Addis Ababa University-1
Addis Ababa University-1
DEPARTMENT OF ECONOMICS
BY:ASAMINO MULUGETA
ID NUMBER:BER/5111/08
MAY 2017
high and growing unemployment are cited and was added further in the study
and it is tried to put the situation in brief. Hence, the study is believed to be
and community of large to take measures to help the unemployed for the time
Addis Ababa city due to fact that the problem was making serious here in
Addis Ababa city due to the lack of financial resources and time, it would not
cover the area.
Several publications were referred and was in the preparation of this study and
as possible. The secondary data would have been gathered through careful
The data that gathers from respective source was organized and classified
figurative discussion and also the data was analyzed by using frequency tables
and percentages, and graphical method. This study wholly entails the data
logical remarks.
One that was the most limiting factor for the study is that the data
requirements were not fully satisfied due to the lack of time series data on
unemployment which may make the study partial in coverage and unreliable in
information, and shortage of time have effect on quality and coverage of the
The research paper was structured to have four chapter arranged sequentially.
The first chapter consists of the introduction and methodology which are
pertinent for the study. Second chapter deals with theoretical and empirical
literature discussions. The third chapter focus on the deal with analization
and discussion . Finally the last chapter was present the conclusions and
recommendations that must be made on the basis of the main finding of the
research.
CHAPTER TWO
2.Literature Review
jobs while they are actively searching for job and are willing to be employed at
unemployed if one seeks jobs that one is produced from obtaining because of a
and willing to work at the market wage rate. Some may decide to with draw
their labor services because the prefer leisure to work at the market.
According to what Todaro (1994) wrote, we must take into account, in addition
to openly unemployed, the larger numbers of workers who may be visibly active
but in economic sense are grossly underutilized. He said that Edwards has
jobs implying some other means of support than employment) and involuntary
b) Under employed: those working less than they would like to do.
c) The visibility active but underutilized: Those who would not be under
because job opportunities are not available at the level of education attained or
d) The impaired: Those who may work fulltime but whose intensity of effort
medicine.
e) The unproductive: Those who can provide the human resource necessarily
for productive work but who struggle long with inadequate complementary
resources..
comprises all persons above the specified age who during the reference period
were:
b) Currently available for work: i.e were available for paid employment or self-
employment.
c) Seeking working: i.e had taken specific steps in specified reference period to
are imperfect, and it takes time to unemployed workers and employees to find
each other.
Some people will quit their job, to search the other employment. Moreover,
random fluctuations in demand across will cause some firms to lay off workers
at the same time the other firm will be seeking to hire new employees, because
information about the characteristics of those searching for work and the
nature of job cannot instantly be know or evaluated, it takes time for job
of individuals in to and out of the labor market and the speed by the prevailing
demand cause mismatch between the skills demanded and supplied in given
area or cause an imbalance between the supply and demand for workers across
Unemployment rate
Continents year
1960 1970 1980 1990
All Developing 6.7 7.4 7.8 8.2
Africa 7.7 9.6 9.8 9.9
Asia 6.8 7.1 7.7 8.3
Latin America 4.7 5.1 5.8 5.5
As Todaro (1994) suggested, the rural-urban migration is also other cause for
high rate of rural-urban migration that the chronic urban unemployment and
Africa.
authors are more or less acceptable, educational system, non work status of
migration are some from the major causes of the problem in less developing
things that might be done but also a shortage of modern jobs in relation to the
number of jobseekers.
closely connected with. The high rate of urbanization and population growing
in recent years.
people from the country side into urban areas, which are familiar enough are
proportion in Kenya.
From the table 2.2, the unemployed person and unemployment rate in Kenya
in the year 1994 was relatively higher is an the rest of the east African
Kenya. Table 2.2 unemployed persons and unemployment rate in Kenya in The
year 1994
closely connected with the high rate of urbanization and population growth in
recent years.
Ababa with the majority of unemployed people young with modest levels of
The economy of Ethiopia has proven unable to accommodate the rapid growth
As many suggested, the primary reason is that the growth of the economy and
its capacity to create jobs have not keep peace with the population growth. In
fact only about 25,000 formal wage sector jobs are being annually created while
6000,000- 800,000 individual annually are entering the labor market (ILO,
1993). Though the above suggestins on the issues of unemployment in
Ethiopia are acceptable, there are other issues that have to be discussed
agriculture and its consequences such as political, economical and social cost.
The essential feature of the theory is that the labor market forces of supply and
consequences of real wages being an remaining too high to allow the labor
classical system hanges or not creating markets. The policy implication flowing
This school of thought focuses, on fiscal policy regulation like tax cut by
expand employment by reducing taxes, The tax cus was intended to stimulate
The causes of the tax was followed by an economic boom which in the
The new Keynesians also argued that most sometimes do not clear even when
individually and looking out for their own interest. Because of both
information problem and costs of changing prices lead to some price rigidties
in the labor market firms that cut wages not only reduce the cost labor but also
likely to wind up with poor quality labor force. Thus they will be reluctant to
cut wages. If it is cost for firms to change the prices they change and the wage
they pay the change will be infrequent, but if all firms adjusts prices and wages
infrequently, the economy wide level wages and prices may not be flexible
1981).
The new classical school argue based on the assumption of market clearing.
There are no reason why firms or workers would not adjust wages or prices if
that would make them better off. Accordingly prices and wages adjust in
order to equate supply and demand in other words, market clear. The
unemployment. Any unemployed person who really wants job will offer from
some employer. Flexible adjustment of wages and price leaves all individuals
on work at the going wage and firms can produce and sell as much as they
As Todaro (2006) state that rural-urban migration was once viewed favorably in
rural sector to provide needed man power for urban industrial growth. The
process was demand socially beneficial because human resources were being
shifted from locations. Where their social marginal product was often assume
to be zero to places where this marginal product was not only positive but also
recent least developed countries experience that rates for rural-urban migratin
continue to exceeds rates of rural job creation and to surplus greatly the
has typically field to produce growth of job opportunities at any things near the
However, inspite of these rising level of over unemployment and even high level
declaration. To the extent that many newly arriving migrants are likely to joint.
The growing pools of unemployed and to the extent that an increasingly large
proportion of these migrant represent the more educated segment of the society
for job. The term does not refers to people who are not seeking work because of
age, illness or mental or physical disability. Nor does it refers to people who are
attending school or keeping houses. Such people and classified as out of the
Unemployment may include serious problem for both individual and society as
a whole. For the individual it means loss of income and increase of prolonged
unemployment, may result in loss of self respect. For society, it result in lost
production and, in some cases, criminal or other antisocial behavior until the
1900s most people considered laziness the main causes of unemployment , but
to day, they realize that men and women may be out of work through no fault of
their own(Ibid).
Those with out regular employment or with only scattered part time
employment are usually also among the very poor. Those with regular paid
employment in the public or private sector are typically among the middle to
upper income groups. But it would be wrong to assume that everyone who
does not have a job is necessarily poor while whos who work fulltime are
relatively will off. This is because there may be many unemployed urban
worker who are voluntarily unemployed in the sense that they are searching for
they feel have outside sourse of financial support (example) relatives friends or
local money leaders such people are unemployed be definition, but they may
not be poor (Todaro; 1994). Similarly, there are many individual who may work
full time interms of hours per day not may nevertheless earn every little
income. Many employed workers in these called urban informal sector (e.g
trader, petty service providers, workers in repair shops etc) may be so classified
such people are be definition fully employed but often they are still very
poor(Ibid). In spite of the above reservations about a too literal linkage between
unemployment and poverty, it remains true that one of the major mechanisms
for reducing poverty and in equality in less developed nations in the provision
countries and the problem had reportedly concentrated among the educated
which is turn a result of this rapid population growth and hence the labor
force.
Another explanation for the high proportion of young person among the
number of school levels to aspire to urban wage, earning jobs for in excess of
motions on the demand, side, jobs which were for merly filled by, say those
supply side, jobs aspirants now need to get same extra years of further
education in order to qualify for jobs which only a few years earliest were
monthly to one primate city (Addis Ababa, is largely economic and due to rural-
1999/2000).
The main story regarding the labor market is the rapid growth of the work
opportunities for the next generation, and relatively slow creation of new jobs in
low, and have been declining somewhat (from 66% in 1999 to 58% in 2003),
The incidence of unemployment was relatively lower for those with non formal
education (9%) and holders of diploma and above (12%) unemployment, on the
other hand is very high, especially among youth surveys of the last 5 years
among males and slight increase among females, and also the duration of
tend to live with their families, and often not subject to the same immediate
pressures of find work that apply to slightly order married men and women). It
is also generally higher among women than men of wage employment the
public sector still account for about 40% (source MOFED, 2005/06) wages and
low, and for less educated wages, in urban employment are just about at the
poverty line.
Wages rise dramatically with education levels while schooling clearly pays, in
the future it is likely that completing primarily and secondary education will be
less of guarantee of finding employment than it was rise past, as the labor
None the less with the expansion of educations, the average skill level of the
work force is increasing and this should pay off in productivity gains(Ibid).
There are big urban-rural formal-informal and gender gaps in employment and
wages labor mobility is limited especially between rural area and towns,
town. As in most countries, immigrants start out near the bottom of the
urban job market, but their evidence that their let improves over time(Ibid).
Currently (2004/05; 16% of the country total population or some 11.7 million
people, live in urban areas. The urban population is growing at rate of about
important to recognize the over whelming weight of Addis Ababa in the urban
picture in Ethiopia; Addis Ababa is true primate city, with about 3 million
people, 14 times higher than Dire Dawa, the second largest city in Ethiopia.
While final analysis will have to await the result of the 2004/05, there are some
indications that there has been a modest decline in urban poverty in recent
problems for the new urban poor and increasing urban unemployment.