By Mike Adeyemi
Unemployment occurs when factors of production lay un-used, e.g labour. The basis for compiling Nigeria idleness statistics distorted a number of times in the last two decades. The unemployment rate is the percentage of the labour forces that are without a job but are registered as being willing and available for work. Of course, some people without a job are really looking for work but have not bothered to register as unemployed. These people will not be included in the official statistics for the registered labour force, nor will they appear as registered unemployed. Yet, from an economic viewpoint, such people are in the labour force and are unemployed.
Unemployment is a stockpile concept measured at a point in time. Like a pool of water, its levels rise when inflows (the newly unemployed) exceed outflows (people getting new jobs or quitting the labour force together). Economist used to classify unemployment as frictional, structural, demand-deficient, or classical. But, how can we tame high rate of unemployment?
The sky-scraping velocity of unemployment in Nigeria can by far be check-mated perhaps the policy makers adopt a hardnosed and holistic gauge to discipline the scourge. Perhaps being asked, “What is the best way to feud unemployment”?
“For unemployment to be explained, what determines the level of employment in a capitalistic economy should first be explained?” If employment could be explained, then unemployment could be explained too. In attempting to identify the cause of employment, neo-classical economist reasoned as follows;
• the level of employment is directly related to the level of production. This is what the economist called “Multiplier” i.e is the ratio of the change in income to the initial change in investment expenditure that led to it. That is, the numerical co-efficient showing how large an increase in income will result from each increase in investment. In other words, the multiplier is the number by which the change in investment must be multiplied in order to get the resulting change in income.
• In a modern capitalist economy, the level of business production will be determined by the amount of planned spending to purchase business product, or aggregate demand. Business will adjust the level of production to accommodate the demand for their products.
• Since employment depends on production and production responds to spending, the level of employment in a capitalist economy is ultimately determined by the level of planned spending in the economy.
Now, using this simple but coherent analysis, the cause of high national level of unemployment was apparent. If a high level of unemployment existed, it was because spending for business production was insufficient to cause business to operate at a full employment level of production. Thus, insufficient spending was identified as the cause of unemployment. To cult tale unemployment, aggregate demand had to be increased. Aggregate demand is the amount that firms and households plan to spend on goods and services at each level of Income.
However, it is apparent that the large-scale of unemployment was not dealt with very effectively in the classical macroeconomics theory. Basically, the neo-classical answer goes back to the circular flow of income, identifying the individual components of the spending stream and what determines the amount of spending in each component. Keynes looked at the determinants of planned consumption spending and planned investment spending. He concluded that there are times when these two spending sources will be inadequate to give us full employment and that the government, as the third major spending sector, should step in and boost planned spending and aggregate demand to the desire level.
“What were these determinants? Consumer spending (and saving) depend primarily on the level of income. The habits of consumers were relatively stable and that they would spend a consistent fraction of an increase in income. Investment demand, however, was much more volatile. It depends on expectations, interest rate, changes in final consumer demand, and variety of other factors. Government could offset fluctuations by rising its own spending when investments were low and cutting back government spending when investment demand was high. Private sector decision “sometimes leads to inefficient macroeconomic outcome which require active policy responses by the government.
Putting all this together, we can summarize this argument for government fiscal policy intervention in the economy as follows;
i. Macroeconomic equilibrium does not ensure that the economy will have full employment with price stability.
ii. Instability in the private sector is the major source of macroeconomics problems.
iii. Only the government can be counted on to act in the social interest.
iv. This economic hypothesis provides the government with an explanation on how income levels can be changed by government intervention.
The exceptional pose of this viewpoint is a stern view to the Nigerian government to apply the above apparatus in verdict last solution to the scourge. It would equally suggest a reduction in interest rates and the government should have huge investments in infrastructure and industries directly to create employment which, itself, will stimulate demand.
A nationwide quandary can easily be tackled on a sheet of paper by a farsighted leader. As we look at the society today, we see an urgent need for visionary leaders. Statistics reveal that young people commit majority of the evils that are perpetrated in our society. These are youths upon whose shoulders the future of the national rest. And that is why whenever there is a public outcry on the restiveness of youth in Nigeria; one would not dither to apportion blames on the leaders.
Therefore, it is the government responsibility to ensure that the economy achieve a level of national income which is consistent with full employment and price stability.