Impact Of Labour Market Crisis On Developing Economics
(The Nigeria Experience)
The impact of a labor market crisis on developing economies is profound and far-reaching, significantly affecting various aspects of economic and social life. As these economies heavily rely on labor-intensive industries, such as agriculture and manufacturing, disruptions in the labor market can lead to increased unemployment, poverty, and income inequality. Moreover, the lack of job opportunities can trigger a brain drain as skilled workers migrate to more stable economies, further exacerbating the skills gap. This crisis also strains social safety nets and government resources, as increased unemployment necessitates greater welfare spending while simultaneously reducing tax revenues. Consequently, developing economies face significant challenges in sustaining growth and development, hindering progress towards achieving economic stability and prosperity.
This research work tries to investigate the impact of labour market crisis in developing economics using Nigeria as a case study .Using Nigeria as a case study. Using ordinary least square the study shows that there is a negative relationship between labour market crisis and economic growth; Also inflation was found to reduce production output and economic growth. Based on these findings this study recommends that government should apply reconciliation technique with labour unions so that production output would not be affected also policies such as unemployment benefit and reduction in wage inequality should be applied.
ELOHO ELO EDITH
EC/2009/756
Title Page
Approval Page
Dedication
Acknowledgment
Abstract
Table Of Content
CHAPTER ONE
1.1 BACKGROUND OF STUDY
1.2 Statement of the problem
1.3 Research questions
1.4 Objective of the study
1.5 Research hypothesis
1.6 Scope of the study
1.7 Significance of the study
CHAPTER TWO
2.1 REVIEW OF THEORETICAL LITERATURE
2.2 Overview of Nigeria labour market
2.3 Empirical literature
2.4 Limitation of previous studies
CHAPTER THREE
3.1 RESEARCH METHODOLOGY
3.2 Model specification
3.3 Econometric specification
3.4 Economic apriori criteria
3.5 Statistical criteria [first order test]
3.6 Estimation Technique
3.7 Econometric criteria [second order test]
CHAPTER FOUR
4.1 PRESENTATION OF RESULT
4.2 Analysis of the result
CHAPTER FIVE
5.1 SUMMARY
5.2 Policy recommendation
5.3 Conclusion
Bibliography
Appendix 1
1.1 BACKGROUND OF THE STUDY
The Nigeria labour market in recent years has experienced problems such as strikes, unemployment and reduction in productivity.
Labour conflict is a phenomenon that most often takes the form of strikes [where they are permitted] or, as in the public sector in the united states the arbitration procedures. In the United states arbitration is frequently used in the public sector when strikes are forbidden. The arbitrators are generally experts picked by the employers and unions following a procedure setout by the government.
Unemployment is one of the developmental problems that face developed and mostly developing economics of which Nigeria constitute 2/3 [two third] of the population of developing countries. During the last 30 years, the industrialized countries have evolved in different directions with respect to unemployment.
The minimum wage legislation exists in 22 [OECD] organization for economic cooperation and development. Such legislation has generally been framed with the intent to compress wage inequality. But the
effectiveness of the minimum wage as an income redistribution tool is often criticized, since by raising the cost of labour it can have negative effects on out put and employment .Economic analysis suggests that the effects of the minimum wage on employment actually depend on the initial level of minimum wage.
The minimum wage can be set on an hourly, daily or monthly basis .Everywhere thepublic authorities govern the mode of its calculation but it can also be bargained over between employers and employees.
The effect of the minimum wage depend on the characteristics of the labour market to which it applies . However , other theoretical framework s like the monopsony model or the matching model with endogenous labour market participation or job search effort highlight situations which arises in the minimum wage and leads to an increase in hiring.
An active and functioning labour market is important for economic stability .The Nigeria labour market has been experiencing a lot of crisis over the years .Loss of manpower which policy makers fear will adversely affect the national output .
The impact of labour market crisis in developing economies using Nigeria as a case study generates welfare loss in terms of lower output thereby leading to lower GDP, lower income.
1.2 STATEMENT OF THE PROBLEM.
The voluminous literature on the source s of economic growth identified awide range of natural and government imposed stimulants and impediments to growth.
In particular, a huge level of educational attainment, an open – trading regime , a low level of government consumption and political stability are generally seen as having a significant on internal growth is its interest in the effect of institutions on economic growth and the vital role played by the labour market institution s in economic growth . The high rate of labour unionization has been a notable characteristic of a number of economic s with different growth performance s, though probable link between labour unionization and growth has been frequently noted.
This paper attempts to look at the effects of labour market crisis on developing economics using Nigeria as a case study .Strike volume has been studied from a number of viewpoints. One view point attribute strike
propensity to such economic factors as unemployment, inflation and real wage change [faber 1978]. The other view point is the organizational perspective which states that strikes are related to such structural factor as the extent of unionization and the degree of centralization and institutionalization in collective bargaining [BRITTE AND GALLE 1972; SYNDER 1975 ].
Most of the developing economics are faced with numerous labour market crisis and the Nigeria economy is not an exception especially after the [SAP] Structural Adjustment Program. The Nigeria labour market problem could be seen as one of the chronic labour crisis with high wage inequality and unemployment. Since independence there has been series of distortions in the labour market. The market is highly distorted and characterized by insignificant imbalances and industrial actions embarked upon by the Nigeria labour congress [NLC] pressing for improved working conditions for workers .These actions are in the form of strikes .
The academic and non- academic union of the Nigerian tertiary institution are not left out as they embark on several actions to either pressfor improved working condition, redressing the wage inequality problem and in some cases to register their disagreements with
government development program. All these lead to loss of man-hour which policymakers fear will adversely affect the national output.
During the military era, it was not news for workers to embark on strike as it was a potent weapon at the disposal of the workers to drive home their demands.
What then have been the effect of these myriad of the labour crisis on the productivity and the growth of the Nigeria economy? The above questions have not adequately received attention empirically.
Hence, this research work tends to investigate the effect of these labour market crisis on Nigeria economy growth and productivity using Man-hour lost will be proxy to the labour market crisis.
1.3 RESEARCH QUESTIONS
1. What is the effect of labour market crisis on Nigeria economic growth.
1.4 OBJECTIVE OF THE STUDY.
The broad objective of these research is to investigate the effect of labour market crisis on developing economic s using Nigeria as a case
study .Specifically this research work is set out to achieve the following objectives.
1. To investigate the effect of labour market crisis on economic growth of Nigeria.
1.5RESEARCH HYPOTHESIS
The following hypothesis was formulated in line with objective of the study.
1. There is no relationship between labour market crisis and economic growth.
1.6 SCOPE OF THE STUDY
This research is designed to investigate labour market crisis on developing economics using Nigeria as a case study.
This research work covers the period 1980-2010 at which Nigeria economy witnessed liberalization and globalization. This time period witnessed labour unions resistance to new global world thereby leading to series of industrial actions.
1.7 SIGNIFICANCE OF THE STUDY
The crisis that has for a long time beclouded the Nigeria labour market has been a source of worry to policy makers. This worry comes from the fact that industrial actions does not affect only the sector concerned but also affect the general economy because of its multiplier effect .
The study , which is aimed at assessing to what extent the labour market crisis affect s the economy , will be of tremendous importance not only to the Nigerian economy , but also to the global economy since globalization and liberalization have brought global systems together. The findings of this research will also help to improve the current economic reforms that have to do with labour market institutions.
Finally, this research will serve as material for researchers carrying out studies on related area.
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Impact Of Labour Market Crisis On Developing Economics:
A labor market crisis in developing economies can have significant and far-reaching impacts on various aspects of these economies, affecting both individuals and the broader society. The exact consequences can vary depending on the severity and duration of the crisis, as well as the specific characteristics of the economy in question. Here are some of the key impacts:
- Unemployment and Underemployment: A labor market crisis often leads to a surge in unemployment rates as businesses may cut back on hiring or even lay off workers. This can result in a significant portion of the workforce being without a job. In addition to unemployment, there may also be an increase in underemployment, where individuals are working in jobs that don’t fully utilize their skills or education.
- Income Inequality: Labor market crises can exacerbate income inequality within developing economies. Workers in vulnerable, low-skilled jobs are often the hardest hit by job losses or reduced incomes, while those in higher-skilled professions may have a better chance of retaining their jobs or quickly finding new ones. This disparity in economic outcomes can lead to greater income inequality.
- Poverty and Vulnerability: Job losses and reduced incomes can push more people into poverty or make those already living in poverty even more vulnerable. The inability to secure stable and adequate employment can lead to decreased access to basic necessities like food, housing, and healthcare.
- Social Unrest: Persistent labor market crises can fuel social unrest and political instability. High levels of unemployment and poverty, coupled with a sense of injustice, can lead to protests, strikes, and other forms of social disruption. This can undermine economic and political stability in developing economies.
- Reduced Productivity and Economic Growth: A labor market crisis can have a negative impact on overall economic productivity and growth. When there is a shortage of skilled labor or when workers are underemployed, the economy may not be able to reach its full potential in terms of output and innovation.
- Human Capital Erosion: Labor market crises can lead to a loss of human capital. Workers who are unemployed or underemployed for extended periods may see their skills deteriorate or become outdated. This can have long-term implications for the economy’s ability to compete globally.
- Migration: In some cases, labor market crises in developing economies can lead to increased emigration as people seek better job opportunities in other countries. While this can alleviate some of the unemployment pressure, it can also result in a “brain drain” as skilled workers leave their home countries, which can further hinder economic development.
- Government Fiscal Pressure: Governments often face increased fiscal pressure during labor market crises. They may need to allocate resources to support unemployed individuals through social safety nets or job training programs, which can strain public finances.
- Informal Labor Sector Growth: As formal job opportunities shrink during a labor market crisis, the informal sector may grow. While this can provide a source of income for some, it often lacks job security, benefits, and legal protections, contributing to economic insecurity.
- Policy Responses: Labor market crises often necessitate policy responses from governments, such as stimulus packages, job creation programs, and labor market reforms. These policy measures can help mitigate the negative impacts of the crisis and support recovery.
In summary, a labor market crisis in developing economies can have profound and multifaceted impacts on individuals, communities, and the overall economy. The consequences can be long-lasting, underscoring the importance of effective policies and strategies to address and recover from such crises.