RIFT VALLEY UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ECONOMICS

GIMBI CAMPUS

THE CAUSE OF UNEMPLOYMENT (IN CASE OF ENANGO DISTRICT)

A RESEARCH ESSAY SUBMITTED TO THE DEPARTMENT OF ECONOMICS IN
PARTIAL FULFILIMENT OF THE REQUIREMENTS FOR THE DEGREE OF
BACHELOR OF ARTS IN ECONOMICS.

ADVISOR: ……………………….
PREPARED BY:
TOLASA …………………………..

AUGUST, 2020 G.C

ENANGO TOWN, Ethiopia

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 CHAPTER ONE

1. INTRODUCTION

1.1. Background of the study

Unemployment is indicted as a problem of urban areas. This is basically due to the facts that
many people migrate from different parts of rural to urban area mainly in search of jobs and then
gone rating income which is expected to be better than the income generated from agriculture in
their home land. Meanwhile, the result of being high unemployment (Todaro and smith, 2006).

Unemployment in Africa is highly caused by the defective education system. The educational
systems in Africa do not correspond directly to the economic realities prevailing outside the
schools system. Instead of training professionals and people with skills, theory instead of
practical is the order of the day. The education system in our countries has failed to respond to
the existing inter-generation gap. It simply imparts general and literary education devoid of any
practical content. Africa's educational policy merely produces individual whose services do not
reflect the economic trends on the job market. The educational structure, especially the
curriculum does not include industrial skills hence produces most graduates whose skills are not
transferrable. The open door policy at the secondary and university level has increased manifold
unemployment among the educated that are fit only for white collar jobs and not for self
employment. (Michael todaro M. 2009).

The less developing countries are facing the problem of capital shortage. While for the
development of any country, there is a need of a huge amount of capital. When new projects ,
buildings and factories are constructed a large number of people are engaged in these project. So
lack of capital is the major cause of unemployment. There are many industries which produce the
goods seasonally like ice factory. These work only month and remain close in the remaining
period. So a large number of people who are engaged with these industries become unemployed.
Due to inventions, new goods are replacing the old commodities. So the people who are engaged
with old industries are unemployed. (Mindy, 2008). Ethiopia has one of the highest
unemployment rates worldwide. Clearly some young people are more vulnerable than others,
but in many ways a period of unemployment has become a normal part of the transition
from school to work. While unemployment has been well researched, the majority of
studies have focused on those living in urban areas. Despite the recent encouragement in

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economic growth in Ethiopia, unemployment is high and remains to be one of the socio
economic problems in the country. In Ethiopia, there have been significant increases in
educational attainment; however, there has not been as much job creation to provide
employment opportunities to the newly educated job seekers. (Serneels, 2004).

Unemployment is one of the challenges facing today's world coupled with population growth and
increased poverty. It has significant impact on growth and development at large; it causes a
waste of economic resources such as the production labor force and effects the long run growth
potentials of an economy. Unemployment gives rise to private and social problems in the society
such as, increased crimes, killing of oneself (suicides), poverty, alcoholism and prostitution
(Rafik, 2010).

Unemployment is a macro-economic problem that affects people most directly and severely. For
most people the job means a reducing living standard and psychological hard ship, it is not
surprise that unemployment is a frequent topic of political debt and policies their proposed
policies would helped to Job. (Mankiw, 2000).

Measurement of unemployment in developing countries is difficult due to lack of reliable records

and written documents and the existence of various informal types of works. A major part of
unemployment exist in developing countries is the deficiency of the stock of a capital in relation
to the needs of the growing labor force. But the major cause of unemployment in advanced
countries is deficiency of aggregate effective demand or cyclical unemployment (AHUSA, H.
2000).

Ethiopian unemployment is caused by high population growth couple with lower level of
economic growth which manifested slow job creation by the economy. And also some other
external factors like shortage of foreign exchange, balance of payment problem and unfavorable
terms of trade, aggregate unemployment. Because of this condition the country has been exposed
to social complex and economic problems like massive unemployment, hysterics and high
migration of human capital (Tekle,2005).

Unemployment can be a major causes factor predisposing people to social exclusion. The
exclusion applies not only to economic opportunities such as job related insurance, pension and
medical entitlement, but also to social activities such as participation in the life of community
which will be quite problematic for jobless people, just as people "learned by doing" they also

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"unlearned by doing".Therefore unemployment resulted in depreciation of skill and loss of
knowing (cognitive) abilities due to lack of confidence and sense of control ( Tewodros, 2003).

In order to reduce the unemployment situation in Ethiopia, the following solutions are proposed:
Ethiopian governments must pay greater attention to internal resource mobilization, less external
borrowing, fiscal discipline, a maintenance culture and indigenous entrepreneurial development.
There must be increased resource allocation out of national budgets for employment promotion
activities. High priority should be accorded to the promotion of rural employment through
increased support for rural agro and cottage industries, the rural service sector and infrastructural
development. Efforts must be intensified to increase productivity and income through the
informal sector, and governments should increase their efforts to facilitate greater access of
operators in the informal sector to the means of production such as land, capital and improved
management. (Ibid, 2005).

1.2 .Statement of the problem

Now days, so many problem have been seen in the world especially population growth and
unemployment is the main problem. This problem increase without improvement of development
population growth has great impacts for the expansion of unemployment worldwide use
unemployment is high (ILO,2008).

As the per knowledge of the researcher, there is no prior study in the study areas concerned with
this title and the problem of low level of investment is not included in the previous research done
by other researcher. Generally, because of high population growth, inability of economy to
employ increasing labor force and internal migration, the low level of investment unemployment
becomes high in the country and severs problems in Enango town.

1.3. Objective of the study

1.3.1 General Objective

The general objective of the study is to examine and identify the causes of unemployment in the
case of Enango town.

1.3 .2 Specific Objective

 To identify the current situation of unemployment in Enango district.

 To examine the cause of unemployment in Enango district.

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  To identify the socio-economic characteristics of unemployment
 To investigate the policy measures used to improve the situation of unemployment

1.3.3 Proposal question of The Study

The Proposal will be conducted to check such kind of problems based on the following basic
questions that are expects to be address

1. What types of unemployment in? Enango district

2. What are the causes of unemployment in Enango district ?

3. Can unemployment increase dependent ratio?

4. What policy measures should be used to improve the situation of unemployment?

1.3.4 Significance of the study

The study provides relevant information about unemployment to the Administration of Enango
district, nongovernment organization (NGO) and the community at large. Therefore, the study
enforces to take measures for the time being and sustainable employment schemes in the future.
Moreover, the study benefits the unemployed to understand their situation and take measure to
be employed and play their role in eliminating this problem in Enango district.

1.3.5 Scope of the study

The scope of this study is geographically limited to Enango district. The study is limited to
assessing the cause of unemployment in order to conduct manageable and feasible study.

1.3.6 Limitation of the study

The main problem that the researcher faced in conducting this study includes

 Lack of indicated data is secondary data.

 Lack of experience.
 Respondents have less cognitive to available data and information.

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 CHAPTER TWO
2. LITERATURE REVIEW
2.1 .Theoretical review

2.2 .Definition and concept of unemployment

Unemployment was consider in many different ways by different economics. Unemployment is

job situation in which people who are qualified for a job willing to work and willing to accept the
ongoing to wage rate but could not find jobs without considerable delay of time (M.Slang, 1992).

Unemployment or jobless occurs when people are without work and activity seeking work. The
unemployment rate is as measuring of the prevalence of unemployment and it is calculated as a
percentage by dividing the number of unemployed individuals by all individual currently in the
labor force. Unemployment is measured by taking in account the labor force. Unemployment is
measured by taking in account the labor force which is the sum of employed plus the that of
unemployed, those who are unemployed are without work but, they are actively looking for
work. The employed ones are those who are working at least one of hour in week for pay, a non-
paid work per week in family business (Mankiw, 2000).

Unemployment is occurs when a person who is actively searching for employment is unable to
find work. Unemployment is often used as a measure of the health of the economy. Full time
employment is the avoidance of cyclical unemployment, which is caused by the absence of
vacancies, but it does not mean zero unemployment. Natural unemployment is defined as when
unemployment rate at which there is neither excess supplying the overall labor market, nor it will
occur in long run if expected and actual rate are equal or natural rate of unemployment level is
the unavoidable types of unemployment, which is the sum of structural and frictional
unemployment.

Voluntary employment is a way individual increased their personal earnings and is the part of the
process through which society enhances its real output and then income. Voluntary
unemployment is unavailable by product of changes in lasts, population shift and technical
advanced. These changes creates structural mismatch between labor demand and supply and
require adjustments in the allocation of labor resources (ILO, 2012).

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Unemployment person are those who are willing to work but unable to get job at the existing
wage rate. More especially unemployed person is defined as over the age of 16 who is available
for work and actively sought employment during the four week (Mebretu, 2002).

2.3. Types of Unemployment

There are four types of unemployment. Those are:

1) Frictional unemployment

2) Structural unemployment

3) Cyclical unemployment (demand deficient) and

4) Seasonal unemployment

1) Frictional unemployment: frictional unemployment is finding a job takes time and

sometimes the reason is unemployed is because they are waiting to a job that works for them or
taking time to decide between multiple job offers. In addition, it takes time for employees to
interview potential candidates and decided with individuals they want to hire. Friction
unemployment is defined, as voluntary unemployment because it results from the time needed
too much job seekers to job opening, according to one econguru. One example of frictional
unemployment is voluntary quieting one job and taking time off to find another one.

Frictional unemployment is arises because of the custom flow of people between job and into
and out of the labor force. Because information in the job market is imperfect because it takes
time for unemployed workers and employers with job vacancies to find each other. The nature
of frictional unemployment suggested several ways in which public policy could reduce it an
oblivious avenue of attack would be improving public employment service or job fairs where
perspective job candidate tack with representatives of different companies (Kaufman and
Hotchkiss, 2006).

2) Structural Unemployment: structural unemployment is caused by mismatch between the

need of employer and the skills that a work force in a country has according to Drexel
University. For example, low schools in United States train more lawyers than the country needs
which can make it difficult for a lawyer to get a job as lawyer.

As a result, a lawyer may be able to get job working at a retailer and store but he declined the job
because it was not the field of work he was trained for. Structural unemployment can be also

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because by geographical problems. For example, individuals who are willing to do construction
work might live in a rural area, but the construction job only available in urban areas.

Structural unemployment can be reduced government provision or subsidization training

program with Structural unemployment job vacancies and unemployed workers coexists in the
market and in long run are not easily matched. Unlike frictional unemployment, it tends to be
concentrated among certain groups that had been adversely by technological changes. The
decline of major industry or the movement of job to other parts of the country (Kaufman and
Hotchkiss, 2006).

3) Cyclical Unemployment: cyclical unemployment is the type of unemployment that's caused

by economic recessions is the type of unemployment tasked about frequently in the news.
Cyclical unemployment is caused by negative economic growth. In other words, cyclical
unemployment is when there is no enough demand to supply jobs for people with in a country.
This types of unemployment can result in wide spread unemployment with a country. Cyclical
unemployment sometimes it is called demand deficient unemployment. It is the results of in
sufficient aggregate demand in the economy to generate enough jobs for those who seek one.
Cyclical unemployment is closely linked to the movement of the economy up and down of the
business cycle public policy might reduce the extent of cyclical unemployment in several ways
(ibid, 2006).

4) Seasonal Unemployment: it is when a person is unemployment because certain types of jobs

are only available at the certain times of the year. Seasonal unemployment is simply caused by
decreased demand for goods or services during particular time of the year. Seasonal is the most
predictable types of unemployment because it happens each year. Seasonal Unemployment
similar to demand sufficient unemployment in that it is reduced by fluctuation in demand for
labors.

Here however, the fluctuation can be regularly anticipated and follows a systematic pattern over
the course of the year. For example the demand for agricultural employees decline after the
planting season and remains tow until the harvest season.

Similarity the demand for production workers falls in certain industries during the season of the
year when plants are retooling to handle annual model changes (Elenberg and Smith, 2006).

2.4. Theories of Unemployment

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There are different theories of unemployment. Some of them are:

1) Classical Theory Unemployment: classical or real wage unemployment occurs when real
wage for a job are set above the market clearing level. Causing the number of job seekers to
exceeds the numbers of vacancies. Unemployment in the classical system realized up on market
not clearing the policies recommendation for ward from regular and reduces trade union power
to make labor force competitive in the market (Smith, 2009).

2) The Keynesian Unemployment Theory

This theory focused on fiscal policy regulation like task cast by creating the relationship between
the government expenditure and unemployment. Keynes argues that to expand national income
and then employment by reducing tasks the task cut was intended to stimulate expenditure on
consumption and investment thus lead to higher income and employment (Mankiw 2002).

3) Neo classical Theory of Unemployment

They assume that there is always market clearing and therefore there are no reasons why firms or
workers would not adjust wages or prices if that would make them better off. Accordingly, price
and wages are just in order to equate supply and demand. In other words should market clear.
The implication of this assumption is that there is no possible for involuntary unemployment.
Any unemployed persons who really want to job will offers to his or her wages until the wage is
low enough to attract and offer from some employer. (Robert, 2000)

4) Marxist Theory of Unemployment

According to Marxist, unemployment is inherent within the unstable capitalist system and
periodic crisis of mass unemployment are:-to be expected. And the only way to permanently
eliminate unemployment could be abolished capitalism and the system of forced competition for
wage and then shift to socialist or communist economic system.

For contemporary Marxist existence of persistent unemployment is proof of the inability of

capitalism to ensure full employment (Tewodero, 2009).

2.5. Empirical Review

There are many studies done on the causes of unemployment in the developing countries and
Ethiopia. Those studies can be categorized in to third word experience and Ethiopian experience.

2.6. From the study on third world Experience

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We mention the study of by Joseph (2001) he investigated unemployment in third world and his
finding shows that the combination of population growth associated with fertility rates and the
slow paces of job creation in Africa present challenges to its youth despite annual economic
growth rates of 6% or more in sub-Saharan Africa recent years, there are not been a sufficient to
increase in stable employment opportunities for young people with current demographic trends
the preacher to create new jobs will only increase over the coming decades the study also shows
that migration patterns put further strain on urban areas and labor opportunities young people are
more likely than other age group to migrate from rural to urban areas to find batter education and
work opportunities and a way out of poverty. Unemployment and under employment in urban
area are associated with rural urban migration. Young migrates often earn less than their counter
parts in urban areas but more than those in rural areas.

Kingdom and Knight (2003) found out that unemployment in Africa is highly caused by the
defective education system. The educational system in Africa does not corresponding directly to
the economic realities prevailing outside the school system instead of training professionals
people with skills the instead of practical is the order of the day in Africa the education system in
African countries has field to respond to the existing intergenerational gap it simply important
general and literary education devoid of any practical content. Africans educational policy
merely produces individuals whose service do not raflect the economic trends on the job market
the educational structure .specially the curriculum does not include industrial skills hence
produces most graduates whose skills are not transferable.

The open door policy at the secondary and University level has increased manifold
unemployment among the educated that are fit only white collar jobs and not for self-
employment.

Also concluded that Africa is the only continent with most of its populate (Lay people) living the
rural and semi-urban areas yet there is means for self-employment. This is obstacle because it
might mliitates against the generation of more employment opportunities. There exists a high
level of appropriate means for self-employment in rural and semi-urban areas across the
continent of Africa. Unlike in case of developed countries, most of the engineers, technocrats
and other well qualified persons in Africa do not possess ample means for self-employment.
They therefore end up going about in search paid jobs.

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Stephan and Woolard (2008) studied unemployment and household formation in Africa.
According to their study, the major cause of unemployment in Africa can also be associated with
the negligence of the leads and their corrupt attitudes, they down the culture of power retention
and money embezzlement, the funds needed for the development of a sector would be diverted
for personal use, with this trends is no way forward and we remain undeveloped.

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 CHAPTER THREE
3. METHODOLOGY
3.1. Description of the study area
Enango district is a spa town and separate woreda in west Ethiopia. Located in the West Wollega
Zone of the Oromia Region, west of Addis Ababa, and found at 444km from capital city.
Relevant boundary of Enango Woreda town is from south by Haru, on the south west by Ganji,
and in the north by Benishangul Gumuz region, on the east by Gimbi woreda ,and on the south
east by an exclave of the Benishangul Gumuz region. Source (Agricultural Development Lead
Industrialization, 2001. Rural Development Policies and Strategies: Department of Press and
Audiovisual, Ministry of Information. Addis Abeba Ethiopia).
3.2. Method of data Collection and Analysis

3.2.1. Source of Data

The required information will be gathered from two sources of data that are; primary and
secondary source of data. In primary source of data, developing of questionnaires and as required
interview is used. Mostly interview preferred because it is helpful both for literate and illiterate
individuals to respond, to overcome the resistance of respondents and it have also helpful in
obtaining supplementary information by interviewers own skill. On the other hand in secondary
data the researcher use different types of written materials like books, census on housing and
population, magazine etc. Mainly to conduct this researcher used the written papers that are
found in different kebele administration office. In addition to these the researcher used different
website from the internet to get different information.

3.2.2. Method of Data collection

As data collection instrument, the researcher intends to use both open ended and close ended
questions and unstructured personal interview.

3.2.3. Sampling Technique and Size

3.2.3.1. Sampling Technique

To conduct the research the researcher used different sampling technique among these sampling
technique the researcher select the two these are:-
 Simple random sampling technique

 Stratified sampling technique

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The researcher used simple random sampling technique in order to avoid biasness’ among the
different group and to make the result of the research more acceptable. Stratified sampling
technique (clustered) also used because in town Woreda here Enango district are around four (4)
different kebele out of these kebele the researcher select 2 kebele 03 and 04.

3.2.3.2. Sample size

The sample size determined from the total population of the that are sadi chanka Woreda around
48,171 out of these number 1230 people live in the 2 kebele. Among those 100 are unemployed.
From those the number of unemployed males and females were 58 and 42 respectively. Sample
size is determined as Yamane formula (1967) sample size at 95 % confidence interval the degree
of variability 0.5 and the level of precision 10% sample size was compute as follows.

n = N/1+N (e²)

n = 100/1+100(0.1)²

n = 100/1+100(0.01)

n = 100/1+1

n = 100/2

n = 50

Where n = Sample size

N = Targets population

e = Level precision (0.1)

Among these 50 unemployed is taken as the right sample size with consideration of time and cost
constraints.

3.2.4. Method of Data Analysis and Interpretation

To conduct this study descriptive research method would be used. For the reason to analyze the
presented data to form that easy to understand and supplemented by using a table and percentage.

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Cost budget

Personnel cost
Person Quantity Duration Amount/ day Total
Supervisor 1 44 days 179 7,876
Enumerators 2 44 days 50 4,400
Sub total 3 12,276
Stationary cost
Item Quantity Price / unit Total cost Item
Flash disc 1 286 286 Flash disc
Computer paper 2 110 220 Computer paper
Sub total 3 506 Sub total
Miscellaneous expenses
Description Price in birr
For orientation 400
Program
Photo copy 300
Final work writing 600
and binding
Transport 980
Sub total 2280
Cost summary
Description Subtotal expenses
Personnel cost 12, 276
Stationary cost 506
Miscellaneous 2180
Expenses
Overall Total cost 15,062

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 Buffer. A, (2007) cause of unemployment in California University
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 Mebratu Belay (2002), Principles of economics published Addis Ababa Ethiopia
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 Mundu, (2008), 8th edition, Unemployment developing countries
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 Stephan C smith, (2009). Economics development 10th edition, George Washington
university
 Kingdom, G.G and Knights. J, (2003), unemployment in South Africa, the nature of the
least.
 Piston Serneels, (2004), the nature of unemployment in urban Ethiopia, center for
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policy

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