The Truth About How Jobless We Really Are

“A considerable proportion of the world’s working-age population is at risk of poverty, and employment in such cases is a matter of individuals trying to meet S1 basic living needs and those of their families.” - ILO Report on World Employment and Social Outlook

Paid work is the main source of income for an extensive number of households all over the world, which is why it is of such high importance to take measures that would bring the unemployment rate to a minimum.

High unemployment means that consumers are losing their purchasing power, which in turn results in unemployment for other workers. Simply put, if you lose your job, you’ll most likely cut down on the weekly beer in the Friday bar. This will also increase the chances of Chris-the-bartender to lose his job at some point. This creates a cascading, rippling effect on our economy.

Unemployment is one of the most visible indicators of the level economic activity in an economy. It is defined as a situation in which people who are capable of working and are willing to work seek for employment but are unable to find employment at the prevailing wage rate.” — Ademu Wada Attah

Since the great recession in 1930, the most important macroeconomic goal of our society has been to reach full employment. Data before COVID-19 showed that the levels have dropped to around 5 percent. It is evident that the epidemic has had a huge impact on the labor market. According to ILO, the direct effect is hard to measure and even harder to predict long-term. What is clear, however, is that the labor market is complicated and changing too rapidly. During these times, the problems we have had in our labor market have only become prominently evident. We can’t predict exactly how our economy will change, but one thing is clear: we need to shift our focus and dig deeper into the problems our society is facing. (Source: World Employment and Social Outlook — Trends 2019)

There’s always more to the story: 5% unemployment rate says very little on its own. Looking back at ILO’s statistic, it becomes clear that it only took one year for the unemployment rate to jump up significantly- up to 5.6 percent- but it took 8 full years to recover to the original 5 percent. This should clearly serve as a red flag that something is not working the way it is supposed to.

Are younger people also the most jobless?

Another observed phenomenon is that the unemployment has been the most prominent among young people (aged 15– 24), with a percentage of 11.8. This means that roughly a third of the youth worldwide - 621 million - are classified as not in employment, education or training (NEETs). Considering that youth make up roughly a quarter of the world’s population (in many countries, especially in Africa and South Asia- they make up for nearly a third of the population), the amount of young people who are jobless is simply alarming.

As paradoxical as it seems, the technologically flourishing era is failing to provide young, energetic and full-of-ideas humans with job opportunities. By suppressing the youth from engaging in the labor market, we fail to take advantage of the most precious asset of the humankind: the ambition of the youth. As an inevitable consequence, there will appear a sense of vulnerability and inadequacy among youths, which can lead to other social disbalances and conflicts in the long run (Check out our source). All of us were affected by the last decade’s global recession and financial crisis, but especially youths holding part-time employment positions while studying, as these jobs offer less protection. According to Eurostat, in 2015 youth unemployment was higher than 15 percent in 21 European countries, despite the taken actions to create more job opportunities.

Unemployment: a key part of poverty

As unemployment results in reducing one’s income, the two problems are often tied together and often even inter- changed. In most developing countries productive employment is seen as a method for poverty eradication, for the lack of job opportunities, especially among youths has been shown to cause increased criminality. William Wilson states in his publication that high unemployment and poverty go hand in hand, and the characteristics of poor neighborhoods amplify the impact of unemployment. Most of the 43 countries with poverty rates above 18 percent are in Sub-Saharan Africa, 27 of which are among the world’s poorest countries, with a poverty rate that exceeds 30 percent. Economic growth and pro-poor policies that have applied by the government in Sub-Saharan Africa over the last 25 years have repressed the chances of reaching the globally desired 3 percent poverty rate goal by 2030. What is even more alarming is that both the poverty rate and the number of poor has been increasing in this region over the last years and is forecasted to continue this pattern until 2030.

“Globally, extreme poverty continues to be disproportionately and overwhelmingly rural” - World Bank. Poverty and Shared Prosperity 2016. Taking on Inequality

According to the World Bank report, rural poverty is strongly associated with the sector of employment. The extreme poverty rate is higher among agricultural workers, who constitute two-thirds of the extreme poor. However, a notable part of the non- agricultural employees live in extreme poverty. Numbers never lie: rural areas have a poverty rate three times higher than urban areas, which make the rural account for almost 80 percent of the total poor. According to the most recent available estimates published by the World Bank, in 2013, 10.7 percent of the world’s population lived on less than US$1.90 a day.

Taking Nigeria as an example

To exemplify the impact of urbanization and poverty on unemployment, we will analyse the the Sub- Saharan African country Nigeria, as it is the most populous nation in Africa with a population of about 173.6 million (2013), GDP of $521.8 billion (2013) and GDP growth of 5.4% (2013) (World Bank, 2014). Despite it being one of the countries with the the world’s highest economic growth rates, Nigeria is struggling with a high level of poverty, having 63% of its population living below US$1 per day. The poverty issue in Nigeria can be traced down to the long term ethno-religious conflicts, civil unrest, political instability and the income inequality, meaning there are more rural poor than there are urban poor. This is the reason behind the mass rural-urban migrations, that only increase the unemployment levels even more, as only a few of the 1.8 million youths that enter the Nigerian urban labour market annually (Falusi, 2014), end up actually getting a job.

According to this paper, the number of the unemployed in Nigeria rose from 7.5 million in 2007 to 16.07 million in 2011. This also means that the unemployment rate jumped from 12.7 to 23.9 in those years. Yet again, the biggest proportion of unemployed are youths of the age range 15- 24 from rural areas- 38.2 percent. The consequences of high youth unemployment and underemployment are appalling, as they increment into conflicts, youth restiveness and militancy (such as Niger Delta youths; Movement for Actualization of Sovereign State of Biafra, Oduduwa People’s Congress; Boko Haram scourge), and participation in organized crimes.

Another concern regarding Nigeria is that both the 2015 estimate and the 2018 nowcast for Nigeria are based on household survey data collected in 2009, which was increased at the rate of GDP per capita growth rate. This means that there is actually a high chance that the data we have right now is based on assumptions, and the real poverty state is actually in the dark. Check out our source

To work or not to work

For countries that are struggling with poverty, there is also the issue of people settling for jobs that are badly paid or are way below their skill level, due to the lack of employment insurance and social security systems. What this means is that we have no guarantee that those who are counted as “employed” are remotely close to being happy with their job. In fact, the chances are high that they are not. This phenomenon is classified under the term underemployment. The global underemployment rate averages to 17 percent, yet, alarmingly, the rises up to 32 percent in the Middle East, North and Sub-Saharan Africa. We simply cannot ignore the quality of the jobs we provide, especially in low- and middle-income regions. In countries such as Myanmar and Madagascar employment is not only low- 1.6 percent in 2017- a large proportion of the employed are poor and many of them may, in fact, need alternative employment to overcome their poverty. Check out our source

A 2010 ILO Report states “Madagascar is poorer than the average least developed countries, the people of Madagascar have a higher level of literacy and Madagascar itself has enormous mineral wealth, natural beauty, and environmental treasures that, under the right circumstances, can be enhanced and sustained while contributing to development and significant increases in living standards.” This means that the problem is not in the lack of qualitative resources, but rather in their administration, management and distribution.

Unfortunately, the problem of underemployment extends itself further.

What should we do?

While a small rate of unemployment is normal for any economy due to labor market fluctuations, too high youth unemployment, poor job quality and high discrepancy among the rates in different part of the world requires us to take action. The International Labour Conference’ resolution called for “an integrated and coherent approach that combines macroeconomic and microeconomic interventions and addresses both labour demand and supply and the quantity and quality of employment.”(Source: World Employment and Social Outlook — Trends 2019)

The World Bank suggests that we should focus on increasing labor productivity in agriculture and improving human capital, as this will aid labor migration into high-productivity sectors, which is key to poverty reduction. Ademu Wada Attah suggests we should make sure that enough quality jobs exist for young people who seek them through implementing Pro-Growth policies and promoting entrepreneurship. Young people need to be better guided and provided more flexible access to training, which will require finding interventions that actually work. He also recognises entrepreneurship as an important strategy to grasp the potential of individuals and to increase job opportunities: “Anti-poverty strategies in regions with a limited employment can still encourage self-employment based on local resources. For example, they can provide assistance to individuals in creating and operating crafts businesses, low-technology mobile phone repair, and similar small enterprises.”

Moving forward

Entrepreneurship education is one of the most powerful tools to boost job creation and drive innovation. Augmented with a well- functioning support system for entrepreneurs, this strategy might be the long- run silver lining of eradicating extreme poverty and high unemployment.

Add to this an educational, fun and engaging way of accessing support to, and learning about, entrepreneurship basics that anyone with an internet connection can access, and we have a powerful tool to combat this issue. We’re not claiming we offer a solution to this global issue, but we definitely offer a part of the solution.

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