THE EFFECT OF HEALTH STATUS ON LABOUR FORCE PARTICIPATION IN NIGERIA

ABSTRACT

Health status in recent times has been a major concern for developing and under-developed economies. This results from the fact that a healthy population increases labour force participation, productivity and output levels. Poor health has negative effect on participation rate and output. This study examined the effect of health status on labour force participation, across gender and age groups, in Nigeria. An estimation technique to be used is the logistic binary model. Data for the study was obtained from the Nigerian General Household Survey (GHS), 2013. This study adopts objective health as a measure for health status due to data availability. The findings show a negative relationship between activities for daily living and labour force participation across gender. This effect is stronger for females than for males; and for all age groups.   This calls for intervention by policy makers and employers of labour to improve health status of the working population for higher participation and in turn, higher outputs.

Keywords: health Status, labour force participation, logistic model, cross-sectional data, observed health

CHAPTER ONE

INTRODUCTION

1.1      BACKGROUND TO THE STUDY

There is a growing attention on the benefits of improving population health status especially in low  and  middle-income countries due  to  its  implications  on  productivity and  output  level (Laplagne, Glover and Shomos, 2007). The World Health Organization (2003) defines health as a “state of complete physical, mental and social well-being and not merely the absence of disease or infirmity”. Grossman (2000) also posits that health is longevity and illness-free days in a particular year – that is both demanded and produced by consumers”. Health (or health capital) is a form of human capital, in that, a person inherits an initial stock of health that depreciates over his life time and can be increased by investment. Grosman (2000) describes health as both a consumption commodity and an investment commodity. As a consumption commodity, sick days are a source of disutility to the consumer. As an investment commodity, health determines the total amount of time available for market and non-market activities such as education, job- training, acquiring information on economic system, and, prevention and treatment of diseases which may either be borne by the household, the employer or the government (Grossman, 2000). Thus, improving health status is relevant to the individual, household, employer and the government.

Health status refers to the general state of well-being of an individual at a particular time. Health status is determined by more than the presence or absence of a disease and is often summarized by life expectancy or self-assessed health status (Australian Institute of Health and Welfare,

2015). Life expectancy is the  number of years remaining for an individual to  live  from a particular point in time. Life expectancy can be grouped into: life expectancy at birth, healthy life  expectancy at  60  years, and  healthy life  expectancy at  birth. Self-assessed health  is  a combination of physical, social, emotional and mental health and wellbeing.

Globally, there are five major health statuses that affect labour force participation. These include: disease, malnutrition, bodily injuries, life style choices (such as smoking), and lack of access to health care systems (Shah, 2014). Malnutrition occurs when a person does not consume the right sort of food that provides micronutrients to the body. Malnutrition reduces physical and mental development especially among children. Bodily injuries include broken bones or fractures, burns, which can cause infections or reduce an individual’s quality of life. Disease is an abnormal condition of a part of the body resulting from various causes such as infection, inflammation, genetic defects, or environmental factors, and characterized by an identifiable group of signs, symptoms, or both. Diseases can be non-communicable (e.g. cancer, diabetes, chronic lung disease, etc) or communicable (e.g. HIV/AIDS, tuberculosis, malaria, hepatitis, etc). The United Nations Programme on HIV/AIDS (UNAIDS, 2015) statistics shows that HIV continues to be a major global public health issue with 36.9 million people globally living with HIV and 25.3 million people who have died of the AIDS-related illnesses since 2000. HIV/AIDS has continued to devastate the African continent. Figures from the World Health Organization (2016) indicates that Sub-Saharan Africa is the most affected region in the world, accounting for almost 70% of the global total of new HIV infections with 25.8 million people living with HIV as at 2014. The Central Intelligence Agency (CIA, 2015) has recorded an adult prevalence rate of 3.14 percent for HIV/AIDS virus i.e., about 3.4 million Nigerians currently live with HIV virus. More than

90% of malaria cases that occur worldwide every year occur in African. 48.2 million people worldwide suffer from malaria epidemic, 44.7 million of this population are domiciled in African (WHO, 2016). Malaria death rate in Nigeria currently is 60.46 per 100,000 populations, ranking the 13th in the world after Burkina Faso (WHO, 2014). Life expectancy in Sub-Saharan Africa was estimated to be 58.5 years in 2014, below that of the developed nations – 70 years (WHO,

2016). Life expectancy for both male and female in Nigeria is 53.02 years (CIA, 2015).

The level of labour force participation is limited for people with poor health status because of the low probability of being employed under prevailing wages (Cai, 2007). Poor health status means that the general wellbeing of an individual at a particular time is low. It also means that an individual requires more health services and obtaining these health services requires him to work (Nwosu  and  Woolard,  2015).  More  so,  poor  health  status  implies  that  the  individual’s productivity level will be low. Low productivity reduces an individual’s earning power, and

therefore, their willingness to participate in labour. Participating in the labour market depends on the demand for and the supply of labour in the labour market. On the demand side, employers demand more labour from workers with high human capital and offer to pay higher wages. This in turn creates financial incentives for workers with high human capital to join the labour force. On the supply side, people with relatively high educational attainment may derive utility from the social and intellectual stimulation that work provides, thus supplying more labour, at a given wage level, than people with lower levels of education (Laplagne, Glover, and Shomos, 2007).

Labour force comprises of all persons (male and female) of working age who can supply labour for the production of goods and services during a specified period. It comprises of the working population aged 15 years to 65 years that are either employed or unemployed. People outside this category: those retired, the disabled, physically or mentally challenged, those within the economically active population i.e. 15‐65, who are   unable to work, not actively seeking for work or choose not to work and/or are not available for work and those below age 15, are not considered as part  of the  labour  force. This definition conforms to  the  standard definition specified  by  the  International  Labour  Organization  (ILO,  2015).  The  Nigerian  Bureau  of Statistics classifies people in employment in a particular period as all labour force members that work for pay/wages in the formal sector; and those members that work for at least 20 hours in the informal sector. ILO (2015) defines employment, underemployment and unemployment as a function of a person’s involvement in economic activity to make ends meet, and, computes employment rate as one-hour work a week.

According to ILO (2015), labour force participation rates globally have declined over time from

65 percent of the working population in 2002 to 63.5 percent of the working population in 2014, reflecting a loss of more than 37 million potential workers from the global labour force. This has slowed productivity growth from 2.5 percent in 2008 to 2.6 percent in 2013. Falling participation rates reflects both changing demographics and discouragement effects. In developed economies, participation rates have falling from 60.4 percent in 2009 to 59.8 percent in 2014. For emerging economies, especially in South Asia, participation rates have been falling from 57.8 percent in

2009 to 56.2 percent in 2014. Productivity rate declined from 6.8 percent in 2009 to 3.6 percent

in 2014. Meanwhile, in Sub-Saharan Africa, labour force participation rate increased slightly from 70.4 percent in 2009 to 70.9 percent in 2014 while productivity rate fluctuated between -1.5 percent in 2009 and 1.0 percent in 2014 (Organization for Economic and Community Development, 2015).

1.2      STATEMENT OF THE PROBLEM

Nigeria is ranked 143rd in terms of health and primary education by the Global Competitiveness Index (OECD, 2015). Her health status is low – considering the high rate of HIV and malaria epidemics among others as compared to  some other African nations such as South Africa (Central Intelligence Agency, 2015). HIV death rate per 100,000 population is 170.85, ranking

18th  in the world, while malaria death rate is 60.46 per 100,000 population ranking 13th  in the

world (WHO, 2014). In the urban areas of the country, 42.3% suffer from malaria whereas 37% in the rural areas suffer from malaria (Nigerian Demographic and Health Survey, 2013). Other non-communicable diseases such as tuberculosis, cancer, diabetes, malnutrition, etc, have also been on a high rate (NDHS, 2013). Labour force participation rate has remained relatively constant at 56 percent between 2011 and 2014 despite the rapidly increasing population size, (ILO, 2015). Given the high rate of disease infection, and low labour supply compared to the immeasurable increase in population size, it becomes essential to examine the effect of health as a factor responsible for the low rate of labour force participation in Nigeria.

Over time, labour force as viewed as those who participate in the labour force, not considering those who  do  not  participate but  belong to the  labour force. In estimating such outcomes, researchers have adopted methodologies such as the Full Information Maximum Likelihood (FIML) model (Cai, 2006), two stage least squares (Dogrul, 2015 and Cai, 2006) as estimation techniques. For a developing economy like Nigeria, this may not be so given that her labour force consists of people who either participate or do not participate in the labour force. Inclusive in her labour force are individuals who have previously participated in the labour force but dropped out for various reasons. To this end, for a country like Nigeria, such methodologies may not be appropriate.

Inspite of the facts above, researchers have focused more on health status, education and labour force participation (Leung and Wong, 2002; Laplagne et. al., 2007; Cai and Kalb, 2004; Cai,

2006; Swaminathan and Lillard, 2001; Belachew and Kumar, 2014; Zuvekas et. al., 2005) for various developed economies. In measuring health status, most researchers have used subjective health indicators such as self-assessed health as a proxy for health both at the micro and macro levels and have observed that health status affects the level of participation in the labour force but the reverse causality is not the same. Some researchers (Cai and Kalb, 2004; Cai, 2006; and Dogrul, 2015) have observed that labour force participation has more impact on health status for females than for males. Assessing the relationship between health status and labour force participation, Novignon, Novignon and Athur, (2015) used life expectancy at birth and found that health status has more impact on female labour force participation than males. Bloom and Canning (2005) observed that there is  no difference in using objective health indicators to evaluate the effect of health on labour supply both at the macro and micro levels. Locally, researchers have focused mainly on health, labour productivity and economic growth (Ichoku,

2015; Umoru and Yaqub, 2013).

Specific in-depth analysis of the effect of health status on labour force participation, using either subjective or objective (observed) health indicators in Nigeria is rare. As a result, this study will differ from previous studies as it aims at considering the possible effect of health status (using observed health as a proxy) on labour force participation (or labour supply, used interchangeably for this work) and productivity level in Nigeria.

1.3      RESEARCH QUESTIONS

The research work is guided by the following research questions;

1.        What is the effect of observed health status on labour force participation across gender in

Nigeria?

2.        Does  observed  health  status  affect  labour  force  participation  across  age  groups  in

Nigeria?

1.4      OBJECTIVES OF THE STUDY

The broad objective of this empirical work is to analyze the effect of health status on labour force participation in Nigeria. Specifically, this research work seeks to:

1.        Determine the effect of observed health status on labour force participation across gender in Nigeria.

2.         Estimate the effect of observed health status on labour force participation across age groups in Nigeria.

1.5      RESEARCH HYPOTHESES

The hypotheses for this study are;

H01:   Observed health status has no significant effect on labour force participation across gender in Nigeria.

H02:    Observed health status has no significant effect on labour force participation across age groups in Nigeria.

1.6      SIGNIFICANCE OF THE STUDY

Little attention has been given to the effect of health status on labour force participation for a developing country like Nigeria as most works have focused basically on health outcomes and economic growth. Given the significant health challenges and poor health care systems that Nigeria faces, there is need to understand the effect of observed health on labour force participation so as to improve on policies that relates to health conditions of individual workers and the terms for demand and supply of labour. If health problems reduce labour supply and productivity, then, health challenges imposes a great cost on production process by reducing labour market outcomes. The empirical knowledge of the effect of health status on labour supply will be useful to government agencies, policy makers, program managers and employers of labour to better understand the cost of low productivity to the economy as a result of poor health status.  Also,  to  evaluate,  design programs and  strategies  and  improve on existing  policies

regarding the health status of the working population. The study will help improve access to information and medical services aimed at increasing productivity and labour market outcomes, promoting growth and development in the country. The study will be beneficial to workers, helping  them know the  benefits of constant  medical check-ups, the  kind  of jobs they can participate in and what their productivity levels will be given their health conditions. More so, the findings from this study will add value to the literature on this area of the study.

1.7      SCOPE OF THE STUDY

This study will concentrate on explaining the effect of health status (measured by observed health) on participation in the labour force in Nigeria. The data for the analysis of this study will be a secondary data obtained from the General Household Survey (GHS) 2013. The sample is designed to be representative at the national and zonal levels. Observed health status will include those who where ill or had an injury and other activities of daily living – all given as dummy variables that take the values one or zero.

1.8      ORGANIZATION OF THE STUDY

The study will be organized into six chapters. Chapter one concentrates on the background with brief information on health status and labour force in Nigeria. It also contains the main objectives of this study. Chapter two will discuss the socioeconomic characteristics where the Nigerian health system and labour force will be discussed in details. Chapter three concentrates on the basic concepts of health status and labour force, theories to health and labour supply, empirical findings, and limitations of previous works. Chapter four will discuss the methodologies to be used for analyzing the data. In chapter five, we present and interpret the findings from our analyses. Finally in chapter six, we summarize and conclude the results of our findings and make recommendations for policy and further studies and contribute to knowledge.

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