In May, Nigeria’s National Bureau of Statistics raised eyebrows locally and internationally when it reviewed downwards the percentage of the unemployed in the country from 23.9 percent to 6.4 percent. The Government agency argued that most Nigerians were not unemployed, as had been previously believed, instead, they were underemployed. It put the underemployment rate at 17.89 percent, and thus declared that the bigger challenge for the nation was tackling underemployment, not unemployment. While the new definition of unemployment has generated a lot of argument, the truth, they say, is not in the thesis or the anti-thesis, but in the synthesis. Here is the synthesis: 24.29 percent of Nigerians are either unemployed or underemployed, and both are basically the devil and the deep blue sea.
When it comes to jobs, quantity—availability—is as crucial as quality; while the former needs to be there in the first place, only the latter can determine the standard of living. Thus unemployment is as big a challenge as underemployment, and it is not restricted to Nigeria alone, but the whole of Sub-Saharan Africa (SSA). South Africa’s unemployment rate stood at 25 percent of the labour force for the second quarter of 2015, Angola was a percentage point worse, and Kenya almost doubled that, while Ethiopia recorded an all-time low of 17.40 percent. The aforementioned countries, together with Nigeria make up the top 5 economies in SSA when measured by GDP. Unlike Nigeria, the others do not keep an official underemployment statistics; regardless, they all share a huge lag in the quality of employment as exampled by the wide income inequality perverse in all of their economies. The average Gini coefficient (used to measure income inequality) of the five countries is 45.36 percent, six percentage points higher than the global average of 39 percent.
With such extremely high level of income inequality combined with the abysmal level of poverty in the subcontinent, there’s a desperate need to massively create millions of jobs and radically raise the quality of pay for its workers. Both are pressing challenges demanding immediate attention and they need to be carried out simultaneously if Africa is to match its growth with development. However, fashioning how to massively create jobs and radically raise wages at the same time poses an even bigger challenge. This is because, as several economists and policy makers have argued, pushing one aggressively may negatively affect the other. The logic is that it is easier to create jobs when they are low income, but that when pushed to raise wages, employers often slash number of employees or freeze employment in order to keep costs under control. However, South African Economics Professor, Gavin Keeton, argues that, with particular regards to South Africa, “a large part of [the country’s] inequality exists in the labour market. This he says, means that while unemployment and poverty will fall if lots of low paying jobs are created, inequality will remain high because of the large differences between high and low paying jobs.
Available evidence in other countries seem to support professor Keeton’s argument. Nigeria’s economy created 2.5 million jobs between 2012 and 2014, while Kenya got 800,000 in 2014, most of which were in the low-income informal sector. Angola, on the other hand has halved the number of those living in absolute poverty while Ethiopia has lifted over 10 million above living on $1.29 a day. Despite these impressive results, inequality continues to rise unabated in these countries.
For Nigeria’s former Minister of Finance, Dr Ngozi Okonjo-Iweala, who is also a Senior Advisor at US Investment Bank Lazard, solving both challenges can go together. She argues that on one hand, “[African governments] need to focus on the sectors that create jobs] as well as propagate entrepreneurship among its youth—who make up its largest demographic segment of the unemployed. On the other hand, she argues that governments have to also “look at the types of social safety nets that it can use to help those at the bottom without adequate sources of income.” She espoused conditional cash transfer programmes to boost education enrollments as well as the provision of universal healthcare as among the measures which would at least prevent generational poverty. Professor Keeton agrees with her. “Improved education should reduce this wage premium for skilled workers and reduce inequality,” he said.
However he adds that for the countries in Africa with not so large differences within the labour market, creating low wage jobs may reduce both poverty and inequality. Ethiopia is an example of such. The government’s massive agricultural support programmes have helped it successfully reduced the country’s poverty rate by over a quarter. The country’s Gini coefficient is also below the global average and one of the lowest in Africa. Its GDP per capita— average per-person income—is also very low due to the relatively low returns of jobs.
To raise the quantity and quality of jobs at the same time requires increased productivity, says Professor Keeton. “In most countries this requires better education, probably improved investment as well but investment of a kind that enhance labour productivity rather than replacing labour.” Still he admits that the choice between poverty and inequality is very difficult, and so too is doing both.
But it is doable. Brazil and Argentina are examples of countries, that have in recent decades, achieved relative success in reducing unemployment and inequality. In both countries improved education, increased investment and wealth redistribution through the expansion of social grants to the poor, all played an important role. However, to successfully replicate these measures, African countries and their governments will need greater political will and less impropriety to succeed.