Employment Creation, Poverty and the Structure of the Job Market in Nigeria

Job creation is a central part of the policy of almost all African countries. The problems are particularly acute in Nigeria where over the period of the early 2000s there was a substantial decline in the number of private wage jobs. While policy discussion focuses on the extent of unemployment the unemployment rate, as measured in labour force surveys, is low in Nigeria. This is a common finding across a range of sub-Saharan African countries. To understand the nature of the employment problem it is argued in this paper that jobs need to be linked to the incomes those jobs generate. While wage jobs do, on average, produce more income than those in self-employment a critical issue is the extent of the distribution of incomes within occupational categories and the overlaps across these sectors. It is the very low incomes we observe in Nigeria at the bottom of the distribution, for both wage and the self-employed, that creates high exit rates from the labour market – the jobs simply pay too little. In this paper the evidence is reviewed as to how far the more rapid growth of recent years has translated into poverty reduction and how these poverty measures link to job creation. There is evidence that the headcount measure of poverty has fallen and has been associated with a rapid rise in rural employment over the period from 1999 to 2006. It is this sector which has seen the largest increases in income. This was not due to investment in human capital, the return for which has fallen over the period, but to a general increase in the returns to the labour and land owned by the poor.