Oketayot, B. F. (2023). Impact of economic growth on unemployment rate in Uganda (1994 – 2022)

Abstract

Uganda established remarkable economic growth since in the 1994s. For the twenty years, the average of annual growth rate stood at about 7%. Recent estimates indicate that the labour force rose to 11.5 million persons in 2009/10 from 9.5 million persons in 2005/06. This represents a labour force growth rate of 4.7 percent per annum, which is higher than the population growth rate of 3.2 percent. Uganda’s unemployment rate stands at 4.2 percent and youth unemployment rate stands at 4.7 percent, much higher than the national one (UNHS, 2009/10). Uganda’s unemployment rate has been increasing since 1994s in which the highest rate of unemployment averages 26% to 29% for the last ten years, even so it reached at 32% in 2011(UBOS, 2013). The increase of unemployment since 2006 can be attributed to the disappointing harvests due to draughts, inadequate investments, and high rates of labour force growth at 4.7% per annum (World Bank, 2013). This study aimed to examine the impact of economic growth on Uganda’s Unemployment rate between 1994 to 2021. To examine the trends of Unemployment rate and annual GDP per capita in Uganda between 1994 and 2022. The specific objectives of the study include; to determine the structural break points in annual GDP per capital growth, assessing stationarity of foreign direct investment rates, examining the relationship between foreign direct investment and unemployment rates in Uganda between 1994 and 2022. The research used time series data of economic growth and unemployment rate in obtained from World Development Indicators (WDI) database for Uganda from 1994 to 2022. ARDL model results showed that first lagged values of unemployment rate were positively significant in predicting unemployment rates in Uganda over time. More findings designated both at levels and lagged values, household consumption rate significantly caused increase in unemployment rates in Uganda. Additional study results established that increase in foreign direct investment rates significantly caused reduction in unemployment rates. ARDL model results further established a statistically significant positive impact of money supply on unemployment rates at levels in Uganda between 1994 to 2022. Based on the study results, the research recommends; improving agriculture and services sectors, review into the employment programs to ensure consistency and dynamics in skills development, private sectors development through promoting local and foreign investments through favorable investment policies in Uganda.