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Tackling the unemployment and underemployment complexities – What have we learnt from recent global experiences?

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Introduction

It is indisputable that the challenges of ensuring adequate productive and decent job creation, especially for the rapidly increasing youthful labour force in most parts of the globe, have by now emerged as one of the most complex development issues of our times. Consequently, they invariably constitute a major policy preoccupation for governments and other key stakeholders in developed and developing countries alike across the world. In this regard, it is notable that the monthly jobs report of the US Government is always eagerly awaited by all the key stakeholders of the country and even beyond. Similarly, periodic job creation performance of economies of other industrialized and emerging countries also attracts keen interest across the societies. The high rates of open unemployment and underemployment in African countries, including the Gambia, have been major triggering factors in significant brain drain and, worse, rising dangerous migration in recent years, especially across the Mediterranean, as well as recurring social unrests in them.

Given that persistent and high levels of unemployment, especially among the youth, constitute serious threats to social cohesion, stability and sustainable development in all countries, addressing them in a concerted manner has been broadly recognized as essential. To this effect, various initiatives have been put in place for attaining that important development objective. What success rates have been achieved and what lessons can be drawn from recent experiences for the desired rates of jobs creation?

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First things first: What exactly does unemployment and underemployment mean?

Before proceeding, it is useful to recall the key elements of the concepts of unemployment and underemployment and how they have evolved over time as they could provide pointers to more successful solutions to the persisting job deficits.

Traditional economic theory defines unemployment as a situation that “occurs when a person who is actively searching for employment is unable to find work”. Given that the human resources of any society are among its most  precious assets, the state of unemployment is now generally agreed to be roughly  indicative of the health of any economy and state of equalities in the societies. The extent of unemployment is measured by the unemployment rate, which is the number of unemployed persons divided by the total labour force. Over time, different variations of the unemployment rate have emerged depending on what definition of the unemployed and/or what notion of the composition of the labour force is used.

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For instance, in recent times, dampers have been put on the significantly improving US unemployment rate because “the definition of unemployment excludes actual unemployed workers who have become discouraged by the tough labour market and are no longer looking for work”( Mirrian-Webster). A phenomenon was observed in the US during the immediate post Covid 19 pandemic months whereby the hitherto unemployed workers stopped the active job searches because they felt that the unemployment benefits they were receiving exceeded wages they expected when they reentered the workforce. One difference between the advanced welfare states and developing countries like the Gambia is that the “discouraged” unemployed workers in the former could afford to stop the active search for jobs at given times because of the existence of unemployment insurance schemes or other welfare benefits like food stamps/subsidies that guarantee them minimum standards of living while being unemployed.

But the phenomenon of unemployment is not singular; it has different dimensions, with each requiring different solutions. In the literature, four main types are normally focused upon:

Structural Unemployment

Structural unemployment occurs because of an absence of demand for a certain type of worker. This typically happens when there are mismatches between the skills employers want and the skills workers have. The skills/available jobs mismatch is quite common in developing countries like the Gambia. Major advances in technology, as well as existence of much lower labour costs overseas and consequent relocation of production facilities to the latter, has led to this type of unemployment in many advanced industrialized countries.

When workers lose jobs because their skills do not match jobs being offered or are obsolete or still because their jobs are transferred to other countries, they are structurally unemployed. This type of unemployment is characterized as structural because the structure of the economy has changed, not because of the recurring cyclical changes. Addressing it may require relatively difficult measures, that are also likely to yield the desired results only in the medium to long-term. The recently launched University of Science, Engineering and Technology (USET) by the Gambia Government could be said to belong to the category of possible solutions for structural unemployment in the country.

Frictional Unemployment

Frictional unemployment occurs because of the normal turnover in the labor market and the time it takes for workers to find new jobs. Throughout the course of the year in the labor market, some workers change jobs. When they do, it takes time to match up potential employees with new employers. Even if there are enough workers to satisfy every job opening, it takes time for workers to learn about these new job opportunities, and go through the established recruitment processes. Unemployed university graduates could belong to this category as during the time they are looking for jobs after graduation they are frictionally unemployed. This phenomenon is currently being observed in many African countries, including the Gambia, with university graduate unemployment rates persisting  in the double digit ranges.

Cyclical Unemployment

Cyclical Unemployment arises from the ups and downs in economies, normally referred to as business cycles or booms and bursts. For instance, when the economy enters a recession, many of the jobs lost are considered as cyclical unemployment. Thus, cyclical unemployment increases during recessions or bursts and decreases during recoveries or booms. The massive job losses during the Covid 19 Pandemic could be said to belong to this category as well.

Seasonal Unemployment

Seasonal unemployment occurs when people are unemployed at certain times of the year, because they work in industries or enterprises where their services are only needed during specified periods of the year. Examples of industries where demand, production and employment are seasonal include tourism and leisure, farming and construction. Seasonal unemployment has been a clearly observed phenomenon in the Gambia, whether in the dry seasons in the case of agriculture or off seasons in the case of tourism.

The more predominant form of unemployment problem in developing countries is the phenomenon of underemployment. Underemployment characterizes situations where a person holds a job that does not correspond to his or her qualifications or where the person is not fully occupied. The notion of underemployment has three major dimensions: overqualification, whereby people do jobs that do not correspond to their skills or academic qualifications, like university graduates; involuntary part-time, whereby workers who would otherwise have wanted to be employed full-time could only find part-time work; and over-staffing or hidden unemployment. Underemployment is predominant in developing countries, including the Gambia, notably in rural and peri – urban areas, where the informal sector dominates.

why are the complexities of unemployment so persistent?

In an article I published in at a different time and context, I posed the question: “why the global community, with all the enormous resources and intellectual power at its disposal, has apparently failed to crack the complexities of unemployment and underemployment confronting nations across the world for such a long time?” I postulated that this situation puts on the spot the highly qualified professionals and policy makers as well as the commonly accepted approaches and strategies for addressing unemployment issues

Over the past decade and a half, the phenomena of unemployment and underemployment have increasingly preoccupied policy makers across the world, without any exception. At the height of the financial crisis in 2008, the unemployment rates in the US deteriorated sharply to 8% from some of their lowest rates of 4%, at the peak of Bill Clinton’s Presidency in 2000, while the average jobless rate exceeded 10% in the EU as well as emerging Latin American and Asian countries. In fact, in countries like Italy, Spain and Greece, jobless rates among the youth reached 30% and have remained there for a prolonged period of time. Compare all this to what for a long time had been considered by mainstream economists as the “normal” or “acceptable” unemployment rates of 4-5%. In most developing countries like the Gambia excessively high rates of youth unemployment, up to 50 to 60% in some cases, has emerged as major challenges for policy makers.

There is consensus that such high and persistent levels of unemployment have profound economic, social and political implications. In fact, they constitute significant threats to social and political stability in many countries. Consequently, there has been unprecedented focus over the past few years by the Governments and policy makers in a broad range of countries as well as international development and financial organizations on the issue of unemployment.  Enough time has by now elapsed to allow us to not only comprehend why the unemployment challenges have persisted for such a prolonged period of time but also to draw valuable lessons from some initiatives that have recorded some measure of success.

What progress has been achieved so far?

I believe that the progress (although still incipient) that has been registered in some advanced and developing countries in tackling the unemployment challenges underscore the validity of the above hypothesis. If we take the US as a very good example, right from the outset of his Presidency, President Obama deliberately focused in an intensive manner on reducing the US unemployment rate from 8% in 2008 to the full unemployment rate of 4%, drawing on lessons learnt from the initiatives of President Bill Clinton. Such focused efforts have been maintained by the regimes of Presidents Trump and Biden presently. So far their proactive strategies at reducing unemployment have been successful in large measure in reducing the US employment rate to just under 4%, despite the significant disruptions caused by the Covid 19 Pandemic, which is a notable achievement. The US July 2022 jobs report indicated that the US unemployment rate had dropped to 3.5% as job market recoveries continued in the post Covid 19 pandemic period. UK has also been registering similar successes. Apart from resorting to quantitative easing policies, former British Prime Minister, David Cameroon also launched very ambitious apprentice development or TVET initiatives. His initiatives were maintained and built upon by Prime Ministers May and Boris Johnson. The high rates of youth unemployment in many of the EU countries, notably France, Spain, Italy and Greece are also being steadily impacted upon by similar programmes.

 In Asia, China and India as well as South Korea, in trying to respond to teeming populations, including their fast growing labour forces, embarked on ambitious employment generating growth strategies, with emphasis on industrialization, technological innovation and rural transformation. In many African countries, such as Rwanda, Kenya, Cote DIvoire, Senegal and South Africa, recourse has been made to establishment of Special Economic Zones, innovation, including start ups and promotion of SMSEs. Deliberate efforts have also been made to address skills/jobs mismatches through innovative TVETs.

A common thread that runs through all the measures adopted by these countries is more activist and aggressive policy stances rather than the neoclassical laissez faire approaches, that leaves everything to the market to determine.

There may not be a magic bullet yet to tackling the complex problems of unemployment and underemployment, but experience so far shows that the following approaches could yield measurable positive results, even in relatively short periods of time:

First, more aggressive stances towards growth and employment creation are key, whereby leaders and states must prioritize inclusive growth and adequate productive employment creation in order to effectively address the triple acute needs to absorb the ever-expanding job seekers, ensure quality, decency and sustainability of the jobs, especially for the youth and women, and address specific development objectives of poverty reduction, and gender equality.

Secondly, such aggressive approaches to growth and productive job creation have to be situated in the context of ambitious and well -coordinated medium and long-term plans that aim at agricultural and rural transformation, well managed urbanization processes, promotion of industrial sector expansion, notably the SMSEs and green growth, all underpinned by well- defined complementarities between public and private sector investments.

Thirdly, they also have to address the following multiple challenges: the mismatch between the products of the education systems, especially at secondary and university levels on one hand and the practical requirements of the labour markets on the other (termed as “skills and attitudes issues”); improvement and expansion of TVET education to adequately take into account the rapid technological changes; need for promoting the entrepreneuship spirit among women, youth and school leavers, especially in contexts where the entrepreneurial culture is weak; ensuring access to affordable financing and business development facilities; and technological innovation for job creation.

The author was a former UNDP Africa Regional Support Hub Director.

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