The study determines the effect of Government expenditure on unemployment rate in Nigeria for the period of 33 years (1981 – 2014). The focus of the research was to determine the cause and effects of Government expenditure on health and education on unemployment rate in Nigeria. The methodology adopted for the study was ordinary least square (OLS) involving the student’s T-test, to test the significance of the individual parameter estimate, the F-test, to test the significance of the entire regression plane, the R2 and Adjusted R2, to test the joint influence of the explanatory variables on the dependent variable. Finally, Durbin-Watson’s statistics (DW) was used to check the presence or absence of serial correlation on the data. The study observed that the government expenditure on Health and education has a positive and insignificant relationship on unemployment rate. Thus, this study recommends that urgent attention should be accorded to rising unemployment and the Nigerian government should reduce unemployment rate through direct investment on Health and education sectors of the economy in order to enhance productivity skills of the labour force and formulate fiscal policy that will monitor the channelling of public funds to avoid waste of resources as observed from this research work. This would protect the economy from further negative trends of unemployment growth in Nigeria.
1.1 BACKGROUND OF STUDY:
Unemployment is a situation in which an individual in an economy is looking for job and cannot find one. According to international labor organization (2012), some scholars have argued that increase in government spending can be an effective tool to reduce unemployment rate. According to Keynesian view, government could reverse economic downturns by borrowing money from the private sector and then returning the money to the private sector through various spending programs. High levels of government consumption are likely to increase employment, profitability and investment via multiplier effects on aggregate demand. Thus, government expenditure, even of a recurrent nature, can contribute positively to the reduction unemployment rate in Nigeria. On the other hand, endogenous growth models such as Barro (1990), predict that only those productive government expenditures will positively affect the long run growth rate.
Some studies suggest that increase in government expenditure on socio-economic and physical infrastructures impact on long run growth rate. For instance, government expenditure on health and education raises that productivity of labour which reduces unemployment and increase the growth of national output. (Barro, 1990; Barro and Sali-i-Martin, 1992; Roux, 1994; Okojie, 1995; Morrison and Schwartz, 1996).
A difference in the living standard among citizens is influenced by unemployment rate and productivity. This is often the case, even though it is recognised that labour is not the only input utilised in the production process.(NBS,2014) .Hence, any country with high rate of unemployment as found in Nigeria is often characterized by very low productivity, low standard of living , Inadequate health facilities and law standerd of education .(NBS, 2014)
Unemployment and low Government expenditure on education on health has been categorized as one of the impediment to economic progress in Nigeria, Apart of being waste of resources, unemployment generates welfare loss in terms of lower output leading to low income and well-being as stated by Reheem,(1993) and Akinboyo (1987).
In the study of unemployment and Government expenditure in Africa, Okonkwo (2005) identified some of the causes of unemployment; the growth and choice of technology which can either be labour intensive or capital intensive, inadequate attention to agriculture, Inadequate health and educational skills to have access to credit and capital. (Nbs, 2014) identified unemployment rate as the proportion of the labour force that is employed divided by the total number of the labour force.
A country’s capability to improve its national output growth over time depends almost entirely on the size of its labour force (National bureau of statistics, 2014). This in turn propels the country’s productive capacity and hence raises productivity (Qaisar and Foreman-Peck, 2007).This study therefore attempts to measure the extent to which government expenditure on health and education affects unemployment rates and also its implication to national unemployment rate.(Nbs,2014).
1.2 STATEMENT OF PROBLEMS
Despite the increase expenditure on education and health by successive Government over the years, unemployment rate has been on rise with modify condition and devastating consequence on the general living standard of the people. The rise in unemployment rate has led to numerous social vices like drug abuse, armed robbery, prostitution, and most importantly, it has negatively impacted on economic growth as those who are unemployed cannot contribute positively to the nations growth ̸̸ output.
Unemployment has become a major problem in Nigeria and millions of graduates and school leavers are busy roaming the streets in search of elusive jobs Eme (2014). Statistics from the National Bureau of Statistics (NBS, 2015) show that Nigeria’s unemployment rate rose from 21.1 per cent in 2010 to 23.9 per cent in 2011. Also in 2012, 2013 and 2014 unemployment rate was rated as 24.3%, 28.5% and projected at 30% respectively
The relationship between government expenditure and unemployment rate has continued to generate series of debate among scholars. This shows that the unemployment issue has a very effect on the personal well-being of the unemployed and Continuous rise in rate of unemployment and persistence low output are the major causes of poverty in Nigeria (NBS, 2014). Fadayomi (1992) found out that one of the causes of high unemployment is inability to utilize the nations resources effectively especially in rural areas.
John Maynard Keynes (1931) viewed that low values in Government spending on education and health in Nigeria have often been associated numerous constraints facing economic activities notably power and, access to finance, as well as governments policies. In addition, the quality of educational institutions, investment climate and favourable policy support to businesses are some of the major challenges identified over time by business owners especially small and medium scale enterprises, which dominate the Nigerian economy. Keynes 1931). Giving the problem of high unemployment and low Government spending on education and health, it then becomes pertain that there exists a proper understanding between these macroeconomic Variables. This leads to the following research questions:
- What is the relationship between Government expenditure on health and education on unemployment rate in Nigeria?
- What is the effect of Government expenditure on health and education on unemployment rate in Nigeria?
1.3 RESAECH QUESTION
The major question which this research work will attempt to answer is as follows:
- What is the relationship between Government expenditure on education and health on unemployment rate in Nigeria?
- What is the effect of Government expenditure on health and education on unemployment growth in Nigeria?
1.4 OBJECTIVES OF THE STUDY
The main objective of this research work is to ascertain the nature and the relationship between Government expenditure on health and education on unemployment rate in Nigeria. A crucial question that requires an urgent answer is whether the government expenditure on Health and education impact positively on unemployment rate in Nigeria. This study attempts to provide an answer to this question by empirically estimating the effects of government expenditure on health and educational on unemployment rate in Nigeria. There is urgent need to address the observed weakness in the country and encourage increase government expenditure. This therefore gives insight into how unemployment can be reduced to the barest minimum. This will be achieved through these specific objectives below:
- To examine the relationship between Governments expenditure on education and health on unemployment rate in Nigeria.
- To ascertain the magnitude and effect of Government expenditure on health and education on unemployment rate in Nigeria.
1.5 RESEARCH HYPOTHESIS
Based on the above stated research objectives, emphasis will be drown from the following research hypothesis:
Ho: There is no significant relationship between Government expenditure on education and health and unemployment growth in Nigeria.
H1: There is significant relationship between Government expenditure on education and health and unemployment growth in Nigeria. This is represented thus:
Ho = Bo = B1 = 0
H1 ≠Bo ≠B1 ≠ 0
1.6 SIGNIFICANCE OF THE STUDY
The study of Government expenditure on Health and education on unemployment growth is important to the policy makers, student of economies and politicians. To the policy maker, ascertaining the rate of unemployment in the economy would help in their efforts in mapping out policies that would bring the economy to the desired level. The policy maker with the knowledge of the state of unemployment in the system stands the best chance of controlling it through appropriate initiatives like provision of educational and health care facilities programme. This will help in creation of employment opportunities that touches the lives of the population.
Therefore, the significant of this study is to determine the dimension of Government expenditure on education and health on unemployment reduced in Nigeria knowing that a full knowledge of this two variables will enable policy makers to adopt a more effective and efficient policy measures towards reducing the problem of high unemployment rate and low Government expenditure on education and health in other to enhance economic development since growth of labour force provides the basis for adequate output and the supply of goods and services which will improve the welfare of citizens and also enhance social progress of the economy.
1.7. SCOPE AND LIMITATION OF STUDY
The scope of this study is centred on the effect of Government expenditure on unemployment rate in Nigerian economy. This research work is also centred on thirty three years duration from 1981 to 2014. It shall focus on such variables as unemployment rate, Government expenditure on Health and Government expenditure on Education. The regression analysis will be based on the use of time series data extracted from the central bank of Nigeria statistical bulletin.