Is Economic Growth Working for Jobs? An Investigation of the Employment Generating Capacity of the Nigerian Economy

Nigeria has been best with the incidence of concurrent unemployment and a good run of economic growth thus calling to question the efficacy of economic growth to create jobs in the country. In this paper, we examine first whether there exists any relationship between economic growth and employment in the manner espoused by Okun’s law and then interpret the coefficient of the relationship as indicative of the capacity of the economy to translate growth into employment. Due to the unreliability of unemployment data in many developing countries we use the growth rate of employment as the dependent variable and thus expect to find a positive relationship with economic growth. A second model was specified with the growth rate of employment-to-population ratio as the dependent variable. Data were extracted from World Development Indicators and Penn’s World Table for 1961 to 2017. All the variables were level stationary from two different tests of their statistical properties. We thus estimate the Ordinary Least Squares for the short-run coefficients and explore the robustness of the ARDL to different orders of integration for the long-run form. Both establish the application of Okun’s law to Nigeria with the employment elasticity of GDP growth too small to generate discernible growth in employment. We estimated an average GDP growth of 16.22% over the long-run for the economy to keep a steady growth in employment