High unemployment affects the economy
As the world observes the 2023 May Day celebration, workers in Namibia are lamenting over unfair labour practices, like casualisation and non-payment of minimum wage by some employers- under the theme ‘Workers United in Ensuring Productivity for National Economic Growth and Guarding against Unfair Labour Practices in the World of Work’.
President Hage Geingob stressed the need for workers to retool and reskill due to the rapid changes in the world of work brought about by the Fourth Industrial Revolution (4IR), robotics, the internet of things (IoT), and artificial intelligence. The President asserted that the government established the Fourth Industrial Revolution Task Force in 2021 to make recommendations on how best to prepare Namibia for the 4IR, and the private sector and trade unions were urged to accompany the government in preparing workers for the future of work.
The workers’ welfare is central to the achievement of socioeconomic justice, which is key to national and global sustainability. We cannot talk about economic emancipation if equity, fairness, and justice are not ring-fenced which underpin the survival of societies and create resilience for nations amid upheavals and turbulence. The country and the nation suffer. The greater the number of unemployed or the longer they are without work this means despair, unhappiness, and anguish. It forces people to live their lives in a way they do not wish to. Life expectancy is negatively affected. Therefore, the nation not only has to deal with lost income and decreased production but also with additional costs.
The unemployment rate in Namibia averaged 21.04% from 1991 until 2021, reaching an alltime high of 24.50% in 1997 and a record low of 16.80% in 2012. The unemployment rate in Namibia was expected to reach 22% by the end of 2022, according to Trading Economics’ global macro models and analysts’ expectations. In the long term, the Namibia unemployment rate is projected to trend around 23% in 2023 and 22.50% in 2024, according to econometric models.
We need to understand that unemployment is both an economic and a social problem. Unemployment is an economic problem in the sense that unemployed persons will be consumers only without being a producer. It is a social problem in the sense that it causes enormous suffering to unemployed workers due to their reduced or zero income. Many social evils like dishonesty, immorality, drinking, gambling, and robbery, are the outcome of unemployment, it causes social disruption in society and the government has to incur heavy unproductive expenditure on law and order.
It is important to note that unemployment brings mental health problems such as low self-confidence, feeling unworthy, depression, and hopelessness. With the lost income and the frustration involved in it, the unemployed may develop negative attitudes toward common things in life and may feel that all sense of purpose is lost. Hence, an economic recovery that does not translate into more jobs will not mean much for most people. People may not notice whether there is a 4.6% growth in the economy. In contrast, whether unemployment is 23% or 10% is a very big deal, not just for the pain it imposes on the unemployed but for the anxiety it creates for many of the employed. And when you realise that the crisis has led so far to 46% more people becoming unemployed, you get a sense of the immense human cost of the crisis. If our leaders can reduce the uncertainty about where the economy is heading, businesses will be less inclined to wait and see and will respond to increases in turnover by employing again.
Moreover, recognising this human toll, and the risks of entrenched unemployment, economic policies should target as quick a job recovery as possible. The government has to use fiscal and monetary policies to support as strong an output recovery as output growth is the single most important determinant of employment growth. Furthermore, the government can foster sustained job growth is to reduce corporate tax and regulatory obstacles to job creation in the private sector. With government regulation, the key focus should be the number of net new jobs. Fortunately, there is a lot the government can do to remove its barriers to job creation in the various industries and the economy at large. Namibia can cut taxes to encourage investment, or at the very least not raise them. Therefore, a lot more good jobs could be created if Namibia simply did a better job of not excessively taxing, spending, or regulating.
Additionally, the government should promote entrepreneurship and avail startup capital for the unemployed. The government should introduce compulsory training and mentorship programs for newfound entrepreneurs. Most institutional knowledge is stored in our minds rather than written down. Not every great thinker has time to write a book about all the lessons they’ve learned over the years. That experience is an important link in the chain of knowledge transfer, which can be threatened if mentorship doesn’t continue to proliferate. We need a transformation in agriculture, mining, and hospitality and this needs young people to step in and lead. Entrepreneurship can put young men and women in control of their future success. However, successful youth entrepreneurship depends on inclusive economic systems and a business-friendly environment. On this basis, I recommend reforms that will ensure ease in access to start-up and growth funding, ease in doing business reforms, and a system to help mitigate risks these entrepreneurs may encounter, also providing non-contributory social safety net programs will help.
In conclusion, a critical factor of every economy is the quality of its human capital. The best way for Namibia to reduce unemployment is to keep economic growth as high as possible. Furthermore, improve labour market outcomes for the unemployed through targeted programs that make them job ready and create pathways to self-employment. The informal sectors must be formalised. In light of the ongoing high unemployment, policymakers should be keenly focused on what they can do for the economy. Hence, they must also recognize the limitations of policy initiatives. Unemployment is a serious social and economic issue that results in a tremendous impact on everything but is often overlooked. A stronger system of assessing unemployment should be put in place to determine its causes and how to address it better.
Therefore, there is a need for sustainability, and sincere commitment from all stakeholders towards a better Namibia for all.
*Josef Kefas Sheehama is an independent economics and business researcher.