LABOUR MARKET PARTICIPATION AND INCOMEDISTRIBUTION OF THE AGED IN NIGERIA

By Osunde Omoruyi (PhD) and Augustine Dokpesi (PhD)

Presented in the Inaugural Ceremony and International Conference of African Society for Ageing Research and Development (ASARD), ABUJA NIGERIA

13th – 14TH October, 2015

Outline of presentation Introduction Ageing as a policy issue in Nigeria Objectives of the Study Labour Market Issues Methodology for Labour Market Analysis for

the Aged Data Results Policy Implications/Recommendations

Introduction More than 2 million people, representing 70 percent of the older

population, lived in the rural areas and they contributed mostly to agricultural production (NPC, 2006)

Virtually all the people in the rural areas lack access to social and economic amenities.

Studies have shown that the income situation and welfare of the elderly persons in Nigeria are deplorable.

However, the rate of labour market participation in Nigeria is higher among elderly males than females, and a significant proportion of them participate in the formal wage sector well beyond their retirement age (NPC,2004)

The reason for their continuous participation in the labour market is that social security policies for the seniors are weak if any and the lack of social security system increases their level of poverty and inequality

Introduction continue

Apart from the level of education and place of residence as factors that influence the distribution of income of the older persons, a social security policy for the aged is another factor that could influence the distributional pattern of income for the aged.

The support for old age result to high fertility in Africa. Parents do invest in their children with the hope that such investment will yield dividends in old age. Having a disabled children are viewed as “poor investment”.

Increasingly, the care of older family members is falling due to the process modernization and industrialization.

Ageing as a policy issue in Nigeria Recently, ageing has become a policy issue receiving some

attention by government and other stakeholders like ASARD. United Nations (2010) report on current status of the social situation

of older people stated that the issue of ageing represents economic and social development strategy.

While it is expected that Nigeria in the next 40 years will experience a rapid increase in the number of older people, like other African countries, sees this emerging issue as a serious future challenge.

Inability of government to cope with the regular payment of pensions to the retired workforce, inadequate social and health services to cater for the needs of an ageing population and a predominately rural agrarian population all these pose new threats to sustainable development in Nigeria.

Labour Market Issues Features of the labour market

. Formal . Informal

LocationRural – largely informal

Urban – mix of formal and informal

Labour Force Participation Income Inequality and Determinants

Methodology In this study, income generation model were designed to

described the structure of the labour market income

The method of Bourguignon et al, (2002) was adopted based on the decomposition of wage differences on the socio-demographic structure of the Nigerian population for the elderly.

This methodological approach provides information regarding the impact of demographic patterns on labour force participation and income inequality for older people.

Earnings are a function of education, experience and other demographic characteristics such as gender, martial status and number of children

Methodology continue

The logit model is specified for labour market participation. This model is used to predict the probability of each individual (minimum 65 years of age participate in the labour market for both males and females).

For the estimation of earnings, a logarithm of the yearly wage is estimated using the Ordinary Least Square (OLS) method.

On the decomposition side, the Half Square Coefficient (commonly referred to as the General Entropy Class of Inequality measure were employed). This method were employed because it places more weight on the income trend of high income households.

Data National Living Standard Survey. 2004- Conducted by the national

Bureau of Statistics

Comprises of:19158 Households 92610 IndividualsOnly individuals 65 years and above were used in this

study. (3290)

RESULTS

Descriptive Statistics Table 1: Average Age of Household Head and Number of persons In each Household Group

Source: estimated by the authors

Table 1 describe the average age of household head and number of persons in each household group. These are likely going to offer some clues as to the likely sources of changes in the income distribution among household heads.

Household group Number of persons Age

Married old persons with more than 2 other adults

4 80

Unmarried old persons without children

2 72

Married old persons with children

4 71

Total 8 72

Table 2: Percentage share of sources of Household Income of the elderly persons by Education, Sex, Region and Occupation

Source: Estimated by the authors

Demographic variables

Employed income

Self-employed income Farm income Capital Benefit

Male 10.6 27.2 54.7 2.8 4.6

Female 1.7 43.3 50.8 2.5 1.7

Urban 13.9 52.1 25.8 2.6 5.7

Rural 5.2 9.3 79.9 3.0 2.9

No education 4.1 14.5 78.7 2.3 0.4

Primary 13.4 30.2 52.3 3.7 0.5

Lower secondary

12.8 42.1 41.1 1.4 2.6

Upper secondary

23.1 64.3 7.9 1.7 3.0

University 18.2 30.0 28.1 5.2 18.5

Table 2 shows the percentage share of household income type for sex, region of residence and education. It was observed that household income between male and female varies substantially with the income types.

Overall, the income of elderly male is higher than that for elderly female in all income types except for self-employment

As expected, income is also higher in urban areas than in rural areas except for farm income in the rural areas

Considering how education significantly enhances the earnings potential of the elderly, it should come as no surprise that the elderly persons with no university degrees have lower proportion of earnings in the formal wage sector.

Elderly persons with upper secondary education have a higher share of income in the self-employed sector, while the share of income is higher in the farming sector with elders with no education.

Interestingly, elders in the household received more benefits with those with university degrees.

Table 3 Inequality by Gender and Rural- Urban Dimensions

Sector/Gender/Inequality Indices GE(0) GE(1) GE(2) Gini CoefficientIncome

share Population share

Aggregate 0.661 0.537 0.759 0.551

MaleFemale

Within Inequality Between Inequality

0.6070.5200.580(86.0)0.081(14.0)

0.4860.3730.469(85.5)0.068(14.8)

0.6396.4140.699(91.50.059(8.5)

0.529 0.472

0.8480.151

0.6880.311

Urban RuralWithin InequalityBetween Inequality

0.5840.8430.656(99.20.005(3.8)

0.4860.6850.532(99.2)0.004(0.8)

0.6341.2140.754(99.3)0.005(0.7)

0.5310.598

0.7650.234

0.7220.277

Inequality by Gender and Rural- Urban Dimensions Inequality is about 5 percentage points different between males and

females (male 0.529, female 0.472) using Gini coefficient.

Within group inequality accounts for 86% of inequality by sex. While between gender inequality accounts for only 14%.

Urban-rural inequality is slightly higher in rural areas than urban based on Gini coefficient (urban 0.531 and rural 0.598).

Within group inequality dominates at 99% as against between group at about 1%

Table 5: Labour market participation equations using Logit method for in-work, employed, self-employed, farmer, has-capital and benefit received

Inwork Employed Self-employed Farm Capital Benefit

Mal e Female Male Female Male Female Male Female Male Female Male Female

Univ -1.431*(0.265)

-4.145*(0.683)

-0.130(0.744)

0.570(0.488)

2.427(1.532)

-0.326(0.519)

-2.079(1.529)

0.710*(0.199)

-0.437(0.735)

2.377*(0.403)

1.791**(0.859)

Upsec -1.060*(0.600)

-2.316**(0.888)

0.906(0.636)

-0.919*(1.567)

1.450*(0.485)

-1.551*(0.527)

-0.069*(0.483)

1.919*(0.624)

3.331**(1.224)

Losec -0.568*(0.165)

-0.440(0.311)

1.063**(0.391)

0.401***(0.279)

1.199**(0.596)

-0.667***(0.288) -1.212*

(0.598)-0.328(0.256)

-0.466*(0.736)

1.826*(0.426)

Primed-0.494***(0.199) -0.364

(0.278)1.126***(0.439)

0.611**(0.337)

-0.029***(0.536)

-0.626***(0.360) 0.047

(0.542)0.076(0.296)

0.134(0.410)

0.705(0.779)

1.389(1.109)

Rural 0.728*(0.113)

0.035(0.129)

-1.013*(0.254) -1.347***

(0.587)-2.481*(0.176)

-2.929*(0.262)

2.756*(0.185)

3.105*(0.281)

0.542**(0.202)

-0.697**(0.264)

-0.622*(0.309)

-0.044(0.761)

Married

0.955*(0.134)

-0.409*(0.129)

-0.214(0.425)

-0.229(0.284)

-0.058(0.245)

0.316(0.304)

0.084**(0.250)

Illness -0.261***(0.115)

0.105(0.125)

-0.081*(0.314)

0.329(0.632)

0.380**(0.213)

-0.378*(0.241)

-0.233(0.226)

0.405***(0.045)

-0.082(0.183)

0.165(0.277)

Experience

0.029(0.048)

-0.200(0.113)

-0.351*(0.122)

-0.796***(0.474)

-0.081(0.091)

-0.082(0.091)

0.165(0.996)

-0.186(0.249)

Experience2 -0.001**

(0.000 )0.001(0.000)

-0.003*(0.001)

0.005**(0.003)

0.001(0.000)

-0.002(0.000)

-0.001*(0.000)

-0.001(0.000)

Worky-5.286*(0.615)

-2.194***(0.885)

3.300*(9.111)

4.011*(3.688)

4.633(1.833)

--0.000(0.000)

Constant 0.741

(1.671)9.592***(3.954)

9.265***(4.160)

-2.863*(0.242)

2.366(3.075)

-9.355*(8.939)

-5.700**(3.375)

5.433(8.649)

-2.888*(0.208)

-2.686*(0.231)

-4.521*(0.395)

-5.100*(0.722)

Pseudo R2 0.082 0.075 0.119 0.355 0.236 0.256 0.408 0.282 0.025 0.016 0.119 0.123

Obs. 2234 1464 1548 546 1548 580 1548 580 2234 1455 2234 1403

Determinants of Labour Market Participation

Labour market participation was measured by various income type for both male and female aged 65 years and above

Significant determinants include education, age and marriage

For female, illness and marriage affected participation in the labour market significantly though has a negative relationship

Capital and Benefit recipients increases with education and decreases with rural areas.

Choice of Occupation and Labour Market Income (OLS Estimation)

Employed Self-employed Farm Capital Benefit

Male Female Male Female Male Male Female Male Female

University0.301(1.532)

0.549(0.105)

-0.175(0.834)

0.422**(0.231)

0.393(0.253)

-0.041(1.305)

3.336***(1.282)

0.394(0.277)

Upper secondary

-0.754(1.152)

0.208*(0.501)

2.274***(0.964)

0.328*(0.366)

0.742(0.647)

3.960**(1.788)

0.031(0.240)

Lower secondary

0.301(0.811)

3.174(2.458)

0.436**(0.320)

0.006(0.339)

0.369(0.129)

0.801***(0.348)

1.045(1.045)

1.024(1.264)

-0.434**(0.245)

Primary -0.074(0.122)

0.038(0.409)

-0.641(0.489)

0.131(0.144)

1.151*(0.403)

1.290(01.094)

2.858(2.366)

-1.185*(0.235)

Rural -0.919***(0.487)

-0.604(1.035)

-0.659*(0.219)

-0.395***(0.159)

-0.350**(0.119)

-0.300(0.268)

-0.281(0.488)

-0.316(1.012)

-1.150*(0.107)

Illness 0.768(0.645)

-1.872**(0.827)

-1.153(0.253)

-0.271*(0.079)

Experience -0.137(0.237)

-0.767(0.781)

0.030(0.103)

0.168(0.150)

0.069(0.048)

Experience2 0.001(0.000)

0.006(0.000)

-0.000(0.000)

-0.001(0.000)

-0.000(0.000)

Constant 15.867**(8.108)

35.509*(29.358)

9.731*(3.462)

4.994(5.189)

7.831*(1.641)

-0.581(0.871)

-3.595(23.355)

10.267(78.889

7.486*(0.233)

R2 . 0.149 0.692 0.077 0.081 0.018 0.056 0.058 0.319 0.183

Obs 78 13 202 220 1563 211 64 48 13

Earnings Education and experience significantly and

positively affects income of the elderly for both males and females

Being employed in rural area is significant and sign is negative

Farm income reduces significantly in rural areas

Capital and benefit incomes reduces for male and female in rural areas

Policy Implications/Recommendation

Need for adequate social security system for the elderly in order for them not to part take or continue to participate in the labour market after retirement.

There is also need to balancing the unequal distribution of income in the Nigerian labour market among the seniors

There is also the need for policy makers to focus more on various development programs for the elderly to reduce unequal distribution of income between males and females

Conclusion☻Labour market is a primary area where inequality should

be addressed especially among the elderly☻Structure of the labour market is an important factor in

determining welfare☻Inequality is more pronounced among the elderly males

involves in income earning activities compared to the elderly females

☻The primary variables which explains the distribution of income and its differences among the elderly is their educational attainment, sex and location of residence

☻ Disparity in labour earnings is a specific factor, which explains inequality among Nigeria elderly people