Uganda Martyrs University

Faculty of Business Administration and Management

(BAM I 2014)

Managerial Economics II:

Lecturer:

Mr. Ssebaggala Cyprian

Group Work Assignment February 2015

Question:

a.)

Describe unemployment in East Africa

b.)

Explain the different types of unemployment

Group Members (Group 1)

Name

Reg No

1.

Kyobe Godfrey

2014-B022-20019

2.

Nekesa Carol

2014-B022-20046

3.

Mukiibi Phillip Robert

2014-B022-20027

4.

Ludigo John

2014-B022-20062

Submission Date:

Scores / Lecturers
Remarks

3rd February 2015

Discussants: Kyobe Godfrey & Nekesa Carol

Mukiibi Phillip Robert

Sign

Part B-Types of Unemployment

Part A-Unemployment Statistics in E.Africa

Lecturers General Remarks:

........................................................................................................................
........................................................................................................................
........................................................................................................................

Part A.

Explain unemployment in East Africa.

Part B.

Describe the various types of unemployment.

Introduction
Scope/Argument environment
Unemployment:

An economic condition that describes a situation in which individuals

who are actively seeking for jobs remain unhired. Unemployment is
expressed as a percentage of the total available work force. The level of
unemployment

varies

with

economic

conditions

and

other

circumstances. (http://www.investorwords.com, 1st Feb 2015).

According to the International labour organisation (ONS,2010), for an individual to be
considered unemployed, the person should:1. Have been out of work for 4 weeks
2. Be able to start work in the following 2 weeks they must be readily available for
work
3. Be available for work for one hour per week. Therefore, part-time unemployment is
included in the measurement although part-time workers are unlikely to claim that
they are unemployed.
To interpret arguments on unemployment, it is important to understand some other related
terms, which include:
Employed

People who are employed are currently working.

Out of labour force

People not currently looking for a job or would not work if

they found a job.

Measurement

The unemployment rate is the ratio of the number of people

unemployed over the total number of people in the labour force.

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Sparknotes2: Measuring the economy

We know that when there is unemployment, the economy is not
producing at full output since there are people who are not working.
But, what exactly is the relationship between unemployment and
national output or GDP? How much would we expect the GDP to
increase if unemployment fell 1%? These are useful and important
questions to ask when trying to understand the costs of
unemployment.
An economist named Arthur Okun looked at the relationship between
unemployment and national output over the past 50 years. He noticed
a general pattern and stated an equation to explain it. His equation,
Okun's Law, relates the percentage change in real GDP to changes in
the unemployment rate. In particular, the equation states:
% change in real GDP = 3% - 2 x (change in unemployment rate)
This equation basically says that real GDP grows at about 3% per year
when unemployment is normal. For every point above normal that
unemployment moves, GDP growth falls by 2%. Similarly, for every
point below normal that unemployment moves, GDP growth rises by
2%. This equation, while not exact, provides a good estimate of the
effects of unemployment upon output.
For example, let's say a country had an unemployment rate of 8% in
one year and 6% in the next. Using Okun's law, it would be
hypothesized that the percentage change in the real GDP would be 3%
- 2 * (-2%) = 7%. Because 2% fewer people were unemployed the
nation produced 7% more output.
East Africa

As a continental region, East Africa is comprised of several countries

which include Burundi, Kenya, Rwanda, Tanzania and Uganda.

Approach

To assess the unemployment in east Africa as a continental region, an

examination of available statistical unemployment data of the
individual countries and unbiased scholar remarks obtained from
various studies and literature will be necessary.

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Illustrations
Statistical data on unemployment in East Africa.

The unemployment rate measures the number of people actively looking for a job as a
percentage of the labour force.
The unemployment statistics provided in the tables 1 to 5 below, Compares the
unemployment in Jan 2007 (Last) and that in Jan 2013 (Previous).
Uganda Labour

Last

Previous

Unemployment Rate

4.20

Population

37.59 36.35

Table 1:

Highest Lowest

1.90

Unit

4.20

1.90

percent

37.59

6.79

Million

Unemployment in Uganda, Source: http://www.tradingeconomics.com

Burundi Labour

Last

Previous

Highest

Lowest

Unit

Unemployment Rate

35.00

19.50

35.00

19.50

percent

Population

10.16

9.85

10.16

2.78

Million

Table 2:

Unemployment in Burundi, Source: http://www.tradingeconomics.com

Kenya Labour

Last

Previous

Highest

Lowest

Unit

Unemployment Rate

40.00

12.70

40.00

12.70

percent

Population

41.80

40.70

41.80

8.11

Million

Table 3:

Unemployment in Kenya, Source:

Rwanda Labour

Last

Previous

http://www.tradingeconomics.com

Highest

Lowest

Unit

Unemployment Rate

3.40

1.20

3.40

1.00

percent

Population

11.78

11.46

11.78

2.93

Million

Table 4:

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Unemployment in Rwanda, Source:

Economics II Group work,

http://www.tradingeconomics.com

BAM I 2014- Group 1

Tanzania Labour

Last

Previous

Highest

Lowest

Unit

Unemployment Rate

10.70

11.70

12.90

10.70

percent

Population

49.25

47.78

49.25

10.07

Million

Table 5:

Unemployment in Tanzania, Source: http://www.tradingeconomics.com

Unemployment Rates of East African countries between Jan

2007 and Jan 2013

Percentage values of unemloyment rates

45.0
40.0
40.0
35.0
35.0
30.0
27.3

25.0

26.4

Jan-07

20.0

Jan-13

19.6

Average

15.0
12.7

10.0

11.7
10.7 11.2

5.0
4.2 1.9 3.1

3.4 1.2 2.3

0.0
Uganda

Burundi

Kenya

Rwanda

Tanzania

East African Countries

Fig. 1 Unemployment rates of E. African countries, 2007 2013(tradingeconomics.com, 2015)

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In view of the statistical information obtained, the unemployment rate rankings in east
African countries from highest to lowest as of January 2013 stands as follows
Jan 2007

Jan 2013

Burundi

35%

19.55%

Kenya

40%

12.7%

26.4%

Tanzania

10.7%

11.7%

11.2%

Uganda

4.2%

1.9%

3.1%

Rwanda

3.4%

1.2%

2.3%

Table 6:

Average Jan
2007 Jan 2013
27.3%

Average unemployment in E. African countries 2007 - 2013

As of January 2013, the unemployment statistics show that the average unemployment rate
throughout the east African region is 14.06%. This is a relatively high unemployment level,
likely to affect GDP values significantly.

Types of Unemployment
There are several types of unemployment, usually identified by the cause of unemployment,
the gravity of unemployment or its own characteristic. Below are some commonly referred to
types of unemployment.
Cyclical

This refers to a type of unemployment resulting from reduced aggregate demand.

Economicsonline.co.uk, Feb. 2015.
Cyclical unemployment exists when individuals lose their jobs as a
result of a downturn in aggregate demand (AD). If the decline in
aggregate demand is persistent, and the unemployment is long-term, it
is called either demand deficient, general, or Keynesian
unemployment.

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Demand deficient unemployment

economicsonline.co.uk, Feb. 2015.

This is caused by a lack of
aggregate demand, with
insufficient demand to
generate full employment.

Figure 2: Fall in Aggregate Demand

Source: www.economicsonline.co.uk

Structural unemployment

Structural unemployment occurs when certain industries decline because of long term changes
in market conditions. (Economicsonline.co.uk, Feb. 2015)
Regional unemployment

When structural unemployment affects local areas of an economy, it is called regional

unemployment. (Economicsonline.co.uk, Feb. 2015). For example, unemployed copper
miners in Kilembe mines and tea growers in Fortportal town in western Uganda add to
regional unemployment in these areas.
Classical unemployment

A type of unemployment cause because the real wage of employment is too high and
individuals are not willing to work for a less wage.

Economicsonline.co.uk, Feb. 2015.

Classical unemployment is caused when wages are too high. This
explanation of unemployment dominated economic theory before the
1930s, when workers themselves were blamed for not accepting lower
wages, or for asking for too high wages. Classical unemployment is
also called real wage unemployment.

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Seasonal unemployment

Seasonal unemployment exists because certain industries only produce or distribute their
products at certain times of the year. Industries where seasonal unemployment is common
include farming and tourism. (Economicsonline.co.uk, Feb. 2015)
Frictional unemployment

Frictional unemployment, also called search unemployment, occurs when workers lose their
current job and are in the process of finding another one. This suggests that full employment
is impossible at any one time because some workers will always be in the process of
changing jobs. (Economicsonline.co.uk, Feb. 2015)
Voluntary unemployment

This refers to unemployment by choice.

(Economicsonline.co.uk, Feb. 2015)
Voluntary unemployment is defined as a situation when workers
choose not to work at the current equilibrium wage rate. For one
reason or another, workers may choose not to participate in the labour
market. There are several reasons for the existence of voluntary
unemployment including excessively generous welfare benefits and
high rates of income tax. Voluntary unemployment is likely to occur
when the equilibrium wage rate is below the wage necessary to
encourage individuals to supply their labour.
NAIRU and sustainable employment

The Non-Accelerating-Inflation Rate of Unemployment (NAIRU) is a

similar concept to the NRU. Short-run NAIRU is the short run level of
unemployment where inflation is neither likely to rise or fall. Longrun NAIRU is defined as the rate of unemployment at which inflation
stabilises once any short run shocks have worked their way out the
macro-economy. Long-run NAIRU is usually assumed to be the level
of unemployment that exists when the economy is operating on its
long run Phillips Curve. The implication is that a level of
unemployment below NAIRU is unsustainable for an economy. It is
clear that NAIRU is a significant policy concept which has helped
shape modern macroeconomic policy.
End of Question.
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Given the complexity of employment theories and its adverse effects on an

economy, it is imperative to examine other unemployment dynamics, Such as:

Cost of unemployment

Causes of unemployment

Possible methods of dealing with unemployment.

Non accelerating rate of Inflation unemployment

Structural unemployment and Labour mobility.

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References
Economicsonline.co.uk,. 'Unemployment'. N.p., 2015. Web. 2 Feb. 2015.
Sparknotes.com,. 'Sparknotes: Measuring The Economy 2: Unemployment'. N.p., 2015. Web.
2 Feb. 2015.

List of Tables
Table 1:

Unemployment in Uganda, Source: http://www.tradingeconomics.com ........................ 3

Table 2:

Unemployment in Burundi, Source: http://www.tradingeconomics.com ......................... 3

Table 3:

Unemployment in Kenya, Source: http://www.tradingeconomics.com ............................. 3

Table 4:

Unemployment in Rwanda, Source: http://www.tradingeconomics.com ........................ 3

Table 5:

Unemployment in Tanzania, Source: http://www.tradingeconomics.com ........................ 4

Figure. 1

Unemployment rates of E. African countries, 2007 - 2013 ................................................ 4

Table 6:

Average unemployment in E. African countries 2007 - 2013 ............................................. 5

Figure 2:

Fall in Aggregate Demand ................................................................................................... 6

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