide policy over the years.  During the 1960s, data from the then FOS reflected full-employment in the economy. Even when government was concerned about rising unemployment, the FOS from 1983 – 1998 published unemployment rates average as 4.0 per cent signaling full-unemployment.  From 1999 to 2013, the rates of unemployment published by NBS mirrored the concern of government that unemployment was not only a major challenge but also indicated noticeable rising trend among youth unemployment. For example, in 2010, the rate of unemployment stood at 21.4 per cent and rose to 27.4 per cent in 2012 and declined to 24.7 per cent in 2013. These high rates clearly indicate that the economy has an unemployment problem. These rates are quite at variance with the 5-5.5 per cent full employment rates.

The NBS recently published new rates of unemployment for Nigeria’s economy from 2010 – 2014 based on a ‘new’ methodology, which suggests that the economy is almost at full–employment, as the rate for last quarter of 2014 stood at 6.4 per cent. The rate as at   first quarter of 2015 was 7.5 per cent. One is not so much concerned about the methodology used because they are based on certain assumptions, so if any of the assumptions is relaxed, the calculated rate may be different.

However, what is worrisome is the speech made by the Statistician General, on May 14, 2015 while welcoming the committee on the review of the framework for calculating unemployment rate in Nigeria. He asserted that the ‘new’ rates of unemployment were based on scientific method and that persons should not be sentimental and ideological over unemployment figures, stating that it was not social science. He further argued that the new rates were calculated on the basis of accepted international best practices. Is the situation different in the Nigerian economy? Every economy must take into account its own peculiarities in applying the concept and calculation of employment and unemployment.

While one would agree to some extent that sentiments ought to be set aside but the issues of ideology, science and international best practices must be challenged in the interest of knowledge in general and the Nigerian economy in particular. In measuring unemployment, countries have adopted the concept to their peculiarities. For example, the International Labour Organisation (ILO) considers that a person who works for an hour a week is employed and often adduces reasons to support its position. The same organisation also calculates the rate of vulnerable unemployment.  The USA Labour Agency assumes that if you register as unemployed and did not show up after a week, you must be employed. The same country considers the frequency, duration and incidence of unemployment in measuring the overall unemployment rate in the country. The USA economy also pays unemployment compensation to workers who lost their jobs among other welfare programmes.

For the most part, the outcome of administered surveys in any economy depends on the coverage, the content (questions asked) in the questionnaire is crucial.  In the Nigerian case, the number of Enumeration Areas is relevant.  The NBS states that the working age goes from 15-65 years, one would ask why stop at 65?  Why not 60 or 70? How many Enumeration Areas are covered by the NBS? About 28,  is that adequate? How is rural employment/unemployment captured?  Nonetheless, whatever the assumptions, one should be guided by economic theory and principle. Economics may be an inexact science but it uses scientific method. The other social sciences do the same. For example, in analysing the population structure within the context of the labour force, one may need a demographer, among other experts.

In the epistemology of knowledge, the distinction between the natural sciences and social sciences is a false distinction. Every scientist/science deals with matter in motion.  It is interesting to note that certain laws in economics were based on casual observation.  Hence, one would have expected that the wide variation of the unemployment rates between the old and the new methodology as well as the concern of all Nigerians would have alerted the experts in the NBS to re-examine their data, coverage, sampling techniques, among other variables. Not all variables observed in statistical sampling are based on objectivity. The experience of the policy-maker and the reality on ground are also crucial.  In addition, there are no unemployment benefits in the Nigerian economy.

There are tendencies and different schools of thought in economics. The matter of full employment is and has always been ideological in terms of conceptualisation, formulation and implementation. Within a market based economy, there exist debates as to whether full employment should be an objective as well as what should be the role of government during high rates of unemployment. The debate becomes intense if the economy is in a recession or a depression.  It is interesting to note that even in Nigeria, economists have different tendencies. Their ideas are not homogenous despite the broad and technical training. The tendencies may not be perceived to be sharp because of the underdevelopment of the economy and the economics profession itself in the country.

Regarding international best practices, the unemployment rates from the ILO suggest that the Nigerian economy has been at (average of 4.2 per cent) full-employment in the last five years. No active observer of the Nigerian economy would take those ILO figures seriously. Who determines the so-called International best practices? In the same vein, the NBS ‘new’ unemployment rates indicate that unemployment is not a serious challenge in the economy hence no need for urgent government policy to tackle unemployment.  Is that really the case?

One is not alluding that the NBS cannot fine-tune any of its methodologies including that of employment/unemployment.  The worry is that not too long-ago, the NBS informed Nigerians that the incidence of poverty stood at almost 70 per cent in 2012 and projected future increase.

The government challenged the figure of the NBS and invited the World Bank to calculate the incidence of poverty for the country.  The Bank arrived at a rate of 33 per cent indicating that the poverty incidence decline sharply over the years. What the World Bank should have done was to use the formula and data of the NBS and see whether the result would be different.  It is hoped that the rates of unemployment has not suffered the same panel-beating like the incidence of poverty measure. The NBS needs proper funding by government so that labour survey coverage would be extensive while the questionnaire design, testing and execution would be rigorous reflecting the Nigerian reality. Furthermore, State governments should also make efforts in computing employment/unemployment statistics in their jurisdictions.

Notwithstanding the low unemployment rates published by the NBS, the new administration should see job creation (not seasonal employment) as a priority. The reserved army of the unemployed in the economy is too large.  It remains a time-bomb, and it is in our collective interest not to allow it to explode. In economics, between 5 and 5.5 percent is construed as full employment because at some point in time some persons may not wish to work for various reasons.  Before 1936, full employment was never considered an objective of government. The economists before then (referred to Political Economists or Moral Philosophers) argued that the economy was always at full employment and that supply created its own demand.  Hence, any deviation from full employment was very temporary and if it persists for a while, it was because workers were unwilling to take a wage cut.  This position which prevailed during the Great depression of the 1930s is still relevant today with some coloration by neo-and new classical economists.

The intervention of government’s fiscal policy to set their economies on the path of recovery and growth convinced skeptics that the State has a role to play in the economy. Thus, most governments in Europe and North America enacted laws mandating their governments to ensure that full employment was among the macroeconomic objectives of the State.  Hence, the employment/unemployment matter should not be taken lightly.  If a high per cent of the labour force is unemployed then that economy cannot be performing satisfactorily even if such an economy is registering positive growth rates.

Ekpo, a professor of economics is the current Director General, West African Institute for Financial and Economic Management (WAIFEM).

- Culled from: http://www.vanguardngr.com