ASSESSMENT OF UNEMPLOYMENT CONDITION (In case of Fitche

Town)
By

Haile Girma
ADVISOR: Toleshi Wakjira, (MSc)

A SENIOR ESSAY SUBMITTED TO DEPARTMENT OF ECONOMICS IN PARTIAL

FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF THE B.A DEGREE IN
ECONOMICS

DEPARTMENT OF ECONOMICS

COLLEGE OF BUSINESS AND ECONOMICS

SALALE UNIVERSITY

AUGUST, 2021
FITCHE, ETHIOPIA
 STATEMENT OF THE AUTHOR (DECLARATION)
I declare that this senior essay is my original work and all sources of materials used for this study
have been duly acknowledged. I solemnly declare that this paper is not submitted to any other
institution anywhere for the award of any academic degree, diploma or certificate.

Name: Haile Girma Signature:…….……………

Place: College of Business and Economics, Salale University, Fitche

Date of Submission:………………………………………….

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 ADVISORS’ APPROVAL SHEET
This is to certify that the research entitled “assessment of unemployment condition in Fitche
town” submitted in partial fulfillment of the requirements for the BA degree in economics
carried out by Haile Girma Id.No 10068/10, under my supervision. Therefore, I recommend that
the student has fulfilled the requirements and hence hereby can submit the research to the
department of economics.

Toleshi Wakjira, (MSc) ________________ ______________

Name of advisor Signature Date

2
 EXAMINERS’ APPROVAL SHEET
We, the undersigned, members of board the examiners of the final open defense by Haile Girma
have read and evaluated his thesis entitled “assessment of unemployment condition in Fitche
town”, and examined the candidate. This is, therefore, to certify that the thesis has been accepted
in partial fulfillment of requirements for the BA degree in Economics.

______________________ ______________ ______________

Name of Chair person Signature Date
______________________ ______________ ______________
Name of Advisor Signature Date
Toleshi Wakjira, (MSc) _______________ ______________
Examiners:

_________________________ _______________ ____________

_________________________ _______________ _____________

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 ACKNOWLEDGMENT
First of all, I would like to extend my unshared thanks to the almighty GOD for his unreserved
gift and for providing me the opportunity and smoothening of all aspects throughout my study.
Second, I would like to express my heartfelt thanks and deepest gratitude to my advisor, Toleshi
Wakjira (MSc) for her scholarly help in reading, honest guidance, critical comments and timely
suggestion in addition to her unreserved input and guidance from the inception of title selection
to the end of the thesis writing. Next, I am also forward my heartfelt gratitude to my parents.
They have put many of their wishes and desire aside to put me and my siblings through school
and university. They have raised me with a love of education and supported me in all my
endeavors. At the last but not the least, I would like to thanks all my classmates.

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 ABBREVIATIONS (ACRONYMS)

CSA- Central Statistical Agency

GDP- Gross Domestic Product

GIS- Geographic Information System

ILO- International Labor Organization

LDC- Least Developed Countries

OECD- Organization for Economic Co-operation and Development

WB- World Bank

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 Table of Contents
Contents…..……………………..……………………………………….…………………. Page

STATEMENT OF THE AUTHOR (DECLARATION) i

ADVISORS’ APPROVAL SHEET ii
EXAMINERS’ APPROVAL SHEET iii
ACKNOWLEDGMENT iv
ABBREVIATIONS (ACRONYMS) v
List of Tables vii
List of Figures i
ABSTRACT x
CHAPTER ONE 1
1. INTRODUCTION 1
1.1. Background of the study 1
1.2. Statement of the problem 3
1.3. Research questions 7
1.4. Objectives of the study 7
1.4.1 General objectives 7
1.4.2 Specific Objectives 7
1.5. Significance of the study 7
1.6. Scope and limitation of the study 8
1.7. Organization of the paper 8
CHAPTER TWO 9
2. LITERATURE REVIEW 9
2.1.1. Concepts and definitions 9
2.1.2. Types of unemployment 10
2.1.3 Theories of unemployment 11
2.1.4. Causes of Unemployment 14
2.1.5. Costs of Unemployment 15
2.2. Empirical Literature Review 16
2.2.1. Unemployment in Ethiopia and the urban labor market 17
CHAPTER THREE 20

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3. METHODOLOGY 20
3.1. Descriptions of the study area 20
3.2. Sources of data 21
3.2.1 Primary data. 21
3.2.2 Secondary data 21
3.3. Method of data collection 21
3.4. Sampling Technique and sample Size 21
3.4. Method of data analysis 22
CHAPTER FOUR 23
4. RESULTS AND DISCUSSIONS 23
4.1. Demographic Characteristics of the Respondents 23
4.2. Attitudes of unemployed respondents towards the general information related to each objective of
the study. 26
4.3. Consequences of being unemployed on the society 32
CHAPTER FIVE 33
CONCLUSION AND RECOMMENDATION 33
5.1. Conclusion 33
5.2. Recommendation 35
Reference 38
Appendix 40

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 List of Tables
Table 1: Sex classification of respondents 23
Table 2: Respondents Level of family size 25
Table 3: Educational levels of the respondents 25
Table 4: Average duration of unemployment 26
Table 5: Migration pattern of respondents 27
Table 6: Methods used in order to seeking job 28
Table 7: Kind of jobsrespondents like to join 28
Table 8: Challenges in establishing business 29
Table 9: Consequences of unemployment on the living standard of unemployed respondent 31

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 List of Figures
Figure 1: Map of study area 20
Figure 2: Age classification of respondents 23
Figure 3: Marital status classification of respondents 24
Figure 4: Pushing factor for migration of respondents 27
Figure 5: The main causes of unemployment 30
Figure 6: responses of respondents on the ways of getting support for their lives 32

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 ABSTRACT
A high level of unemployment is one of the critical socioeconomic and demographic problems
facing in Ethiopia. The intensity of the problem is high in urban areas in general, Fitche town in
Particular. Unemployed respondents face serious difficulty in getting employment. In light of
this problem, this study was conducted within the objective of “assessment of un employment
condition in Fitche town. Primary data was collected from 118 respondents out of target
population (2,763).In this study the researcher was use ‘Yamane formula,1967’to calculate the
required sample sizes from the target unemployed respondents and the stratified random
sampling technique were used to select the unemployed respondents from four kebeles of the
study area. The method of data analysis used in this study was descriptive method of data
analysis. The unemployed population wants to work any available job to relief from their family
assistance and support themselves and their families. Surprisingly, 15.3% of unemployed
respondents want to establish their own business, though still they did not do because of different
constraints mainly shortage of finance, lack of training, lack of place of working, absence of
license. Besides, the educated are more unemployed than that of the uneducated one which
implies education doesn’t guarantee for employment. Based on the findings of the study;
increasing investment in training institution and linking the training institution with labour
market, attracting foreign investors to promote industrializations were suggested as
recommendations. Therefore, the Fitche town administration should consider this problem and
take a serious measure to minimize the unemployed population. The administration should focus
on labour-intensive investments that can employ huge man-power at a time. Besides the
government should create suitable working environments for those who want to establish their
own business including provision of financial credit without any collateral, working place and
continuous training on entrepreneurship concepts with the collaboration of nearby higher
institutions.
Key words: unemployment, underemployment, psychological trauma, Fitche town

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 CHAPTER ONE

1. INTRODUCTION

1.1. Background of the study

The persistent character of unemployment over the last decade in world has become great
concern for academicians and policymakers. Unemployment is often used as a measure of the
health of the economy. The underutilization of human capital or unemployment is very important
issue that negatively affects the development of the one’s country. Economic theories states that
unemployment occurs when a person who is actively searching for employment is unable to find
work (U.S. Bureau of Labor Statistics April 3, 2020).

Unemployment is a problem for both developing and developed countries. However, the impact
and intensity might differ. According to Sumera, Shahzad, Muhammad, &Muhammad (2012),
high unemployment implies resources are wasted, people’s income is depressed. It has the most
direct and strong influence on every individual. Denied employment for the majority of the
population means a decline in the standard of living and causes serious, sometimes dangerous,
psychological trauma. Also, for the government, the unemployment rate is one of the most
important indicators of the economic situation in the country. Additionally, it is a socio-economic
phenomenon, in which part of the labor force is not engaged in the production of goods and
services. In actual economic life, unemployment appears as an excess of supply of labor over
demand on it (Malika, Faisal, & Nil, 2017).

According to Rafiq, Ahmad, Asmatullah, & Khan (2010) and Joel& Johannes (2010),
unemployment has a great impact on growth and development at large and it causes a waste of
economic resources the productive labor force and affects the long run growth potential of an
economy. If peoples cannot find jobs in their home country, they may be inviting to relocate to
another country for getting jobs. This can be harm for the future of a nation, particularly if other
nations are attracting its brain drain. Therefore, if this problem uninterrupted in any economy, it
could be a major factor in deteriorating the economic growth.

1
Moreover, persistent unemployment not only affects the position of a nation in comparison to
other nations, but it also leads to suffering home country problems. Another explanation may be
that unemployment might be more serious through creating political instability. If people are left
with no alternative, they are more liable to join an uprising as an alternative way of generating
earnings (Sisay, 2020).

Unemployment is one of the major challenges facing today's world. Coupled with population
growth and increased poverty, it has a significant impact on growth and development at large. It
causes a waste of economic resources such as the productive labor force and affects the long run
growth potential of an economy. Unemployment gives rise to private and social problems in the
society such as increased crimes, suicides, poverty, alcoholism and prostitution (Rafiq, Ahmad,
Asmatullah, & Khan, 2010). When workers are unemployed, their families lose wages, and the
nation as a whole loses their contribution to the economy in terms of the goods or services that
could have been produced. Unemployed workers also lose their purchasing power, which can
lead to unemployment for other workers, creating a cascading effect that ripples through the
economy. In general, unemployment affects household income, health, government revenue and
hence GDP and development at large. Studying unemployment therefore helps tackle these
problems through some kind of policy actions.

Unemployment is one of the several socio-economic problems prevailing in virtually all

countries of the world. It has been one of the several features of the urban phenomenon in many
countries though some countries have suffered the worse rate of unemployment than others (B.
Paul, 2005 and F.Nazir, M. A., et al, 2009). The problem has a serious effect not only on the
living standards of the people but also on the socio-economic status of a nation (F.Nazir, M.A., et
al, 2015). Today, in Ethiopia, the problem of unemployment is a central concern of development
and more recently the discussion has focused on unemployment in urban sectors. Many urban
centers in Ethiopia are challenged by high rates of unemployment. Moreover, despite the huge
unemployed labor force, urban centers of these nations experience high rate of rural-to-urban
migration, exacerbating the unemployment problem of urban areas.

2
According to Rafik et al. (2010), unemployment has been the most consistent problem in both
advanced and poor countries. In 2009 for example, as indicated in the World Bank data base
(2011), the general unemployment rate stood at 20.5% in Ethiopia, 23.5% in South Africa, 4.3%
in China, 5% in Japan, 9.1% in France, 8.3% in Brazil and Sweden and 9.3% in the US.

Another explanation may be that urban unemployment might be more serious than rural
unemployment for example in creating political instability. For instance, the recent uprising in
the Middle East especially in Egypt and Tunisia which toppled the respective regimes is
motivated by major socioeconomic problems such as rising unemployment (Behr and Aaltola,
2011). It is also vital that the obstacles for productivity (which unemployment can be one) should
be studied not only in the agricultural sector but also in the urban non-agricultural sector so as
for both to contribute for growth and job creation. Urban poverty stood at 37% and rural poverty
at 45% in 2005 (World Bank, 2005). Growth, unemployment and job creation in urban areas
therefore require equal attention for poverty alleviation.

The aim of this study is, to give a brief insight into current unemployment situation of Fitche
town; the response to it from both demand and supply side of the labor market and challenges
related to employment creation. In addition, this study was identifying the cause and
consequences of unemployment in the study are. Finally, the researcher was giving adequate
recommendations, which were used to tackle this problem, for policy and decision makers of the
Fitche town.

1.2. Statement of the problem

Unemployment is involuntary idleness of a worker seeking work at prevailing wages (Webster’s
third new dictionary).Unemployment is a problem for both developing and developed countries.
However, the impact and intensity might differ. According to (Sumera, Shahzad, Muhammad, &
Muhammad, 2012) high unemployment implies resources are wasted, people’s income is
depressed and it has the most direct and strong influence on every individual.

Unemployment is one of the most common and chronic problems worldwide. It is a concern for
individuals as well as global communities. Kieselbach and Traiser (2013) in their analysis of the
relationship between unemployment and ill-health found out that unemployed youth suffer from
“feelings of vulnerability, inferiority, worthlessness and uselessness and depression”. Moreover,

3
they could also be socially stigmatized for being unemployed. Altogether, these affect their
“self-esteem” that leads to social exclusion.

According to Sisay (2020), high unemployment and low economic growth become as a seed to
produce poor country, terrorism, racism, financial hardship, poverty, homelessness, frustration,
family tension, social isolation, loss of self-confidence, loss of hope and self-esteem, with hope
but for without living standard change it invites peoples for migration. According to Geda
(2020), the most vulnerable groups are employees in the private sector, COVID-19 pandemic
become as hinder to run their business with full capability. Those employers have obliged by
Ethiopian government to do not fire their workers but if the government does not finance and the
pandemic sustain for long period, they have not become volunteer to hold more job seeker and
pay for their workers. Therefore, they may fire workers and this leads to unemployment.

Unemployment situation existing in Ethiopia is the same due to the population growth, the
unbalanced economic growth and job opportunity in urban areas. Only a small percentage of the
immigrants were able to find job in the urban modern sectors. This problem of unemployment is
exacerbating from time to time. Unemployment gives rise to private and social problems in the
society such as increased crimes, suicides, poverty, alcoholism and prostitution (Rafik et al.,
2010 and Eita and Ashipala, 2010).

Unemployment is one of the several socio-economic problems prevailing in virtually all

countries of the world. It has been one of the several features of the urban phenomenon in many
countries though some countries have suffered the worse rate of unemployment than others (B.
Paul, 2005 and F. Nazir, M. A., et al, 2009). The problem has a serious effect not only on the
living standards of the people but also on the socio-economic status of a nation (F.Nazir, M.A., et
al, 2015).
Today, in most of the developing countries the problem of unemployment is a central concern of
development; and more recently the discussion has focused on unemployment in urban sectors.
Many urban centers in developing countries are challenged by high rates of unemployment.
Moreover, despite the huge unemployed labor force, urban centers of these nations experience
high rate of rural-to-urban migration, exacerbating the unemployment problem of urban.

4
The concern is whether there should be substantial growth in job creation in urban areas to
absorb new labor market demands. This calls for a careful study of the current urban
unemployment and labor market situation, efforts being done towards employment creation and
the challenges towards those efforts (Fitsum, 2014).

Kingdon and Knight (2004) analyze unemployment in South Africa and they show that
unemployment is determined by education, race, age, gender, home ownership and location
among others. Echibiri (2005) investigates unemployment in Nigeria using data from 220
randomly selected youths in the city of Umuahia and finds that unemployment is influenced by
age, marital status, dependency ratio, education, current income and employment preference
(paid or self-employment).

Eita and Ashipala (2010) study the determinants of unemployment in Namibia for the periods
1971-2007 and conclude that unemployment is positively correlated with investment, wage
increase and with an output level below the potential output. They also found that unemployment
is negatively related to inflation. Another study by Alhawarin and Kreishan (2010) on long term
unemployment in Jordan indicates that age, gender, marital status, region, work experience and
education are the major determinants.

Studies addressing urban unemployment in Ethiopia are relatively few. Serneels (2004) studies
the nature of youth unemployment and analyzes incidence and duration and concludes that urban
youth unemployment for males stands high at 50% in 1994 and means duration is about 4 years.
Duration is shorter for those aspiring for high paying public sector jobs and for those with their
fathers are civil servants. Haile (2003), using data from the 1994 and 2000 waves of the
Ethiopian Urban Socio-Economic Survey, studies the incidence of youth unemployment in
Ethiopia with special focus on the urban youth and finds that youth unemployment was high at
more than 50%. Haile (2008) also studies the determinants of self-employment in urban Ethiopia
and concludes that self-employment was less among the young, the educated and those who
migrated to urban areas recently.

5
Dendir (2006) analyzes the determinants of unemployment duration in urban Ethiopia and
concludes that mean duration is 3 years for completed spells and 4.7 years for incomplete spells.
Denuet.al, (2007) in a study on the characteristics and determinants of unemployment,
underemployment and inadequate employment in urban Ethiopia, finds that the youth are
characterized by relatively high unemployment which differs among the youth group across
location, gender and education.

The numbers of rural urban migration to hold tremendous implication for the proportion of those
who was entering the working age group were affecting the sample size. In Fitche town the
problem of population growth and unemployment was affect the town. Unemployment is not
only a problem at country level but also, it’s a great problem at a town level (i.e., In Fitche
Town). Most of the previous research related to the problem of unemployment focuses on
finding its determinants. In addition to confirming in it, the researcher focuses on the cause of
unemployment problem and its effects; in order to assess unemployment condition and to give
directions(recommendations)mostly for decision makers and town administrations. Also, it was
direct unemployed peoples, how they get employed, in the selected study area to tackle this
problem.

The previous studies do not address the issue of corruption and discriminations as a cause of
unemployment. So, the researcher was give emphasize for this issue; in addition to confirming in
the ideas of the previous study. The researcher mostly concentrates on assessment of
unemployment condition in Fitche town. The rationale of this study is; to create awareness and
giving adequate recommendations for decision and policy makers of the town on the issue of,
problem of unemployment by reviewing the previous research and current situation of
unemployment in Fitche town and then identifying the effects of unemployment by focusing on
the cause and consequences of unemployment in this town to tackle this problem.

It is rare to find recent studies on unemployment problem in a particular urban area like Fitche
town. Therefore, this study was giving a brief insight into current unemployment situation of this
town; the response to it from both demand and supply side of the labor market and challenges
related to employment creation.

6
However, studies on the causes and consequences of this challenging problem in the Fitche town
are not yet made. So, the researcher motivated to study on assessments of unemployment
condition in this town.

1.3. Research questions

On the ways of filling the gap, the researcher was focus on the following research questions.
Accordingly, the researcher assesses the study based on the following research questions.
✔ What is the cause of unemployment in Fitche town?
✔ How long an individual remains unemployed on average?

✔ What are the challenges that deter employment creation in Fitche town?
✔ What are the consequences of the unemployment in Fitche town?

1.4. Objectives of the study

1.4.1 General objectives
The general objective of the study is to assess the unemployment condition in Fitche town.

1.4.2 Specific Objectives

The study is focusing on the following specific objectives:
❖ To examine causes of unemployment in the town.
❖ To assess how long an individual remain unemployed in the town on average.
❖ To identify the challenges that deters employment creation in Fitche town.
❖ To examine (forward) consequences of unemployment in the town.

1.5. Significance of the study

The social and economic consequences that could arise in association with the high and growing
unemployment are cited. Hence, the study were believed to be relevant in that it could motivate
government, non-government organizations and community of large to take measures to help the
unemployed for the time being and to establish sustainable employment schemes in the future
and it could be helpful somehow to initiate policy makers to design policy concerns, which are
necessary to tackle the problem.

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Moreover, it was benefit the unemployed peoples to understand their situation and to take
measures to be being employed and play role in eliminating this complex problem of
unemployment in Fitche town.
.
This study is significant to the Town policy makers to reduce unemployment problem and to
enhance the per capita income of the residents and also for the further researcher by laying down
a corner stone through making available relevant and useful data. On the basis of finding
regarding the assessment of unemployment condition, the researcher was pick up some relevant
information that were help economic growth and development.

Furthermore, it was relevant to planners and policy makers in identifying the overall condition of
unemployment in Fitche town. The finding of this study was also has immense benefit to social
workers in evaluating and quantifying the magnitude of unemployment towards growth and
development of the Town.

1.6. Scope and limitation of the study

In current world, the performance of economic development especially in developing countries is
challenged by many factors (I.e., Unemployment). Since, unemployment is macroeconomic
problem it’s difficult to study its nature as a whole. Thus, the focus of the study is limited to the
assessment of unemployment condition in Fitche Town and its effect on socio-economic
development of the town. Further, this study focuses on North Shoa Zone particularly in Fitche
Town due to; time, finance, and other resources constraints. In addition, there are many
constrains that was faced the researcher throughout the accomplishment of the study; - lack of
finance, enough time, difficulties in getting relevant data and other constraints.

1.7. Organization of the paper

The paper was organized into five chapters. The first chapter of this paper contains an
introduction part; - background of the study, statement of the problem, research questions,
objective of the study, significant of the study and scope and limitation of the study. The second
chapter explains about the literature review of the study. Under this chapter theoretical and
empirical review of the study were discussed. The third chapter discuss about methodology of
the study which includes description of the study area, source of data, the method of data

8
collection, sampling technique and sample size, and method of data analysis. The fourth chapter
contains results and discussion, the last chapter was about conclusion and recommendation.

CHAPTER TWO

2. LITERATURE REVIEW

2.1. Theoretical literature review

2.1.1. Concepts and definitions

The ILO definition of unemployment that comprises three conditions: being without work, currently
available for work, and actively seeking for work has been criticized for its rigidity to accommodate
peoples temporarily laid off or peoples discouraged of job prospects (Izzi, 2013).

Many economists and institutions defined unemployment differently for instance (Smith, 2000)
wrote” unemployed are those who have no jobs while, they are actively searching for a job and
are willing to be employed at the ongoing wage rate”. On the other hand, the current
International definitions of unemployment stipulates, that is sufficient for a person to be engaged
in an economic activity for at least one hour during the reference period to be classified as
employed. In this framework unemployment is considered to be an extreme situation of total lack
of work.

The CSA 2006 Survey, as quoted from ILO, 1983 defined the standard international definitions
of unemployment based on three criteria. These are: -

I. “without” those neither in paid employment or self-employment

II. “Currently available for work”, those available either for paid employment or
self-employment.
III.” seeking “work those who had taken specific steps such as registration at a public or private
employment exchange, application to employees etc.
Todaro, 1994 under the little of “labor underutilization and some definitional distinction
distinguished five kinds of underutilization of labor-based time, intensity of work and
productivity: -

9
1. Open unemployment: both voluntary and involuntary unemployment. Voluntary unemployed
persons are those unwilling to accept jobs for which they could qualify, probably they have
means support other than employment whereas the involuntary unemployed are those who are
willing to work but unable to find jobs.

2. Underemployment: is a situation in which workers works less than they would like to work.

3. The visibility active but underutilized: those who would actually classify as neither
unemployed nor underemployed by the above definitions given.

A, Disguised unemployment: those people who seen occupied on forms or employed in

government on a full. Time basis through the services they render may actually require
much less than full time.

B. Hidden unemployment: those who are engaged in second choice non employment activities
perhaps job opportunities may not available at the level of education already attained or for
women due to social norms.

C. The prematurely retired: this is evident and prematurely growing civil service because in
many countries’ retirement ages are falling.

4. The impaired: That who may work full time but who intensify effort is seriously impaired
through malnutrition or lack of common preventive medicine.

5. The unproductively: those who can provide the human resources necessarily for productive
work but who struggle long hours with in adequate complementary resource.

2.1.2. Types of unemployment

Smith, 2000 and other scholars have identified four types of unemployment with their respective
cases.

1. Frictional unemployment: results from the normal short run adjustment between supply and
demand of labor. i.e., takes time unemployed works and employers to find each other it
maintains that during periods of growth: workers voluntary level present jobs as enter the labor
market in search of new employment, in periods of decline workers become unemployed because
they choose to work in jobs at lower equilibrium wage.

10
2. Structural unemployment: this is involving a miss match between the workers looking for
jobs and vacancies available even though the number of vacancies may be equal to the number of
the unemployed.

The unemployed workers lack the skills needed for the jobs or in the wrong part of the country to
take the jobs offered. That is, it is either very expensive or physically difficult to bring workers to
where jobs are as to train the workers for the available jobs at a given point in time. Structural
unemployment lasts longer and demand management does not eliminate. To reduce this type of
unemployment facilitation and implementation of training programs, subsidization of mobility of
workers, etc. are required a long with demand management instruments.

3. Seasonal unemployment: seasonal unemployment arises because of both supply side and
demand side seasonality. Variation in products demand such as seasons of fertilities, lead to
variation in the demand for labor associated with production of what commodity, production
seasonality from the supply side such as have tin of agricultural produce, leads to seasonal
variation in about demand (McCONNEL.2003).

4. Demand deficiently (cyclical unemployment): This type of unemployment arises due to

inadequate effective’s aggregate demand. Gross domestic product may not be as high as potential
output because of demand failure. Demand shrinks due to expectations which discourage private
investment spending, low government spending or taxes, low private consumption, low net
exports, under demand deficient unemployment condition, the number of unemployed workers
far exceeds the numbers of job vacancies or available (Smith, 2000).

2.1.3 Theories of unemployment

Here are a summary of different theories and policies of unemployment suggested by different
schools of thought.
1. Classical theory of unemployment

The main characteristic of this theory is that the labor market forces of supply and demand
responds to changes in real wages. Thus, unemployment is consequence of real wage and
remaining too high of wage level to clear a market. Government and trade unions are identified
as significant causal factors consequently unemployment in the classical system lies up on
market not clearing. The policy recommendation forward from classical analysis of

11
unemployment is that reduces trade unions power to make labor competitive in the market
(Smith, 2003).

2. Neo classical theory of unemployment

It focuses on choice techniques i.e., the best cost minimization bundles of factors of production.
Labor and capital are viewed as factor of production as objects and not as social relation with
one another. Unemployment is explained either as a result of factor price i.e., the relative
cheapness of capital in relation to labor or in terms of technological considerations related to the
no sustainability of capital for labor or what has been dominated as the factor of production
(Atkinson, 2005).

3. Keynesian theory of unemployment

When the people’s expenditure on goods and services declines with volume of saving, there and
bellow investment activities which consequences recession and unemployment. Therefore,
unemployment results from low level of investment and also depends up on the level of national
income. In such conditions, for ensuring full employment and production, there should be
increment in savings and it will have to be employed in productive investments so that the effects
of diminished demand for consumers’ goods may be offset (Hajela, 2004).

Inflation and unemployment

It is suggested that there is an inverse relation between unemployment rate and inflation. In fact,
such relationship was studied by Philips. The Phillip curve is an inverse relationship between the
rate of unemployment and the rate of increase in money wage.

The higher rate of unemployment, the lower the rate of wage inflation, in other words there is
tradeoff between wage inflation and unemployment (Dorbush, 2001). He also stated that the
relationship pattern of wage inflation and unemployment. Assuming gw is wage inflation with
U*- representing the natural rate of unemployment and U represents unemployment rate then he
wrote the simple Phillips curve as: - gw =E (U-U*). Where E measures the responsiveness of
wage to unemployment, this equation states that wages are falling when unemployment rate
exceeds the natural rate of unemployment. I.e., U>U*.

12
In developing country, it is usually inconvenient to look into this relationship because of
impartibility of conventional assumption of economist and in developing countries data are
lacking. For instance, time series data on the rate if an employment is lacking in Ethiopia.

Migration and unemployment

In Africa the magnitude of rural-urban has greatly exceeded the capacity of the modern industrial
sector to absorb the migrants so that it can only employ productively a small portion of them.
Part of the problem relates to the nature of the Africa industrialization process itself, a process
that has typically failed to produce growth of job opportunities at anything near the rate of output
(Todaro, 1994).

Todaro indicated three factors that are contributing for high rural urban migration in developing
countries. These are demographic factors, educational and economic factors. Firstly, the
described demographic factors, urban migrants in LDCs tend to be young men and women
between ages 15 and 24 because young people generally seem-in prefer non-farm jobs, most of
which are to be found in urban areas, the second factor that has been mentioned is educational
characteristics. One of the most consistent find of rural migration studies shows positive
correlation between educational facility attainment and migration.

The urban labor force grows as a result of the combined effect of the natural increase in urban
areas and from rural urban migration. Todaro (1994) has emphasized the role of push and put
factors of migration as important contributors to the increase in unemployment of agriculture and
attraction is town life as exacerbating, the rural unemployment problem. He suggested the heavy
rushing of people in to urban area give rise to socio–economic problems in the town.

Also, it contributes for the expansion of informal sector, especially in less developed countries
since women are more vulnerable to the problem of unemployment recommend. The basic
solution to the problem must lie in improving the living and employment conditions in the rural
areas to a degree that would about the inflow to the town.

The labor market, like any other markets, has both supply and demand sides. The supply side,
also called the labor force or the economically active population, has two components: the
employed and the unemployed (Hussmann’s, 1989). The demand side on the other hand consists

13
of jobs (filled posts) and job vacancies (unfilled posts). According to Olsson (2009), since labor
is not a "normal" good, we do not have a condition where labor demand equals labor supply at
equilibrium wage rate.

The prevailing situation in countries around the world is instead the demand for labor is less than
the supply due to the higher than equilibrium wage rate and hence there is an excess supply of
labor. This gap between the supply and the demand for labor is referred to as unemployment.

It is important to understand the causes of unemployment and its consequences for possible
intervention. In this section, the causes of unemployment which might slightly differ between
developed and developing countries were discussed. The costs of unemployment were also
discussed briefly. To understand the nature of the labor market in urban Ethiopia, earlier studies
on the same and related study was surveyed.

2.1.4. Causes of Unemployment

The causes of unemployment are among the extensively debated issues by economists.
Keynesian economics stresses on the inadequate aggregate demand in the economy as the major
cause. Real wage rigidities and/or real interest rates cause low output and high unemployment.
Real wage rigidity, "the failure of wages to adjust until labor supply equals labor demand"
according to Mankiw (2002), can cause unemployment.

In the real world, wages are set at a higher level than the equilibrium wage rate and the reasons
for this can be grouped into three broad views. Efficiency wages theory assumes that higher
wages give incentive for workers to exert more effort and reduce shirking. Hence, firms pay
higher wages. "The insider-outsider theory" asserts that firms are prevented from cutting wages
by labor unions and contracts (Romer, 2005 and Olsson, 2009). The major assumption of this
model is that labor unions try to maximize the interests of only their members (the insiders) who
are already employed and do not care about non-members (the outsiders). In doing so, firms and
the insider’s bargain to knock the outsiders out of the job market and thereby create
unemployment.

Another explanation for higher than equilibrium wages is the search and matching model which
emphasizes on the heterogeneity of workers and jobs as the cause for unemployment.
Heterogeneity of workers in skills and preferences, information asymmetry and heterogeneity of

14
jobs in their attributes all make it difficult to find the right person for the right job-hence,
unemployment.

2.1.5. Costs of Unemployment

Unemployment comes up with costs. According to Feldstein (1997), one who wants to analyze
the costs of unemployment should start by disaggregation. The costs of unemployment can be
classified broadly as private and social. The private costs of unemployment are those costs borne
by the unemployed themselves. The social costs on the other hand refer to those costs to the
nation at large and can be the cumulative result of private costs. In this approach, the cost of
unemployment can be seen as the opportunity cost of unemployment to the nation i.e., the cost is
the national income forgone (Feldstein, 1997 and Haile, 2003).

Unemployment results in a waste of economic resources such as the productive labor force and
thereby affect the long run growth potential of the economy. It gives rise to increased crimes,
suicides, poverty rates, alcoholism and prostitution (Rafik et al., 2010 and Eita et al, 2010. These
evils in turn come up with a cost (cost of crime prevention) and channel resources to their
prevention which rather could have been used for other developmental purposes.

Unemployment may also have a scary effect. Previous spell in unemployment has a discouraging
effect on future participation in the labor force, earnings and welfare in general (Haile, 2003).
Children are affected by the unemployment situation of their parents. According to Dao and
Longani (2010), children of jobless parents tend to perform less in their education in the short
run. In the long run, a parent's lost income due to unemployment reduces the child's earning
prospect. Unemployment has an adverse effect on health and mortality via its economic, social
and psychological effect on the unemployed. It is also considered as one of the risk factors for
HIV/AIDS.

According to M. Shang (1992) idle humors resources were a loss of goods and services and
therefore a loss of real income that unemployed resource could have been contributed to the
society’s wellbeing. The economic cause of this cost contribution of goods and services in the
economy is measured as the difference between what may be produced full employment and
what is produced at less than full employment. Loss incomes or without income, the head of
family cannot play the role in which he /she was and family suffers from economic and social

15
dependency and important family ties may be in danger. During unemployment person loses
self-respect it is more likely to suffer from related illness. There also some evidence that higher
unemployment leads to increased crime and reliance (John Salmon, 1998).

Moreover, the following macro effects are associated due to unemployment problem: -

▪ Loss of output due to the economy unemployed could be produce goods and service that
the country needs to have.
▪ Loss of taxes revenue- unemployed people are not earning and they are not paying tax.
The government has lost out.
▪ Increase in government expenditure: the government has to payout benefits to support the
unemployed. A long with the loss of tax this is a double whamming.
▪ Loss of profits: with higher employment firms are likely to do better and make better
profits. If they make less profit because of unemployment, they may have fewer funds to
invest.

2.2. Empirical Literature Review

According to Krugman (1994), the welfare system in developed countries particularly in Europe
can have an impact on unemployment. Krugman also argues that productivity growth may not
come with good employment performance or the vice versa. Instead, increased productivity and
employment creation are features of competitiveness and unemployment is part of a decline in
economic performance. On technology and unemployment, he asserts that the rapid information
and communication technology growth has increased skills premium and possibly played a role
in unemployment problem in Europe.

Another study by Bassanin and Duval (2006) on unemployment in OECD countries shows that
among the determining factors for rising unemployment are high and continuous unemployment
benefits, "high tax wedges", and "stringent and anticompetitive product market regulations".
According to Stiglitz (1974), unemployment in developing countries like those in East Africa is a
result of rural to urban migration motivated by the high wage differential.

Noveria (1997), on the other hand, states that the major causes of rising unemployment in urban
areas in LDCs are education expansion, urbanization which results in rural to urban migration,
population growth and job aspiration.

16
In the Ethiopian case, the World Bank (2007) indicates that the potential causes of urban
unemployment include the increasing number of the youth labor force, the rising internal
migration and literacy rate.

Another study by Haile (2003) states that some of the most important causes in developing
countries especially in Ethiopia are the rapidly growing size of the labor force, poor to modest
macroeconomic performance, low level of job creation and low level of aggregate demand in the
economy.

Kingdon and Knight (2004) analyze unemployment in South Africa and they show that
unemployment is determined by education, race, age, gender, home ownership and location
among others. Echibiri (2005) investigates unemployment in Nigeria using data from 220
randomly selected youths in the city of Umuahia and finds that unemployment is influenced by
age, marital status, dependency ratio, education, current income and employment preference
(paid or self-employment).

Eita and Ashipala (2010) study the determinants of unemployment in Namibia for the periods
1971-2007 and conclude that unemployment is positively correlated with investment, wage
increase and with an output level below the potential output. They also found that unemployment
is negatively related to inflation. Another study by Alhawarin and Kreishan (2010) on long term
unemployment in Jordan indicates that age, gender, marital status, region, work experience and
education are the major determinants.

2.2.1. Unemployment in Ethiopia and the urban labor market

In this section, the Ethiopian labor market and studies on unemployment were briefly reviewed.
Studies addressing urban unemployment in Ethiopia are relatively few and most of those
surveyed in this research concentrate on youth unemployment. Krishnan (1996) studies the role
of family background and education on employment in urban Ethiopia and finds that family
background (especially father's education) strongly affects entry to public sector employment but
it is not significant in determining entry to lower status private employment. Entry to public
sector employment is also affected positively by education while age (being older) positively
affects being in the labor force.

17
Dendir (2006) studies unemployment duration in urban Ethiopia and finds that the mean duration
is 3 years for completed spells and 4.7 years for incomplete spells. Haile (2003), using data from
the Ethiopian Urban Socio-Economic Survey from 1994 to 2000, finds high urban youth
unemployment in Ethiopia with more than 50% of the youth unemployed. Between the periods
1994-2000 teen age youth unemployment increased and was higher for women. Those from
families of at least secondary school education are found to be affected less according to this
study.

Serneels (2004), using the 1994 Ethiopian Urban Socio-Economic Survey, studies the incidence
and duration of unemployment in urban Ethiopia emphasizing on the youth. According to this
study, in the year 1994 Ethiopia's urban unemployment rate was one of the highest in the world
with male unemployment standing at 34% and the urban youth unemployment rate was even
higher at 50%. Serneels indicates that mean duration of unemployment is 4 years and those youth
whose parents are civil servants have shorter durations. It is also indicated that public sector was
the top employer hiring one third of the adult men. A negative relationship is found between
unemployment incidence and duration, and household welfare. There is evidence that households
reduce their savings and consumption to cope with unemployment. With regard to job
aspirations, well-educated, first time job seekers who aspire to well-paying jobs are more
affected. On family background, Serneels concludes that mother’s education may play a role but
father's education has a strong effect for labor market performance in urban Ethiopia.

Denu et al. (2005/07) study the characteristics and determinants of youth unemployment and
underemployment in Ethiopia from 1984-2001 and conclude that the youth is substantially
affected by unemployment and significant differences exist within the youth group across
location (urban-rural), gender and education. The urban youth unemployment stood at 7.2%
while it was 37.5% for the rural, the latter facing high rate of underemployment. Unemployment
for the youth women was 17.3% in 1999 while it was 6.9% for their men counterparts.
Regarding education, 44.5% and 32.6% of the unemployed youth were illiterate or had only
primary education. The research indicates that the private sector plays a huge role in
employment as a result of policy change by the current government to promote the private sector
as opposed to the previous government's policy where most enterprises were government owned.

18
Using data from the Ethiopian Urban Socio-Economic Survey from 1994 to 2000, Haile (2008)
studies the nature of self-employment "for the first time in Ethiopia" and finds that the young,
the educated, those that migrate to urban areas recently and those whose parents are not
self-employed are less likely to be found in self-employment.

The World Bank (2007), with its report in two volumes, acknowledges important improvements
in urban unemployment between 1995 and 2005 though the labor market situation remained
unchanged. According this study, the rapid rise in the urban labor force creates pressure on the
labor market and it can be seen as both a challenge and an opportunity for the Ethiopian
government. The rising number of educated labor force entering the market each year as a result
of education expansion and internal migration necessitate enhanced job creation in the country.
Another feature of the Ethiopian urban labor market indicated in this study is the increasing
literacy rate. This is implicated in World Bank (2011) that the net primary school enrollment rate
in Ethiopia increased to 87.9% in 2010 from 68.5% in 2005.

Low wages characterize the Ethiopian urban labor market although it differs among the type of
employers, sector and worker characteristics. Even though females are relatively less skilled yet,
the literacy rate and their participation in the labor force are increasing. There is labor market
segmentation with a relatively wanted public sector and formal private sector, and a large
number of unemployed and a large informal sector with low wages and mostly occupied by
women. Women in urban Ethiopia are relatively more affected by unemployment and they are
paid lower wages (World Bank, 2007). As can be noted, many of the studies surveyed so far have
concentrated on youth unemployment in urban Ethiopia and not many of them focused on
general unemployment.

The previous studies do not address the issue of corruption and discriminations as a cause of
unemployment. So, the researcher was give emphasize for this issue; in addition to confirming in
the ideas of the previous study. As of the researcher's knowledge and from the empirical review
it can be understood that the impact of Unemployment on output growth and its cause is not
studied well in Ethiopia. Specially, in study area there is no previous study on the problem of
unemployment. This study was contributes enough recommendations, to fill the information gap
in this study area.

19
 CHAPTER THREE

3. METHODOLOGY
3.1. Descriptions of the study area

Fitche town was founded in 1836 E.C. a town in central Ethiopia. It is the administrative center
of the North Shewa Zone of Oromia and separate District. It is located about three km from the
main Addis Ababa-Debre Marqos road, Fiche has a latitude and longitude of 9°48′N 38°44′E and
an elevation between 2,738 and 2,782 meters above sea level. Fitche Town is located in North
Shewa Zone of central Ethiopia 112 km away from Addis Ababa along the road to Bahir Dar.
The town covers a total land area of 3,325.1 hectares and divided in to 4 kebele administrations.
It was bounded in the East by Debre Libanos woreda, in West by Degem woreda, in North by
Lemi town and in South by Fital town. The population size of the town is expected to grow to
about 45,730 by the end of 2020. Moreover, out of the total estimated population of Fitche town
2,763 peoples are unemployed; out of whom 1,372or 49.6 %are male and 1,391 or 50.4 % are
female (Fitche town labour and social affairs office, 2021).

Figure 1: Map of study area

Map of Fitche Town

Source: GIS data CSA, 2017

20
3.2. Sources of data
The required data for this study were gathered from different sources which include both primary
source and secondary source.

3.2.1 Primary data.

This data was obtained by means of preparing questionnaires and interview to get more
information about the assessment of unemployment condition in Fitche Town.

3.2.2 Secondary data

Secondary data was collected from key employer’s official, central statistical agency and
reported document of Fitche Town.

3.3. Method of data collection

In order to explore deep information for the study, the researcher was collect primary data by
preparing and distributing questionnaires to respondents but secondary data was collected from
government sources, published and unpublished sources.

3.4. Sampling Technique and sample Size

There are 4 kebeles in Fitche town that consists of 45,730 populations; from this 2,763 are
unemployed. In this study the researcher was collect data from all kebeles. The total unemployed
are 703,690, 720 and 650 in 01, 02, 03, and 04 kebeles respectively (Fitche town labour and
social affairs office, 2021).
The researcher estimates the required sample based on Yamane formula of 1967. The level of
sample size is computed by the following formula:

𝑁
𝑛= 1+𝑁(𝑒)2

Where, n = sample size

N= target population

e = level of precision at 9%
2,763
𝑛 = 1+2,763(0.09)2
= 118. 17, n=118 sample size

21
So, the researcher was allocates the sample size proportionally among those kebeles by using
stratified random sampling.

Stratified Random Sampling = ( 𝑇𝑜𝑡𝑎𝑙 𝑠𝑎𝑚𝑝𝑙𝑒 𝑠𝑖𝑧𝑒

𝑇𝑜𝑡𝑎𝑙 𝑝𝑜𝑝𝑢𝑙𝑎𝑡𝑖𝑜𝑛 )𝑝𝑜𝑝𝑢𝑙𝑎𝑡𝑖𝑜𝑛 𝑜𝑓 𝑠𝑢𝑏 𝑔𝑟𝑜𝑢𝑝𝑠
SRS= ( )𝑁1;
𝑛
𝑁

𝐹𝑟𝑜𝑚 01 𝑘𝑒𝑏𝑒𝑙𝑒, 𝑛1 = ( )𝑁1 = ( )703 = 30. 02 = 30

𝑛
𝑁
118
2763

𝐹𝑟𝑜𝑚 02 𝑘𝑒𝑏𝑒𝑙𝑒, 𝑛2 = ( )𝑁2 = ( )690 = 29. 46 =29

𝑛 118
𝑁 2763

𝐹𝑟𝑜𝑚 03 𝑘𝑒𝑏𝑒𝑙𝑒, 𝑛3 = ( )𝑁3 = ( )720 = 30. 7 =31

𝑛 118
𝑁 2763

𝐹𝑟𝑜𝑚 03 𝑘𝑒𝑏𝑒𝑙𝑒, 𝑛4 = ( )𝑁4 = ( )650 = 27. 75 =28

𝑛 118
𝑁 2763

A total sample size (n) =n1+n2+n3+n4=30+29+31+28= 118respondents were selected from

Fitche town.

3.4. Method of data analysis

A method of data analysis in this research is descriptive analysis. In this analysis percentage,
tabular presentation and figure were used. The descriptive analysis was employed to describe
results that were obtained from the collected data. Visual representation such as tables and charts
were used to describe data that was gathered through questionnaire and interview.

22
 CHAPTER FOUR
4. RESULTS AND DISCUSSIONS
This chapter deals about the finding based on the data which is collected from Fitche town labour
and social affairs office, 2021 and on the responses of unemployed respondents of Fitche town;
that were gathered through structured questionnaire. In this chapter both the general and specific
objectives of the study were answered based on the collected data.

4.1. Demographic Characteristics of the Respondents

Under this the issues related to the background information of unemployed respondents: - Sex, Age,
Marital status, Family size and their educational levels were analyzed.

Table 1: Sex classification of respondents

Sex Frequency Percentage
Male 87 73.7
Female 31 26.3
Total l18 100
Source: Survey data, 2021

Table 1 indicated that out of 118 economically active labor forces which are unemployed,
among them, 73.7% are male and 26.3% are female. This is indicated that the unemployment
problem in Fitche town is more series for male than female.

Figure 2: Age classification of respondents

Source: Survey data, 2021

From figure2 we can observe that the frequency distribution of respondents among the total
respondents 35.6% of them are between the age of (23-27) years, and followed by 28% by age

23
group of (28-32), 18.6 % are age group of (18-22) years, 17.8% are the group of above 33 years
old of which are the least age respondents out of the total respondents. Unemployment in the
town is more problems for the younger age group that is from 23-27 years old. This is due to
younger age group is the new entrant of labor force and they are more depend on family income
and they prefer high salary job and no experience of works as they responded to interview.

Figure 3: Marital status classification of respondents

Source: Survey data, 2021

The above figure shows that unemployment with single marital status to be very high
which is accounted 46.6% relative to others. This result shows that one cannot get married unless
he/she is being employed or have a job which is mostly real in now a day and it’s followed by
married status 39%, and out of total respondents 10.2% are divorced, the least respondents
related to marital status was widowed which accounts 4.2% out of the total sample.

Table 2: Respondents Level of family size

24
 Family size Frequency Percentage

0-4 89 75.5
5-7 20 16.9
8-10 7 5.9

Above 10 2 1.7

Total 118 100

Source: Survey data, 2021

According to the above table the large level of family size of the respondents is (0-4) or
75.5% followed by (5-7) 16.9%, (8-10) 5.9% and the least level of family size are (above 10) or
1.7%.

Table 3: Educational levels of the respondents

Educational level Frequency Percentage (%)
Illiterate 17 14.4
Primary 22 18.7
Secondary 27 22.9
Certificate 25 21.2
Diploma 7 5.9
Degree 15 12.7
Others 5 4.2
Total 118 100
Source: Survey data, 2021

The above table shows the highest unemployed respondents by education level goes to
respondents with secondary educational levels which is accounted 22.9%, followed by
unemployed respondents with educational levels of; - certificate, primary illiterate, degree,
diploma, and others which is accounted; - 21.2%, 18.7%, 14.4%, 12.7%, 5.9% and 4.2%
respectively.

25
4.2. Attitudes of unemployed respondents towards the general information
related to each objective of the study.

Table 4: Average duration of unemployment

Durations Male Percentage Female Percentage
Less than 1 year 13 11 17 14.5
2-3 year 34 28.8 7 5.9
3-4 year 26 22 5 4.2
above 4 years 14 11.9 2 1.7
Total 87 73.7 31 26.3
Source: Survey data, 2021
From the above table out of the total unemployed respondents about 25.5% of them
remain unemployed in the town for less than 1year about 34.7% from the unemployed
individuals remain unemployed for 2-3 year, about 26.2% from those unemployed respondents
for 3-4year and about 13.6% being unemployed for greater than 4 years. Less than 1year male
account 11% whereas females account 14.5% and for periods of unemployment duration 2-3
years males account 28.8% and females account 5.9%, for 3-4 years male account 22% and
females account 4.2%, for above 4year male account 11.9% and female account 1.7%.

From this more females are unemployed for shorter period of time in comparison with males. In
general, from the table the researcher conclude that one unemployed individual can stay being
unemployed for 2-3 years on average.

Table 5: Migration pattern of respondents

Types of migration Frequency Percentage (%)
Rural- urban 55 46.6
Another town/city 21 17.8
Natives of town 42 35.6
Total 118 100
Source: Survey data, 2021

26
 As the above table shows, the highest unemployed respondents are migrants from other
rural area which is accounted 46.6% followed by native unemployed respondents which accounts
35.6% and migrants from another town accounted 17.8% out of total sample.

Figure 4: Pushing factor for migration of respondents

Source: Survey data, 2021

The above figure shows that the major pushing factors for rural to urban migration are for
the search of job accounted 55.3% of total respondents followed by for better salary accounted
29.7%, for further learning 10.2%, for better health care 4.2% and others 2.6%.

Table 6: Methods used in order to seeking job

Methods Frequency Percentage
Searching vacancy advertisement board 30 25.2
Through newspaper, radio and TV 11 9.3
I have unemployment card 15 12.8
Seeking assistant of friends, relatives etc. 3 2.5
Trying to establish own business 18 15.3
Checking at work site 24 20.5
Browse through internet/website 10 8.5
Direct application to employers 5 4.2
Others 2 1.7
Total 118 100
Source: Survey data, 2021

27
 Accordingly, significant number of respondents (25.2%) responded that in order to get a
job they search vacancy advertisement board. Similarly, 20.4% of respondents were checking at
work site, 15.3% of respondents want to establish their own business, and 12.8% of respondents
has unemployment card. The remaining respondents search the job through newspaper, radio and
TV (9.3%), browse through internet/website (8.5%), direct application to employers (4.2%),
Seeking assistant of friends, relatives etc. (2.5%) and others mechanisms (1.7%). This shows
that; many of unemployed respondents are not going with the change in technology (only 8.5%)
of respondents using the modern (browse through internet) method of seeking a job.

Table 7: Kind of jobs respondents like to join

Types of jobs Frequency Percentage

Self-employment 18 15.3
Nongovernment 20 16.9
Government 47 39.8
Any available work 33 28
Total 118 100

Source: Survey data, 2021

As the above table show 39.8% of the respondent replay that kind of job to join are
government employments, followed by 28% of the respondent replay that to join any available
work, 16.9% of respondents reply that to join nongovernment employment and 15.3% of the
respondent replay that self-employment (to establish their own business). In general, the
researcher understands from the above table government employment is the most kind of job to
join from the total respondents while the percentage of respondents like to establish their own
business is very low as compared to others.

Table 8: Challenges in establishing business

Types of problem faced to start own business Frequency Percentage

Shortage of finance 7 38.9

Lack of training 3 16.7
Problem of working place/land 4 22.2
Absence of License 3 16.7
Others 1 5.5
Total 18 100

Source: Survey data, 2021

28
 If 15.3% of unemployed would like to self-employment why they are unemployed so far?
This is because they faced many challenges not to start their own businesses. Among
unemployed respondents those who attempt to establish their own business were asked to state
what difficulties they have been faced. The great majority of unemployed respondents (38.9%)
replied that shortage of finance is the main barrier to establish their own business. The next
important reason is lack of working place/land (22.2%), followed by, lack of training (16.7%),
absence of license (16.7%) and others (5.5%).

Figure 5: The main causes of unemployment

29
Source: Survey data, 2021

The above figure shows that, there are numerous obstacles that hinder the Fitche town
unemployed not found a job. Based on the survey; lack of job experience (18.6%), mismatch in
skill required (16.1),the presence of corruption (14.4%) and lack of job opportunity (13.6%)
takes the lion share followed by lack of vacancy advertisement (11.1%), discrimination (9.3), in
search for better job opportunity (6.8%), sex preference (5.9%), not to work at distant place
(2.5%) and others (1.7%).

Table 9: Consequences of unemployment on the living standard of unemployed respondent

30
 Consequences Frequency Percentage
Decreased personal income 25 21.2
Unable to cover household expense 20 16.9
Unable to send children to school /cover school expense 10 8.5
Hunger and luck of clothing 17 14.5
Exposed to different addictions 9 7.6
Family dissolution 2 1.7
Getting stress 5 4.2
Hopelessness 19 16.1
Fed up looking for a job 4 3.4
Isolated from social Participation 5 4.2
Others 2 1.7
Total 118 100
Source: Survey data, 2021

The unemployed respondents were asked the types of main problems faced due to
joblessness by giving various alternatives. Based on their response, 21.2% of them explained that
decreased household/personal income was the fundamental problem faced so far due to
joblessness followed by 16.9% of respondents replied that jobless challenge them unable to
cover household expenses, hopelessness (16.1%), hunger and luck of clothing (14.5%). The
other challenges the respondents mentioned due to joblessness were unable to send children to
school /cover school expense (8.5%),exposed to different addictions (7.6%), isolated from social
participation (4.2%), getting stress (4.2%), fed up looking for a job (3.4%), family dissolution
(1.7%) and others (1.7%).

31
4.3. Consequences of being unemployed on the society
Figure 6: responses of respondents on the ways of getting support for their lives

Source: Survey data, 2021

The survey tried to assess how unemployed persons are leading their live in such
circumstances of unemployment condition. Accordingly, the highest number of respondents
(36.4%) replied that they are supported by their family followed by respondents get support from
Casual Work 29.7%,remittance 14.4%, support from relatives & friends 8.5%, past saving 5.9%,
begging 1.7% and others 3.4%. This implies that the significant numbers of unemployed persons
are directly depending on the support of their family which, in turn, affects the economy of the
country.

32
 CHAPTER FIVE

CONCLUSION AND RECOMMENDATION

5.1. Conclusion
All that have discussed in previous chapter give a better understanding about assessment of
unemployment condition in Fitche town. The study was carried out on the 118 unemployed
respondents that were taken as a sample from total unemployed peoples of the town. From those
respondents’ male accounted 87(73.7%) and females are 31(26.3%) this shows that
unemployment is more series for male.

Unemployment by age group (18-22) years old accounted 18.6%, (23-27) accounted 35.6%,
(28-32) accounted 28% and (above 33) were accounted 17.8% only. This implies as the age of
labor force is increasing the problem of unemployment is first increase and then it starts to
decrease. Because they are being manufactured and hold the responsible of their family and
other; but when we see the age group (23-27) and (28-32) years old faced more likely
unemployed problem, because they are not matured as such and they expect only job with
maximum salary due to this reason the incidence of unemployment mostly influences those age
group account 35.6% and 28% respectively. This may lead to reduction in the total output and
individual’s income because they are active labor force and can produce more but they are not
participated in the economic activity.

Marital status also has a significant impact on unemployment labor force. Respondents in a
single marital status were largely unemployed which accounts 46.6% followed by married
(39%). Divorced (10.2%) and widowed (4.2%). This result shows that one cannot get married
unless he/she is being employed or have a job. Educational level also has a significant impact on
the unemployment problems. The unemployment problem in the town is more problem of
educated person than uneducated one which is accounted 85.6% and 14.4% respectively.

33
Migration has greater impact on unemployment problem in the town and Rural-Urban migration
accounted the higher proportion (46.6%) from the total respondents and with 17.8% contribution
of Urban- Urban (migrants from another town/city). The main pushing factor that causes
migration is to search a job accounted 55.3% followed by for better salary (29.7%), for further
learning (10.2%), for better health care (4.2%), and others (2.6%). This shows that the absence of
equal job opportunity, inequality in income distribution and other facilities between rural and
urban areas.

The duration of unemployment of respondents was accounted Less than 1year male account 11%
whereas females account 14.5% and for periods of unemployment duration 2-3 years males
account 28.8% and females account 5.9%, for 3-4 years male account 22% and females account
4.2%, for above 4year male account 11.9% and female account 1.7%. From this more females
are unemployed for shorter period of time in comparison with males and the researcher conclude
that one unemployed individual can stay being unemployed for 2-3 years on average.

From the challenges that deter self-employment, the great majority of unemployed respondents
(38.9%) replied that shortage of finance is the main barrier to establish their own business. The
next important reason is lack of working place/land (22.2%), followed by, lack of training
(16.7%), absence of license (16.7%) and others (5.5%).

Based on the survey; lack of job experience (18.6%), mismatch in skill required (16.1), the
presence of corruption (14.4%) and lack of job opportunity (13.6%) takes the lion share followed
by lack of vacancy advertisement (11.1%), discrimination (9.3), in search for better job
opportunity (6.8%), sex preference (5.9%), not to work at distant place (2.5%) and others (1.7%)
are the causes of unemployment.

The consequences of unemployment on the living standards of unemployed respondents and

societies were analyzed from different perspectives.21.2% of them explained that decreased
household/personal income was the fundamental problem faced so far due to joblessness
followed by 16.9% of respondents replied that jobless challenge them unable to cover household
expenses, hopelessness (16.1%), hunger and luck of clothing (14.5).

34
The other challenges the respondents mentioned due to joblessness were unable to send children
to school /cover school expense (8.5%),exposed to different addictions (7.6%), isolated from
social participation (4.2%), getting stress (4.2%), fed up looking for a job (3.4%), family
dissolution (1.7) and others (1.7). Those consequences of unemployment were pushing some
respondent to join in different crimes for their daily sustains. Unemployment gives rise to private
and social problems in the society such as increased dependency, crimes, suicides, poverty,
exposed to different addictions and others. In addition, unemployment deters the growth and
development of the town.

5.2. Recommendation
Based on the results of this study, the following recommendations have to be taken in to
consideration. The study identified multitude of factors responsible for high rate of
unemployment in the study area. It can be seen that unemployment issues in Fitche town is a
continuing problem until high priorities are given to the situations and addressed according.

฀ Making the compressive unemployment profile at town level is very important and the task
is only possible if there is commitment from government, town administration,
non-governmental organization (NGO), residents of the town and other concerned bodies.
Since unemployment problem in the town is series for labor force younger age group it is
vital to encourage good capital accumulation or developing the saving behavior and the
government should be increase expenditure on the productive activities and encourage
private investor in the town.
฀ The administration should focus on labour-intensive investments that can employ huge
man-power at a time. Besides the government should create suitable working environments
for those who want to establish their own business including provision of financial credit
without any collateral, working place and continuous training on entrepreneurship concepts
with the collaboration of nearby higher institutions.

฀ Efforts being exerted for alleviating poverty in the country will come up with short term and
long-term employment opportunities. If such policies and strategies are implemented
successfully, welfare will improve. Improving urban infrastructure will also create short
term and long-term employment opportunities and there by improve welfare.

35
฀ Improving the educational system: The educational systems must be designed in
accordance with the reality of the country’s situation not only theoretical. More attention
should be given to practical at colleges or universities. The general structure of education
should not be based only on theories. Because practical knowledge and skill enable students
to have employable skill and to increase their confidence so that they will be able to invest,
innovate, and create their own self-employment.
฀ Training and credit facility to the unemployed: Unemployed persons that do not have any
training are not able to compete with the trained persons. So, the government or other NGOs
should provide different kinds of technical training to these unemployed persons to increase
their confidence of competition since most of the unemployed people have a problem of
finance. Giving training only cannot be taken as a solution to the unemployed because even
if the people are with their employable skill, they may not find job. So, the government and
NGOs should provide them a credit facility which enables them to create their own
employment.
฀ Increasing university or college to industry linkage: Now, a day’s industry absorbs large
number of labor force and college or university creates large number of trained professionals
with different skill when university/colleges allow students to see practically what they had
learned in the class by sending them to the industries that undergo activities that are related
to students skills, industries develop a confidence toward new graduated students and they
reduce their attention of asking longer year work experience which severity cause of
unemployment particularly for fresh graduates.
฀ Employing balanced urban development strategy: Since favoring only one town or city
urban development creates labor mobility in favor of developed ones, so the government
must follow balanced urban development strategy favoring equal capitals funds for all urban
and towns. These reduce urban to urban or rural to urban migration of labor force that
reduces the unemployment in the urban life of Fitche town.
฀ Expansion of micro and small-scale enterprises: The government must provide necessary
facilities such as access to land, tax reduction and organizing individuals in the form of
cooperates so as to reduce unemployment in the town also by providing funds for
unemployed.

36
฀ Establishing unemployment agency: The paper clearly shows that average duration of
unemployed individuals around 2-3 years which is too large. To alleviate this problem the
government must establish unemployment agency through which unemployed individual
must report to be unemployed and the agency must act as the mediator between employer
and unemployed person by reducing information gap between two parties which reduces
average duration of unemployment spell of individuals in turn.
฀ The government should establish good governance in all sectors those create job
opportunities, in order to reduce the issues of; corruption, discriminations and others those
retard the employability of unemployed respondents.
฀ Construct practical skills training centers and make the cost of training affordable to the
youth as only this can help the system to produced job creators than seekers.
฀ Increasing investment in training institution and linking the training institution with labour
market.

37
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Appendix
SALALE UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ECONOMICS

Questionnaire
Dear respondent:
My name is Haile Girma and I’m under graduate student at Salale University, College of
Business and Economics, Department of economics. First of all, I would like to thank for your
volunteer to sacrifice your time to fill this questionnaire. Currently the researcher is conducting a
research in partial fulfillment of the requirement for Bachelor of Art (BA) degree in Economics.
The planned study is entitled as ‘Assessment of unemployment condition in Fitche town’. The
research is going to be carried out on your responses and other relevant data that could support it.
Thus, the researcher kindly asking your co-operation to provide us a sincere response to the
question listed below. All fact you provide will be reported in aggregate form and your response
will remain anonymous.
General Instructions:
✔ No need to write your name
✔ Put tick (√) in the box and for open ended question write on the space
provided.
✔ You are kindly requested to respond the whole questions.

Questions:
SECTION 1: Background information of the respondents.
1. Sex: A. Male B. Female
2. Age: A. 18-22 B. 23-27

C. 27-32 D. Above 33

3. Marital status: A. Single B. Married C. Divorced D. Widowed

4. Parental family size:

A. 0-4 B. 5-7 C. 8-10 D. above 11

40
5. Educational background:
A. Illiterate B. Primary (1-8) C. Secondary (9-12)
D. Certificate E. Diploma F. Degree G. Other

6. What is your job?

A. I have no job B. Government employee
C. Non-government employee D. Self-employee

SECTIN 2: Attitude of unemployed respondents towards the general information related to

each objective of the study,
7. If your answer for question no.6 is “A” have you been looking for a job?
A. Yes B. No
8. If your answer for question no.7 is “A”, why you didn’t join any productive job?
A. Because of low salary C. Because of lack of job experience
B. Because of absence of vacancy D. Because of mismatch in skill required

9. If your answer for question no.8 is “C” what is your work experience interval?

A. Zero work experience B. below one year work experience

C. Two to four year work experience D. More than four year work experience

10. How long you have been waiting for job?

A. <One year B. 2 to 3 years C. 3 to 4 years D. Above 4 years

11. Where did you born? A. In this town B. Rural area C. Another town/city

12. If your answer for question no. 11 is “B” or “C’’why you come to this town?
A. For further learning C. For search of a job
B. For better salary D. For better health care
E. Other (Specify) __________________________________

41
13. What methods you are used in order to seeking a job?
A. Searching vacancy advertising boards F. Checking at work sites
B. Through newspaper, radio and TV G. Browse through internet/ website
C. I have unemployment card H. Direct application to employers
D. Seeking assistance of friends, relatives, etc. I. Others
E. Trying to establish own enterprise

14. What kind of job would you like to join?

A. Self-employment B. Paid employment- nongovernment

C. Paid employment-government D. Any available work
15. If your answer for question no.14 is “A”, what challenges you are faced in establishing your
own business? A. Shortage of finance
B. Lack of training
C. Problem of working place/land
D. Absence of License E. Others
16. Do you still hope to get a suitable job of your choice?
A. Yes B. No

17. What are the main causes of unemployment?

A. Mismatch in skill required F. Low salary
B. Lack of job opportunity G. Corruption
C. Absence of vacancy advertisement H. Discrimination
D. Lack of job experience I. Sex preference
E. In search for better job opportunity J. Others

18. What is the effects (consequences) of being unemployed on your living standard?

A. Decreased personal income G. Getting stress

B. Unable to cover household expense H. Hopelessness
C. Unable to send children to school /cover school expense I. Fed up looking for a job
D. Hunger and luck of clothing J. Isolated from social Participation
E. Exposed to different addictions K. Others
F. Family dissolution

42
19. Since you haven’t any job, from where you get support for your life?
A. Casual Work E. Remittance
B. Family Support F. Begging
C. Support from Relatives & Friends G. Other
D. Past Saving
20. If you have any additional idea regarding the issue of unemployment, please write on this
blank_________________________________________________________________________
_____________________________________________________________________________.

Thank you for your cooperation!

43