Download Impact-of-Labour-Market-Crisis-On-Developing

ABSTRACT
An active and functioning Labour market is important for economic stability and
development. Hence, the importance of a stable labour market cannot be
overemphasized. The Nigerian labour market has been experiencing a lot of crisis
over the years, giving rise to distortions in economic activity. This study tries to
investigate the impact of labour market crisis in developing economies using
Nigeria as a case study covering a period twenty eight (28) years between 1980 –
2007. At the end of this study, the findings show that there is a negative
relationship between economic growth and labour market crisis. Based on this
findings, recommendations were made to enhance proper policy intervention by
government and policy makers
CHAPTER ONE
1.1 BACKGROUND OF THE STUDY
Unemployment is one of the developmental problems that faces
developed and mostly developing economies of which Nigeria constitutes
²/3(two-thirds) of the population of developing countries. Most developing
economies are faced with numerous labour market crises and that of Nigeria
is not an exception. The Nigerian labour market problem may be
characterized as one of the chronic labour market crisis with high rate of
unemployment and underemployment statistics, discrimination and wage
inequalities.
The structure of most developing economies Nigeria inclusive is
fundamentally characterized and entrenched in dualism. At independence in
1960, Nigeria inherited an economy that exhibited both extreme
characteristics of reliability on developed economy and economic
backwardness and neglect of majority of the people. The dualism had arisen
from the policy of the white supremacy that underlined the colonial era. The
issue of dualism originated from the imposition of the capitalist mode of
production unto a non-capitalist system (Chinpanluwa and Makwarara
2002). In their words, this situation becomes self-perpetuating and
concretized over time into what is currently depicted in the economy. This
situation evolved from the institutionalization of the majority of the labour
force before independence. The majority of the people were disentitled of
their land, had restricted access to human capital development (through lack
of education and training) and this brought about the built-in constraints that
shaped the future development as well as labour absorptive capacity.
Unemployment has been categorized as one of the major and serious
impediment to social and economic progress. Apart from representing a
colossal waste of a country’s manpower resources, it generates welfare loss
in terms of lower output thereby leading to lower income and well-being
(Akinbayo 1987 and Rabeen 1993)
Unemployment is a very serious issue in Africa and particularly in
Nigeria. Nigeria has a population of over 40 Million unemployed persons.
Indeed, the Nigerian landscape is crawling with a rapidly mutating
population of jobless able-bodied men and women who are frustrated and
whose disempowerment accounts largely for the reign of cynicisms in the
country and a high mortality rate. We should realize that from the onset, the
unemployment problem is a political economy issue which economic
reforms have failed to address and hence cannot be addressed through
market forces. The Nigerian economy because of its relative diversification
and level of development in the African regions have potentials for
exploiting the benefits og globalization. However, the dualism problem is
militating against the realization of its potentials. The economy needs rapid
growth to absorb the growth in the labour force.
The evidence from the recent experience suggest that large savings in
economic activity associated with financial boom-bust recovery cycles have
consequences for growth and labour market conditions in developing
countries. Labour market conditions deteriorated in all countries with the
outbreak of globalization. Indeed, it appears that reduced income and
unemployment in unorganized and informal markets have been the adverse
impact of globalization on poverty and inequality. Decline in wages and
growing unemployment combined to produce a sharp increase in poverty
throughout the developing economies (Makwarara 2002)
The labour market has increasingly witnessed crisis in the
globalization era. A considerable number of studies have shown that the
inequality of earnings for workers around the world has widened with the
outset of globalization and the rising wages of skilled workers relative e to
unskilled workers is an important cause of this increase in inequality.
Various explanations exist for the rising relative wage of the skilled
compared to the unskilled worker in Asia, Latin America and U.S. during
the 1980’s and 1990’s (Lewis 2001)
It is also observed that economic growth rates in the developing
countries are insufficient to absorb the growing pool of unemployed labour
has been estimated that mass unemployment among the semi-skilled and
unskilled will not fall significantly below 30% in the medium term. It is
noted that unemployment is structural and will not be significantly reduced
in the coming decades without major state intervention (Lewis 2001).
1.2 STATEMENT OF THE PROBLEM
The voluminous literature on the sources of econ0omic growth has identified
a wide range of natural and government imposed stimulants and
impediments to economic 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 positive
effect on growth
A relatively recent development in the literature on internal growth is
its interest in the effect of institutions on economic growth and the vital role
played by the labour market institutions in economic growth. This research
work considers the role of labour market crisis on economic growth of the
developing economies. The high rate of labour unionization has been a
notable characteristic of a number of economies with different growth
performances, though an 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 economies using Nigeria as a case
study. Strike volume has been studied from a number of viewpoints. One
viewpoint, attribute strike propensity to such economic factors as
unemployment, inflation and real wage change (Faber 1978). The other
viewpoint 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 (Brittand,
Galle 1972: Synder 1975)
Most of the developing economies are faced with numerous labour market
crisis and the Nigerian economy is not an exception especially after the
structural adjustment program (SAP) era. The Nigerian labour market
problem could be seen as one of the chronic labour crisis with high wage
inequality and unemployment statistics. Since independence there has been
series of distortions in the labour market ranging from industrial actions
embarked upon by the Nigerian 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
institutions are not left out as they embark on several strike action to either
press for improved working condition, redressing the wage inequality
problem and in some cases to register their disagreements with of
governments development programme. All these lead to loss of man-hour
which policy-maker fear will adversely affect the national output.
During the military era, It was not news for workers to embark on
strike as it was the one most potent weapon at the disposal of the workers to
drive home their demands. The Obasanjo Administration has not been
spared from the workers wrath as workers have embarked on strike actions
severally to press for their improved conditions which are often times
contained in the national economic empowerment and development
strategy(NEEDS) which ii the policy thrust of the Obasanjo Administration.
What then has been the effect of these myriad of labour crisis on the
productivity and the growth of the Nigerian economy? Do these crises arise
from economic growth or does economic growth arise from these industrial
crises? The above questions have not received adequate attention
empirically. Hence, this research work tends to investigate the effect of these
labour market crises on Nigerian economic growth and productivity. Labour
market crisis in this research work will be proxy to man-hour loss as a result
of the crisis.
1.3 OBJECTIVE OF THE STUDY
The broad Objective of this research is to investigate the effects of
labour market crisis on developing economies using Nigeria as a case study.
Specifically this research is set out to achieve the following objective:
1. To investigate the effect of labour market crisis on the economic
growth of Nigeria
2. This research will also explore other variables that affect GDP and
hence on the labour market.
1.4 RESEARCH HYPOTHESIS
The following hypothesis were formulated in line with the Objectives of
this research work to guide the research
1. Labour market crisis has significant impact on the economic growth
of the economy
2. Labour market crisis have negative impact on economic growth.
1.5 SCOPE OF THE STUDY
This research is designed to investigate of labour market crisis on
developing economies using Nigeria as a case study. This research work
covers the period 1985 – 2005. The choice of this period was predicted on
the fact that this period witnessed liberalization and globalization with the
labour union’s resistance to this new global world thereby leading to series
of industrial action where labour union sees strike a useful tool.
1.6 SIGNIFICANCE OFN THE STUDY
The crisis that has for a long time beclouded the Nigerian labour
market has been a source of worry to both policy makers and economy
watchers. This worry comes the fact that industrial actions does not affect
the sector concerned but also affects the general economy because of its
multiplier effect.
The study, which is aimed at assessing to what extent the labour
market crisis affects the economy, will be of tremendous importance not
only to the Nigerian economy, but also to the global economy since
globalization and liberalization has brought global economic systems
together. The study or research will be significant also to international
agencies – most importantly the international labour organizations and the
world trade organization. The study will make available to them the
adequate information on the relationship between labour market crisis and
economic growth. The Nigerian planning commission will also find this
research very relevant as it will make available to it adequate information
needed for policy formulation as it affects labour institutions. 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 a material for researchers carrying out studies in related areas.