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YOUTH UNEMPLOYMENT AND THE SOCIAL COST OF GOVERNMENT INTERVENTION: The Minimum Wage Myth in Nigeria

YOUTH UNEMPLOYMENT AND THE SOCIAL COST OF GOVERNMENT INTERVENTION: The Minimum Wage Myth in Nigeria

 

Abstract: With a minimum wage increase in Nigeria recently, the unemployment rate has increased from 19.7 percent in 2009 to 21.1 percent in 2010. The efforts of the government to upgrade the skills, confidence and experience of the unemployed appear to have yielded little success. Many youths still find it difficult to secure jobs or earn the minimum wage. This paper argues that the key issues in minimum wage policy is the assumption that both private and public labour markets in Nigeria can adjust seamlessly to increases in minimum wages without quantity adjustments. Using a survey data which purposively targeted graduates from two states in the North West which has some of the highest levels of unemployment, that is Kaduna and Kano, this paper investigated unemployment rates among various demographic groups, at state levels to assess the possible existence of discouraged worker effect and unemployment and underemployment linked to minimum wage legislation. The result shows that many youths are either unemployed or underemployed. They earn below the minimum wage. Some are discouraged from searching for jobs, and other highly skilled individuals have resorted to low skilled jobs for survival. The increase in unemployment and underemployment are indications of a significant output gap and the potential source of social conflicts and crisis. The paper recommends that for the minimum wage policy to be effective, the federal government must plan for expansions of economic opportunities through major infrastructural development programmes.

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