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Unemployment is both an economic and a social problem

Unemployment is both an economic and a social problem

By Josef Kefas Sheehama.

While the world observed the 2023 May Day celebration, under the theme “Workers United in Ensuring Productivity for National Economic Growth and Guarding against Unfair Labor Practices in the World of Work,” workers in Namibia still lamented over unfair labour practices, like casualization, and non-payment of minimum wage by some employers.

The President, HE Dr 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, concluded His Excellency.

Worker welfare is central to the achievement of socioeconomic justice which, in turn, is key to national and global sustainability. We cannot talk about economic emancipation if equity, fairness, and justice are not ring-fenced, underpinning the survival of societies and create resilience for Nations amid upheavals and turbulence. With unemployment, both the country and the nation suffer. The greater the number of unemployed or the longer they are without work, the more severe their despair, unhappiness, and anguish. Being out of work forces people to live their lives in a way they do not wish to. Their 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% from 1991 to 2021, reaching an all-time high of 24.5% in 1997 and a record low of 16.8% in 2012. But by the end of 2022, it has jumped back to 22% according to Trading Economics’ global macro models and analysts’ expectations. In the meidum term, the Namibian unemployment rate is projected to trend around 23% in 2023 and 22.5% in 2024, according to their econometric models.

We need to understand that unemployment is both an economic and a social problem. First, it is an economic problem in the sense that unemployed persons will be consumers only without being producers. Second, 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, robbery and gender violence are the outcome of unemployment. It causes social disruption in society and the government has to incur heavy unproductive expenditure on law and order, and for social support systems.

It is important to note that unemployment brings mental health problems such as low self-confidence, feeling unworthy, depression, and hopelessness. With lost income and the frustration resulting from it, the unemployed may develop negative attitudes to 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 4.6% growth in the economy. In contrast, whether unemployment is 23% or 10% is a very big deal, not just because of the pain it imposes on the unemployed but also for the anxiety it creates for many of the employed.

And when you realize 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, recognizing 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 possible since output growth is the single most important determinant of employment growth.

Furthermore, the government can foster sustained job growth byu reducing 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 own 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 start-up capital for the unemployed. It should introduce compulsory training and mentorship programmes 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 further 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 a non-contributory social safety net programme will help.

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 has a tremendous impact on everything, but the effect is often overlooked. A stronger system of assessing unemployment should be put in place to determine its causes and how to address it better.

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 programmes that make them job ready and create pathways to self-employment. The informal sectors must be formalized.


About The Author

Josef Sheehama

Josef Kefas Sheehama has more than 21 years banking experience serving as Manager Credit, Branch Manager and now Centralize Credit Head Office at Bank Windhoek. He holds a Certified Associate Institute Bankers CAIB (SA), Associate Institute Bankers AIB(SA), Chartered Banking Professional CHBP (SA), B Com Banking, B Com Law, Postgraduate Islamic Finance and Banking, MBA and an LLB degree. Also founder of church since 2009. He is an independent Economics and Business Researcher. Authored more than 100 articles in Economics and Business. Served on Northwest University panel (Green Hydrogen). His MBA thesis published by the International Journal of Current Research (Exploring sustainable economic challenges and opportunities).