- Introduction: One of the major causes of unemployment is rapid growth of population. Here, we have to distinguish between growth and size of population. Rapid growth adds to the size of population. If the size of population is big, characterized by malnutrition, hunger, disease, illiteracy, unemployment, and low income, then rapid growth of population is a multiplier of curse. Rapid growth of population contributes to severe poverty in developing countries. Developing countries make efforts to reduce poverty without attacking its root cause. They start from the wrong end. In fact, they take population as a golden gift of nature. What do you make of a population whose characteristic is a non-starter and an obstacle to the process of development?
- Issues: Unemployment has become a major social problem. The failure to create employment is a tragic chapter in the history of development in the developing countries. They may boast of gross domestic product (GDP), but never mention of its distribution. The reason is the perception of failure they want to evade. The reality is that unemployment and underemployment of human resources will future in the hidden chapter of our colorful economic performance.
Despite the dreadful scale of the unemployment problem, there is little reliable information about it. Underemployment, it seems, is even unknown to the policymakers. It is understandable that in developing countries the distinction between unemployment and underemployment is not clear. But, it is not an excuse for not making effort to fathom these undesirable characteristics of poverty.
Underemployment reveals a situation in which workers’ ability to work is not fully tested. It is a situation in which a highly qualified person is forced to engage in menial labor due to lack of demand for his skill. Also, some employees spend their time loitering from one office to another due to lack of sufficient work to engage them fully. In other words, they are overpaid for the work they actually do. This is the situation we observe in government undertakings. Public enterprises, with the 2 exception of a few, care less for productivity as they consider it a non-factor for efficiency. These enterprises are mainly monopolistic and they are not affected by lack of demand for their overpriced goods and services. As sole suppliers they face no competition in the market. So, profit and loss is not a measure of performance. In other words, whether employees are overemployed or underemployed is inconsequential to the survival of the enterprise they work in.
Party functionaries are the most underemployed workers in public enterprises. They are a burden to the enterprise and to the economy to which they contribute very little. They fail to work, but they hamper others from working productively. They spy on those who labor hard. They encourage others in active politicking. Party members threaten their bosses, who happened to be non-partisan. The quality and quantity of work done depends absolutely on supervision. Where supervision is delinked from production of goods and services, enterprises are bound to face losses. Consequently, enterprises close and terminate workers, who would be forced to join the army of the unemployed.
Public enterprises enjoy default on borrowed money, because governments assume their losses. Governments use tax payers’ money to fund failed enterprises. Government owned banks also pile up their bad debt by the order of politicians. Banks are also forced to provide fund to projects that are not credit-worthy. These projects also fail to service their debt. Ultimately, public enterprises, public projects and banks all are bound to collapse. In other words, a vicious circle of poor economic management, inefficiency, rapid population growth and the resultant unemployment sets in.
With shortage of employment opportunities in the rural areas, people are forced to migrate to urban centers of a developing country. The destination of ruralurban migrants is to major cities, where population growth rate is twice as much as the total population growth rate. Studies have shown that policies that promote capitalintensive and labor-saving technologies in the urban centers of developing countries have depressed employment opportunities. Such technologies have been available in the industrialized countries and there have been a tendency for donor agencies and foreign contractors, even local 3 contractors, to transfer capital intensive technologies without modification. Reason given was keeping competitive efficiency at the expense of local employment. Macroeconomic instruments have been used to encourage import of capital intensive technologies. Concessional Interest rates, overvalued exchange rates, reduced import tariffs have been adopted to reduce private cost of imported capital equipment. All these measures, including high wage rate, countered the creation of urban employment. The capacity to absorb labor requires that wage rates should not be as high as to discourage the employment of labor. High wage rate encourages the use of capitalintensive and labor-saving technologies. Moreover, it attracts labor from rural areas to the cities, where full-employment is scarce. This reveals that the burden of absorbing the increase in the labor force falls certainly on agricultural sector. This sector absorbs about 80 percent of the labor force in the developing countries. Only a few of the new labor force is engaged in the non-agricultural sectors. A strategy for agricultural development should, therefore, focus on increasing employment opportunities. It should apply labor-intensive and capitalsaving technologies that raise agricultural productivity and income. Studies have shown that new varieties and intensive irrigation are not dependent on substitution of capital for labor. In other words, they contribute to productive agricultural employment and income. But, this has its own danger.
Rich farmers may prefer to invest in agricultural machinery rather than employing high cost labor, where government policy promotes the use of agricultural machineries. The agricultural strategy should, therefore, be carefully crafted to ensure a balance between productive agricultural labor and profitable investment in the sector. Here, high cost implies low profit and vice versa.
The perseverance of the unemployment problem requires the elimination of policies that undermine employment opportunities in every sector. This requires positive policies and programs that minimize unemployment and underemployment. Unskilled labor could be used to meet urgent needs of the labor force. The construction of houses, schools, health facilities, irrigation canals, and rural roads would provide employment for the unskilled workers.
Such 4 programs, however, should not be designed to benefit politically favored contractors and party affiliates. This group of contractors tries to maximize profit through shoddy work, not subject to supervision. The policy and program just stated would result in employment and income generation. Additional income generates more demand for goods and services in and around project areas. This creates additional employment for rural people engaged in the service industry. However, developing countries restrain from applying such policies and programs assuming that they lead to increased demand provoking inflation and shortage of foreign exchange. These problems could be reduced if foreign aid with positive terms and conditions and relevant fiscal or tax policies are applied. Such measures require capable professionals who could properly handle foreign assistance and fiscal policies.
Both agricultural stagnation and industrial unemployment combine to create the gravest socio-economic havoc in the developing countries. Rural stagnation and high fertility stimulate rural to urban migration. The unemployment problem, rural as well as urban, should be solved to avoid social and political problems in a developing country.
- Conclusions and Recommendations
- In Ethiopia, the employment problem is multifaceted. It is a reflection of policy failure at micro and macroeconomic levels. It is, therefore, necessary to design or revise, apart from macroeconomic policies, the population policy, employment policy, industrial policy, agricultural policy, and regional development policy. Here, designing of policy is not as important as implementing it. But, implementation requires professional and institutional inputs. I strongly believe that a good policy is one that is simple to implement.
- Unemployment and underemployment are results of the failure of the economy to absorb the increase in the labor force due to increase in the rate of growth of population. Though the existing population policy of Ethiopia is outdated, it needs revision along with health and education policies. These policies should focus on raising capacities of the people of Ethiopia to face the 5 new challenges of the digital age of the 21st century. The curriculum should take into account these challenges.
- Agricultural stagnation is the root cause of all economic problems. This sector is supplier of labor and resources to the other sectors of the economy. It is also a source of market demand for consumer and producers’ goods. It is a major source of foreign exchange. Agricultural stagnation leads to unemployment, shortage of foreign exchange, and shortage of agricultural cash crops and food. It is, therefore, important to fight stagnation through designing of relevant agricultural policy and program. Again this calls for smooth implementation using agricultural professionals who attend the needs of the rural farming communities. It is also important to provide incentives for investors in the agricultural sector. Yet, it should not be forgotten that currently investors complain about bureaucratic redtape and corruption.
- Choice of technology is of the essence. Ethiopia should design a technological policy that focuses on employment creation. Selective application of capital-saving and labor-intensive technologies contributes to employment generation and income. Investors should be encouraged to use technologies that employ more workers. Incentives should be designed to influence the use of relevant and appropriate technologies that contribute to employment and income.
- Currently we observe in Ethiopia the strong pull and push effects that lead to excessive rural-urban migration. This needs to be manipulated by public policies. The rural youth that graduate from regional schools and universities believe that they are entitled to urban high paying jobs. They migrate to urban centers looking for such jobs. But, these jobs are very scarce. These graduates do not seem to have been oriented to rural non-agricultural enterprises. They might end up in frustration and engage in dangerous socio-political undertakings.
Here entrepreneurship is of critical importance in mitigating such problems. These graduates should be oriented toward self-employment in rural non-agricultural activities that is fully supported with land provisions, banking facilities, rural agroindustrial networks, economic and social infrastructure. These activities are the proper duties and responsibilities of a government at all levels, Federal as well as regional.
The Ethiopian Herald March 3,2019
BY GETACHEW MINAS (Economist)
