Unemployment and Economic Growth in Ethiopia

Abiy Serawitu

doi:10.7176/dcs/10-3-03

Abstract

Unemployment is one of the major bottlenecks of economic growth in Ethiopia. This study examines descriptively the relationship between unemployment and economic growth (GDP) by relating Okun's law prediction with graphical trend analysis. The result indicated that unemployment has a negative impact on Ethiopia’s economic growth where an increase in unemployment leads the decline of real GDP. To reduce the negative impact of unemployment, and expand the employment generating mechanisms like by strengthening investment in both agricultural and nonagricultural sectors that absorb more labor force; the study recommends adoption of more employment generation mechanisms, addressing the labor market’s failure & improving the labor force productivity, improving agricultural productivity & increasing its linkage with other sectors. Keywords: Unemployment, economic growth DOI: 10.7176/DCS/10-3-03 Publication date: March 31 st 2020

Highlights

Unemployment is a key macroeconomic indicator that serves as primary diagnosis to test the health and growth of an economy (Aurangzeb and K.Asif, 2013; Bean, 1998).Unemployment mostly regarded as “foregone output” because it takes away the government of necessary resources needed to develop the economy
According to World Bank (2018) “World development indicators” forecasted result reveals that the rate of unemployment at national level is decreased by 23.8% from2008 /2009-2017/2018
Even if urban Addis Ababa contributed an extraordinary unemployment growth rate for the country total, the inferential statistics time series regression result indicated that Addis Ababa and Hrari urban unemployment growth rate exhibited a significant declining trend since 2009 to 2018

Summary

Introduction

Unemployment is a key macroeconomic indicator that serves as primary diagnosis to test the health and growth of an economy (Aurangzeb and K.Asif, 2013; Bean, 1998).Unemployment mostly regarded as “foregone output” because it takes away the government of necessary resources needed to develop the economy. The unemployed will not get enough money & government loses revenue. Instead government spend resource in different types of welfare to upkeep the unemployed. As an alternative, Engaging in illegal & anti - social activities (like drug trafficking, violent crimes, unsafe- sex...), and increasing individual’s vulnerability to malnutrition, illness, mental stress, loss of self - esteem, & leads to depression. It can be regarded as an element of vicious circle with poverty, low education, high dependency, poor health, & the like

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