Rising youth unemployment in Ghana, a concern. Is National Unemployment Insurance Scheme (NUIS) the solution?
The future of every nation depends, to a great extent, on the quality of investment made in its youth today. This is because the Youth represents a significant source of human capital and are also key agents for socio-cultural, economic, and political development in addition to driving technological innovations worldwide. Luckily for Ghana, successive governments have long recognized the youth as the true wealth and future of the country. Consequently, policies that would empower the youth for effective participation in the national development agenda have become a key element of national policy. As such, this led to the development of the National Youth Policy (NYP) in 2010.
However, more than a decade after the NYP was developed, the youth in the country continue to face several challenges which recently led to the #FixTheCountry campaign– a youth movement that demonstrated against recent economic hardships in the country. Of major concern to this movement, is the rising unemployment rates. Back in 2017, the Ghana Statistical Service (GSS) estimated that the overall unemployment rate was 8.4 percent whereas that of the youth (15 to 35 years) was 12.6 percent. Moreover, the outbreak of the coronavirus last year has further compounded the situation. According to the COVID-19 Business Tracker Survey, jointly published by the GSS, the UNDP, and the World Bank, an estimated 41,952 workers reportedly lost their jobs by June 2020. The numbers reduced to almost 11,986 by End-September 2020.
However, with the persistence of the virus and its rippling effects on the economy, the true state of the country’s unemployment situation is currently unknown. Commenting on the prevailing situation, Dr. Priscilla Twumasi-Baffour, a Labor Expert and Senior Lecturer at the Department of Economics, University of Ghana, noted that the situation is not getting any better. She explained that the current rising trend of unemployment is not only limited to Ghana but particularly to West African countries.
The major determinant, according to her, is the high fertility rates observed a couple of decades ago on the African continent and the slow growth of the private sector which is the engine of growth to create productive jobs. However, she attributed the contemporary unemployment situation in Ghana to the current pattern of growth being observed in the country recently. “When you zoom in to Ghana, you’ll see that the employment situation is not getting any better. We are not being successful in generating productive jobs especially for the teeming youth who are constantly entering the labour market. The reason basically is that our economy is not expanding in the direction that we expect. Indeed, when you look at the structure of our economy, you’ll find that, now, most of the sectors that are driving the growth are not labour intensive sectors”.
Furthermore, Dr. Twumasi-Baffour noted that the Service sector, which is currently the major contributor to the country’s GDP, is not able to generate enough jobs for the youth. However, she intimated that “if the industrial sector was the leading driver of our growth, the masses of jobs that we expected in the labour market would be generated”. It can be recalled that earlier this year, the Conventions People’s Party (CPP), issued a statement expressing worry about what it described as a barefaced neglect of the Nkrumah-led industrialization agenda. According to the party, this has led to the rising unemployment being observed among the youth in the country.
THE NUIS, A NOVEL INITIATIVE
The government, in a bid to tackle this unemployment ‘pandemic’, has announced the establishment of a National Unemployment Insurance Scheme (NUIS). This, it noted, is part of its Ghana CARES program but was made known in the 2021 Mid-Year Budget Review. The scheme, which is intended to provide temporary income support to workers who lose their jobs as a result of unanticipated events, will also provide training and retraining for the unemployed as well as provide job search assistance. Complimenting the government on its effort, Dr. Twumasi-Baffour lauded the government for such an initiative.
Moreover, she revealed that unemployment insurance schemes are used elsewhere in developed countries to cushion workers who lose their jobs for a certain period of time until they find another. “The whole idea is that, when you are unemployed, the system gives you benefits; gives you some minimum subsistence allowance until the time that you find a job. So, in such a situation, you find that if such a scheme existed in Ghana at the time when corona hit our economy, majority who lost their jobs and had no source of income could have been cushioned by the benefits they would have received. Because when they were in employment, they contributed towards such a fund. So, I think it’s a novel initiative really. But the devil is in the details in terms of how it is implemented”.
SUSTAINABILITY OF THE SCHEME
Sustainability being a major concern when it comes to governmental projects, many have questioned how sustainable this project will be over time. Giving her insight, the Labour Expert believes that for a scheme such as this, there should be an agreement between the government, labour unions and the private sector to be willing to contribute some funds. In that instance, a certain token will be taken out of people’s salaries towards periods of unemployment. So, once the unexpected occurs, the system gives the money back to the people who contributed to the scheme.
Dr. Twumasi-Baffour further detailed how she expects the government to run the scheme so as to yield the maximum results. “In a way, it will be working more like the LEAP initiative but this time, beneficiaries will have to contribute. That is how a scheme like that will be working. In terms of its implementation, a lot of structures will have to be put in place and workers should be willing to contribute towards periods of unemployment. “So, it requires a lot of work and a lot of data & monitoring to be able to make sure that the scheme works well and the benefits go to people who are qualified”
ROLE OF THE GOVERNMENT
It has been observed that several countries in the world operate unemployment schemes. Some of these countries include the US, UK, Germany, Belgium, Canada, Argentina, Netherlands, Sweden, Hungary, Slovenia, Spain, and Italy among others. Even though minor differences exist, the schemes are operated in a similar manner across most of these countries. In countries such as the United States, unemployment benefits are funded by a compulsory governmental insurance system, not taxes on individual citizens.
However, in Finland, the system is operated by trade unions in conjunction with a national agency, Kela. Research shows that in most of the countries, unemployment benefit is calculated as a percentage of the applicant's former income. Even though some countries pay as high as 90% of a person’s income, the average maximum benefit level is about 77% among OECD countries. If this is anything to go by, then it will definitely take a toll on government whose revenue mobilization has not been encouraging for some time now. Contrarily, Dr. Twumasi-Baffour argues that “the will to do” is paramount. In terms of resources, she stressed, a need for a public-private partnership backed by ingenuity in resource mobilization by the government.
THE ONE MILLION JOBS INITIATIVE
Also, the government officially announced its ‘One Million jobs initiative’ in July 2021, to aggressively respond to the unemployment ‘cry’ in the country. However, most Ghanaians are hard to convince regarding the credibility of the government’s resolve to create 1 million jobs within a space of 3 years. Dr. Twumasi-Baffour, on the other hand, welcomes the government’s idea of promoting entrepreneurship; encouraging young budding entrepreneurs and supporting them to create the jobs.
But, she believes, its success depends on how the private sector responds. “I think that any initiative that government takes towards employment creation, once the focus is on the private sector, it’s in the right direction. Because we know that with our limited resources, the wage bill also consumes a chunk of it. So, any attempts we make at adding people to the public sector is more like solving one problem and creating another”. Despite welcoming the private sector-led job creation initiative, she urged the government to put in place the necessary modalities so that entrepreneurs can take advantage to expand their businesses.
Moreover, she noted that the entrepreneurship idea government intends to champion, could also drive the industrialization agenda that will spur job creation. According to the Senior Lecturer, if people are venturing into agro-processing, and adding value to agricultural produce, more people will become employed.
BUILDING A RESILIENT LABOUR MARKET
Looking ahead, the Labour Expert underlined the vulnerabilities in the Ghanaian labour market are due to the large informal nature of employment in the country. “When you look at the data, you see that over 80% of employment in the country is informal in nature. Meaning that a lot of people have to show up for work before they can earn an income; it’s problematic”. Meanwhile, she stressed the need to focus more on the country’s industrialization agenda whilst creating space for a lot of informal sector participants to expand their activities.
Additionally, she urged employers to formalize employment contracts with their employees so that the latter can enjoy the benefits that come along with formal employment in periods of negative shocks. This is where she believes the current unemployment insurance, if well implemented, will play a vital role. Nevertheless, one of the challenges she brought to the fore is the processes involved in the formalization process. She detailed that most at times a lot of informal practitioners do not like formalizing because of too much documentation which they are not cut out for.
According to her, simplifying such process will encourage most of the informal sector players to formalize their activities. The benefits of these are that during periods of negative shocks, there will be enough automatic stabilizers to cushion labour market participants. The Labour Expert, however, noted citizens also have a major role to play if the country is to overcome the current trends of unemployment in the country. Their main role, she averred, is to consume made-in-Ghana products. “So, coming to basics, I think we need to focus on our industrialization and clearly when that is in the right direction, employment will be created. And to get back to basics as well, sensitize the average Ghanaian on the consumption of Ghanaian-made goods. We are demanding jobs but when you look at our consumption patterns, you realize that we are patronizing a lot of imported products.
And for every consumption of an imported product you take, you are creating jobs for other people in other countries. So, that is also something that we should look at”. Aside the unemployment rate, there is also the prevalence of high underemployment in the Ghanaian labour market. The World Bank stated in 2020 that Ghana is faced with more than 50% underemployment, higher than the overall unemployment rates in Sub-Saharan African countries. To address the challenge, the World Bank identifies agribusiness, entrepreneurship, apprenticeship, construction, tourism and sports as key sectors that can offer increased employment opportunities for Ghanaian youth.
The Bank also calls for more investments in career guidance and counseling, work-based learning, coaching, and mentoring to equip young people with the skills needed for work. All these measures, in addition to promoting the industry sector, have the potential of reducing the rate of unemployment in the country. The situation, however, is a national issue. As such, any attempt to solve unemployment must involve all and sundry, must be deliberate and well-tailored.