Unemployment in Namibia: Measurement …

1 FIRST CAPITAL WORKING PAPER SERIES. Unemployment in namibia : Measurement Problems, Causes & Policies Martin S. Mwinga FIRST CAPITAL RESEARCH. 5 Beethoven & Strauss Street, Windhoek West Box 4461, Windhoek, namibia Tel No: 264 61 401326, Fax: 264 61 401353. Web: May, 2012. Working papers are preliminary documents circulated to stimulate discussions and obtain comments. This paper is a working paper in a series of working papers to be published by First Capital Research, a research and consulting division of First Capital Treasury Solutions. I thank trainee research assistants at First Capital who assisted with data compilation. LIST OF ABBREVIATIONS. NLFS namibia Labour Force Survey NHIES National Household Income and Expenditure survey MLSW Ministry of Labour and Social Welfare CBS Central Bureau of Statistics ILO International Labour Organization IMF International Monetary Fund US$ United States of American Dollars N$ Namibian Dollars AGRIBANK Agricultural Bank of namibia DBN Development Bank of namibia TIPEEG Targeted Intervention for Employment Generation Unemployment in namibia : Measurement Problems, Causes & Policies -Working Paper Page | 2.

2 TABLE OF CONTENTS. 1. INTRODUCTION ..8. Aims and Objectives of the Study .8. Research Methodology ..9. Outline of the Research Report ..10. 2. CONCEPTS & DEFINITIONS ..11. The economically active population ..11. The labour force (the currently active population) ..11. Employment .11. Unemployment 12. The population not currently active .12. Types of Unemployment ..13. Structural Unemployment ..13. Frictional Unemployment 13. Cyclical Unemployment ..14. Seasonal Unemployment . 14. Disguised Unemployment ..14. 3. THEORETICAL FRAMEWORK FOR namibia 'S LABOUR 4. namibia LABOUR MARKET DATA QUALITY ASSESSMENT ..19. Data Accuracy, Consistency and Reliability .. 19. Timing of Labour Surveys & Seasonal Adjustments .22. Share of Agriculture Sector in Employment ..23. Labour Participation Rate ..24. Unemployment Comparison.

3 25. Unemployment in namibia : Measurement Problems, Causes & Policies -Working Paper Page | 3. 5. namibia LABOUR FORCE & UNEMPLYMENT ANALYSIS . 26. Characteristics of the Labor Force .. 26. Unemployment Distribution in namibia ..28. Unemployment by Gender ..30. Unemployment by Education Attainment .30. Regional Distribution of Unemployment .31. Urban Vs Rural Unemployment .32. Sectoral Contributions to Employment ..33. 6. EMPLOYMENT INTENSITY, LABOUR PRODUCTIVITY & POVERTY ..37. Aggregate Employment and Productivity Profile of Growth .. 37. Trends in Output per worker (labour productivity) 39. 7. CAUSES OF Unemployment IN namibia 42. Population Growth & Changing Demographics ..42. Rise in Female Labour Force Participation .. 43. Fast growing young unskilled labour force ..43. Low employment intensity of economic (GDP) growth.

4 43. Insufficient Effective Demand ..44. Supply-driven training ..44. 8. RESPONSE TO EMPLOYMENT CREATION ..45. 9. REVISION & RESTATEMENT OF EMPLOYMENT AND Unemployment ..48. Methods used for Unemployment and employment .42. 10. POLICY RECOMMENDATIONS ..56. LIST OF REFERENCES 65. Unemployment in namibia : Measurement Problems, Causes & Policies -Working Paper Page | 4. EXECUTIVE SUMMARY. According to the 2008 namibia Labour Force Survey, namibia has one of the highest Unemployment rates (broadly defined) in the world, currently standing at rising from 36% in 2004. This means more than half of namibia 's economically active population is unemployed, posing major social, political and economic risks, as such high Unemployment can yield devastating effects on social exclusion, crime, and economic welfare, erosion of human capital, death, misery and social instability.

5 Total employment declined from 433850 in 2000 to 333453, more than 100 000. workers lost their jobs, 12500 workers lost their jobs in the formal sector and close to 90 000 jobs were lost in the informal sector in namibia . When segmenting, between formal and informal employment, data shows that informal employment in namibia has been contracting from 43% of total employment in 1993, declining to 33% and 16% of total employment in 1997 and 2008 respectively. This is contrary to trends in other countries at similar income levels with namibia as well as the Sub-Saharan Africa estimates where informal employment stands at between 50% 80% of total employment. Labour market data display some inexplicable large fluctuations, for instance employment figures in agriculture declined sharply by 49%, while fishing sector employment declined by 89% between 2004 and 2008.

6 Unemployment policy and strategies based on current Unemployment rate could fail to produce intended results, not because they are poorly designed but the policy failure could be due to poor data quality. Based on the 2008 NLFS employment figure, namibia 's output per worker (labour productivity) exceeds all country blocks, such as Asia, North Africa, Sub-Sahara Africa and the World combined. The research did not find any convincing explanation to justify namibia 's ranking as the most productive country in the world and the only possible explanation for namibia 's top ranking as the most productive nation on earth could be Unemployment in namibia : Measurement Problems, Causes & Policies -Working Paper Page | 5. found in the quality of both the output (GDP) and employment data used in computing output per worker.

7 A review of namibia 's labour force market trends is not consistent with almost all economic and social indicators, with namibia recording negative growth in its total labour force despite a positive growth in the country population of above 2% per year and youthful population. There is a negative relationship between GDP growth and employment, with the level of employment declining with positive growth of the economy. Despite a high average economic growth of more than 4% over the periods under review, no new jobs were created, and the NLFS shows more people get retrenched when the economy register health positive growth. Unemployment Rate Comparison (Based on 2008 Data). Source: NLFS 19971 200, 2004, 2004; & ILO 2008. Unemployment in namibia : Measurement Problems, Causes & Policies -Working Paper Page | 6.

8 Country Comparison: Output per Worker (Labour Productivity). Output per worker(US$). 25,000. 20,000. 15,000. 10,000. 5,000. - South East Sub- North namibia World East Asia Asia & the South Asia Saharan Africa Pacific Africa Output per worker(US$) 21,998 21,707 16,081 11,499 9,208 6,661 5,166. Source: NLFS (MLSW), NHIES (CBS), National Accounts (CBS), ILO. Employment Intensity/Elasticity by Region Source: NHIES 93/94, NLFS 97-2008, National Accounts, ILO 1997-2008. Unemployment in namibia : Measurement Problems, Causes & Policies -Working Paper Page | 7. CHAPTER 1. INTRODUCTION. In the last two decades (1990 -2010), namibia has been confronted with many challenges and crisis such as HIV/AIDS, floods, various endemic diseases, income inequality, famine and widespread poverty. Underlying all these is the phenomenon of Unemployment and underemployment which has become central features of the Namibian economy.

9 Employment creation provides a direct channel for distributing the benefits of economic growth broadly throughout the population and evidence from around the world suggests that the greater the employment focus, the more effective economic growth becomes in fighting poverty (Khan 2001, Islam 2004). According to the 2008 namibia Labour Force Survey (NLFS), namibia has one of the highest Unemployment rates (broadly defined) in the world, currently standing at rising from 36% in 2004. This means half of namibia 's economically active population is unemployed, posing major social, political and economic risks, as such high Unemployment can yield devastating effects on social exclusion, crime, and economic welfare, erosion of human capital, death, misery and social instability. A country's prosperity depends on how many of its people are in work (employed) and how productive they are, which in turn rests on the skills they have and how effectively those skills are used (ILO, 2010).

10 Although the precise path to poverty reduction differs from country to country, most developing countries that have dramatically reduced their poverty levels have done so by improving employment opportunities for their population. In this paper, I hope to provide a balanced and more realistic picture of the Unemployment problem facing the Namibian economy at present. Aims and Objectives of the Study Unemployment represents waste of resources, a cost to the economy in terms of lost income, and without jobs most people are excluded from taking advantages of opportunities created by the economy. namibia faces an Unemployment crisis, with Unemployment rate at percent in 2008, rising from 34% in 2000. Not only is the Unemployment in namibia : Measurement Problems, Causes & Policies -Working Paper Page | 8.