In August 2023, the National Bureau of Statistics (NBS) issued the Labour Force Survey conducted with the new unemployment measurement methodology.
The survey ignited an active public discussion due to its key findings deemed controversial by labour market experts.
The most heated part of the conversation is whether the new unemployment measurement system is effective enough to address the interests of a regular Nigerian worker and positively influence unemployment management and the overall economic prosperity of the country.
One of the most conspicuous findings is the employment rate of 15 and above year-old Nigerians standing at over 73% from Q4 2022 to Q1 2023.
The number is based on the new employment metric, according to which every individual who works at least 1 hour per week is considered employed.
The definition poses a sharp contrast with the previous measurement system, where the unemployment rate accounted for over 33% and included those who worked less than 19 hours per week.
According to the new methodology, the 33.4% figure represents the underemployment rate of Nigerians working less than 40 hours weekly.
To compare, the unemployment survey “How Do Young People Survive Without Jobs” issued in Q4 2022 by Jobberman Nigeria confirmed that over 50% of Nigerian youths are unemployed and underemployed.
Does the drastic change in numbers mean Nigeria’s unemployment has dropped significantly?
The unemployment measurement framework revision is particularly outstanding in light of the recent minimum wage increase moves, such as the National Pay Policy draft in work and the urge of the Trade Union Congress of Nigeria to provide a six-fold increase of the N30,000 minimum wage.
While this minimum income standard is still officially accepted in Nigeria, it is safe to deduce that a worker who spends from 1 to 19 hours per week doing a for-profit job often does not earn even N30,000 amidst the over 24% inflation.
Although the credibility of the new methodology`s framework, developed upon the International Labour Organisation guidelines, is unquestionable, practical application is challenging.
The current state of the Nigerian economy is not sufficiently conducive for citizens to work less time and earn at par with those who work more.
By the end of December 2022, as the new Labour Force Survey opens with Q4 2022 data, the minimum wage equated to about 40 dollars according to the parallel market rates. It was already lower than the minimum wage in at least 22 African countries.
Evidently, if these countries adopt the same methodology, their workers will turn out to be more financially sustainable and earn more per hour on average.
The updated unemployment measurement methodology also allows for little space to compare workers’ income to occupation.
Imagine two workers: one works at a company for 16 hours a week, commuting time and money, while the other is a self-employed small business owner who works the same hours from home.
Even if they make the same amount overall, the hourly pay will differ because of commuting costs.
Now, think about a farmer. They don’t earn by the hour; growing and selling their crops takes days or months.
A farmer selling in the market spends a lot before making a profit, while a farmer who grows for themselves spends less because they consume what they produce at home.
Moreover, we have no definite working age limit to measure income adequacy, starting from 15 years old under the new framework.
In Nigeria, age-based discrimination remains a problem, affecting both young and elderly workers who may be underpaid.
Employers might unfairly lower hourly wages, citing fewer dependents or perceived skill differences. Older workers might also earn less due to health conditions and slower work.
To address this, we need to focus on improving working conditions to ensure every worker can earn enough to cover daily expenses or feed their family weekly.
We must also ensure that vulnerable citizens have job opportunities, even if it’s just for one hour a week. We can only reduce unemployment statistics that align with Nigerians’ living standards by addressing these issues.
New Employment Measurement and the Informal Sector – Gaps to Close
When examining employment, a pivotal aspect to account for is the tax implications associated with self-employed workers.
In Nigeria’s economic context, self-employed individuals typically belong to the informal sector because many of them operate without official registration, which means their business activities go unnoticed by the government.
According to the new NBS survey, the share of informal Nigerian workers currently stands at over 92%.
The figure is worrisome as it means that the income of almost 100% of employed Nigerians remains in the shadow.
In turn, it signifies that most self-employed individuals pay less personal income tax because part of their income from business activities is obscure.
Meanwhile, taxation plays a vital role in a country’s economic landscape as it expands the social support net, including that for the working-age population who currently contributes nothing to the national economy and the “fine” is eventually paid by the government in the form of lower national productivity
Lately, there has been an ongoing conversation initiated by the Federal Government to remove multiple taxation and ensure that unregistered self-employed individuals pay only VAT.
Although taxes on the informal sector are frequently viewed as pressure contributors, it seems quite rational with the new unemployment measurement system.
Since informal workers qualify as employed, their income is subject to VAT or any similar service tax, payment of which will let them transition to the formal sector.
The funds can be further distributed to eliminate barriers towards upskilling or sustenance opportunities for those who are actively searching for employment and can not acquire it without external support.
Here a crucial consideration emerges: do self-employed individuals meet taxable employment criteria and can be legitimately taxed as a business?
Practically, self-employed people own an MSME with regular profit and service recipients, even if their enterprise consists only of themselves as the owner and single worker.
To ensure taxation supports business growth in Nigeria without hindering productivity, only MSME owners who hire employees should be taxed based on their income.
For example, a digital marketing agency owner with a team of three earns more than a solo taxi driver and should pay a higher tax. Informal workers’ income is also affected by whether they serve individuals or organisations.
To encourage informal workers to register and pay taxes, incentives like tax reductions or holidays can be offered to MSME owners who train unemployed youths, provide professional training, or support youth-focused NGOs.
This approach assures informal workers that they will benefit from registering, preserving their dignity, and ultimately creating jobs for future generations.
Conclusion & Recommendations
The unemployment problem in Nigeria transcends changing measurement systems. Beyond changing how we count employed individuals, making numbers work for Nigerians and their tangible well-being is a must.
This is a collective task of the government, employers and development partners who must complement one another to help citizens.
The government should update the employment legislation to reflect different categories of workers and establish a justified taxation system, employers mobilise teams to protect their employment, and development partners design and deliver upskilling programs to increase workers’ opportunities for paid work.
Jobberman Nigeria contributes both as a development partner actively taking part in skills training in collaboration with other impact-driven organisations while providing a platform linking employers with resourceful workers.
For lower unemployment figures to be the living reality of Nigerians, all stakeholders need to create a labour accounting repository and exchange unemployment data in real time to plan where to channel support to.
Once we know how many employed in all forms and unemployed individuals we have at a given period, what the underlying unemployment and underemployment reasons are, and what measures we have at hand to improve outcomes, our strategies will become truly effective.
About the Author
Oreoluwa Boboye is the CEO of Jobberman Nigeria.