New approaches to measuring unemployment rate

RECENT changes in the parameters for measuring unemployment statistics may have come as a surprise to many. But the National Bureau of Statistics (NBS), umpire of national statistical data, insists the paradigm shift was long overdue and more appropriate for measuring unemployment rate in a nation like Nigeria which has highly entrepreneurial workforce.

The Statistician-General, National Bureau of Statistics, Dr.Yemi Kale, at a recent event said that old methodology for arriving at number of the unemployed which had been in use since 2011 has been replaced by a new one.

Nigeria had, ab initio, adopted a definition and methodology that was thrown up after a workshop in 1997 when the International Labour Organization(ILO),recommended a review of the nation’s unemployment template. It was sequel to the recommendations of that workshop that Nigeria arrived at 40 hours per week benchmark for calculating number of employed, after wide consultations with major stakeholders on employment statistics.

However, given the volume of criticisms and counter criticisms that trailed that formula over time, the NBS decided to review the structure, giving rise to an altogether new definition which now stipulates 20 hours of work per week as valid yardstick for calculating employment statistics in the country.

Under the ILO classification, any worker who had put in up to an hour of labour per day is considered employed, a scenario which when applied in Nigeria will grossly distort the reality of unemployment figures. Meanwhile, before arriving at the 20 hours ceiling, a committee headed by Prof Sarah Anyanwu, a macro economics and social sectors expert was set up to review the suitability of the new methodology.

The committee was made up of participants drawn from the Central Bank of Nigeria(CBN),the National Planning Commission(NPC),National Directorate of Employment(NDE), National Population Commission(NPC),Federal Ministry of Agriculture, Federal Ministry of Labour and Productivity.

Others are Federal Ministry of Finance, Office of the Chief Economic Adviser to the president, Special Assistant to Mr President on Job Creation, and Nigeria Institute of Socio-Economic Research. The committee which had very extensive participation by technocrats also had members of the academia from the University of Ibadan, University of Lagos, and Ahmadu Bello University.

It also had membership from trade unions such as the Nigeria Union of Journalists, Nigeria Labour Congress, National Youth Council, Trade Union Congress, Manufacturers Association of Nigeria, Nigeria Economic Society, and the National Statistical Association.

Equally involved are development partners like the International Labour Organization, World Bank, and UNDP, among others.  According to Mr. Isiaka Olarewaju, Head, Real Sector and Households Statistics, NBS, the bureau was guided by the recommendations of the review committee which deliberated comprehensively on the issues involved in downward review of unemployment methodology among other referral areas.

He emphasized that although the bureau subjected its recommendations to thorough scrutiny ,issues of reclassification of the labour force population, measurement of labour under utilization, sample design to enhance more levels of analysis, and finally data collection and processing system which were recommended have been carried out.

Statistician-General of the Federation, Dr. Yemi Kale

He said the bureau has proactively reproduced the nation’s labour statistics, up to the last five years to give opportunity for comparison of the templates(40 hours bench mark and 20 hours),for purposes of planning and research. “With the availability of the dataset, the first two points have been addressed and the labour statistics have therefore been reproduced.

Unemployment rates for the last five years have been recalculated for purposes of trend analysis. Comparatively, analysis could also be made on the trend of labour statistics, using the old and the revised computational methodology”, he said.

He explained the rationale behind Nigeria’s adoption of a self tailored methodology, given the size of the country and its population within the active workforce age of 15-65 years. Olarewaju said though the NBS agreed with the ILO on the need for a review of the employment standard in use in Nigeria in tandem with other countries which are signatories to ILO international best practices pact, the bureau still needed to adopt a suitable approach to addressing the gap.

“After the revision of the statistical methodology which recommended that the NBS should consider anyone who works for at least one hour a week as employed, the federal office of statistics has been using the ILO global standard of considering any person who works for an hour in a week as employed.

“Nigeria’s unemployment rate then, when compared to other countries remained very low as it is very rare to find a Nigerian who doesn’t work for at least one hour a week.

During the revision of this computation, it showed that the unemployment rate of Nigeria within that period was around three percent which means the percentage of unemployed people at that time was very low.

“Nigerian wasn’t the only country that later realized that the situation in the country wasn’t the same with others when compared to advanced countries where the enumeration for working in an hour a week was sufficient enough to cover the basic expenses for that whole week. That resolution by the ILO mission in Nigeria was discussed and there was an initiative to organize a workshop in 1997.

It was the outcome of this workshop in 1997 that led Nigeria to think of increasing the number of hours for those to be classified as fully employed to be 40 hours and above”, he said.

On the reliability or otherwise of the new methodology of 20 hours per week for calculating statistics of the employed in Nigeria, Olarenwaju argued that the new system is just as dependable as the former, adding that the bureau had taken the initiative to produce statistics using both the previous and the latest benchmark in order to put the records straight.

“If anyone has a problem with the new method of computation he or she can still use the old method; what we do not want is for anyone to think that the unemployment rate has dropped from 25.4% to 7.8%  which is representative of the first quarter of 2014 . “For the last quarter of 2014, the unemployment rate using the new formula is 6.4% but if the old computation is used, the figure changes to 24.3%, so no one should think that the unemployment rate has dropped from what it used to be in 2013, which was around 25.1 to 6.4%.

That is why we computed both old figures and the new one, just so that when Nigerians say that those who have not worked for 50 hours in a week are not employed the data is there for them to compare and rectify”, he noted.

The NBS Real Sector and House Hold Survey department boss, also took a swipe at critics who imply that the bureau was under-representing facts of actual unemployment volume across the country, saying that it was erroneous for critics to imply that the agency claimed that only 1.5 million Nigerians are now unemployed out of a total of estimated 170 million people.

“Some people said that the Statistician General released a figure reporting that only 1. 5Million people among the population of the labour force are unemployed.

The person thought that by that statement, we implied that those who did nothing daily were 1.5 million, but that thinking was wrong. By the figures we released, what we meant was that those people who did not find anything to do at all within a reference period of 7 days was 1.5million”, he said.

He emphasized that such figure, using the reference period cannot be tagged as a mere 1.5million,since among the group of people who are unemployed, many find menial jobs to do and when the duration of hours spent during such time is calculated, it amounts to more than an hour a week.

“By ILO standard, the only people who fall into the category of “doing nothing” or “unemployed” are those people who work for less than 1 hour in a week. But in our case, we classify a person who works between 0-19 hours in a week as “unemployed” and those who work between 20-39 hours in a week as time related unemployed because we found that those in this category have the ability and capability to work more than they are suggested to.

It is like asking a driver to work from 8am to 12pm, then you employ another to take over and work from 12pm.From this analogy, the driver’s production capacity for the day has been reduced and you have asked him to go home and do nothing for the remaining hours of the day”, Olarewaju said.

He further stated that unemployment statistics is not calculated based on the number of the total population, but on the size of the labour force. He said this has to do with the economically active population in Nigeria which consists of people within the ages of 15-65. Persons below 15years, he said, are not economically active just as those above 65 are equally not economically active in the labour force.

According to him, figures released by the Statistician-General, saying that those who worked 40 hours and above in a week are about 52million,was computed from the population of the labour force which was given as 72.9million as at the last quarter of 2014.The population of Nigeria he said is estimated to be around 170million.Olarewaju said if 72.9million is the population of the labour force, then it goes without saying that the labour force constitutes less than 50% of the entire population of Nigeria.