Introduction

1.1 Background of the study

International Labour Organization (1992) defines that unemployment is the situation of being
out of work or need a job and continuously searching for it in the last four week or unemployed (
age 16 or above) but available to join work in the next two weeks. People who voluntarily do not
want to work, full time students, retired people and children are no included in unemployed
category. In short, unemployment means the state when people who are willing and able to do a
job but fail to get the desired job. Youth unemployment is a problem that affects most countries.

Government organizations, NGOs and civic association in different countries adopt and use
various age ranges for the concept “youth” from the stand point of the purpose which they stand
for and the activities they undertake. For Example, The United Nation (UN) defines the youth as
persons between 15-24 years; WHO, 10-24. In Ethiopia, according to the national youth policy,
youth includes parts of the society who are between 15-29 years (Ministry of youth, sports and
culture, 2004). Since the recent years, unemployment especially youth unemployment represent
growing concerns worldwide. It is also one of the causes for several socioeconomic problems
spreading in almost all countries of the world. It has long been one of the several features of the
urban phenomenon in many countries. Youth unemployment has serious negative effects on the
psychology, socioeconomic, physical well-being and socioeconomic status of a nation (Fitsum,
2014).

Youth Unemployment and underemployment represent growing concerns worldwide. According

to international Labour organization (ILO) estimates, Youth in 2002 made Up 41% of the Wolds,
Unemployed, and 88 Million people in absolute number. Young worker everywhere invariably
has much higher rates of joblessness and much lower earnings than older workers. In many
contexts, Young people are also concentrated in low- skill informal work or in the hazardous
form of work that is ill-suited to their age and experience. Employment outcomes are typically
worst for former child labors and other early school leaves, group which least opportunity to
accumulate the human capital needed for gain full employment (Guar cello, 2007).

According to the 2008 Global employment trends for Youth report prepared by the
( ILO,2008 ), In the decade between 1997 and 2007, Unemployment worldwide increased from
10.9 to 11.9 percent while the global Adult employment ratio stayed level at 4.2 from 1997 to
2007 (ILO,2008).today’s world contains an estimate 1.2 billion young people aged between 15
& 24 years (an increase 17 % compared to 1995), that is 24.7% of the world is working age
population (Ilo,2008), According to David Bell world growth unemployment rate in the year
2009 examine that Spain 11.4 % , Denmark 3.3% , Mexico 3.2%, Canada 2.8% ,united kingdom
2.7% ,Japan 1.7%, & Italy 1.5% (bell & blanch flower,2010).

Unemployment is widely regarded as a major social and economic global problem that attack
both developed and developing countries. Specially, the developed nations had come across the
worst unemployment problem in 1930 called “great depression “in USA in which number of
people were looking for a jobs. However, this problem in developed countries has lately reflected
in great magnitude in developing countries with the increasing urban population particularly
after the national independent and the population setting in urban areas of developing countries
(Ishumi, 1984).

The challenge of youth unemployment in Africa is especially greater. According to ILO (2004)
figures, the Sub-Saharan Africa region has the highest rate of youth unemployment (18.4%) after
the Middle East and North Africa (21.3%). Like other Africa Countries

In the first decade of independence, development planning in Africa was strongly influenced by
the theory and independence of the industrialized countries. The major towns were in investment
and growth go out.But it was unfortunately an optimistic protection which over look the failure of
modern urban industries to generate significant number of job opportunities to absorb the great
number of rural to urban migrant.

The youth population in Ethiopia is projected to grow in absolute terms from about 15 million in
2005 to 26 million in 2013 but would remain at about one-fifth of the overall population during
this period (CSA, 2005). The absolute size of the national labor force was estimated 32.2 million
people in 2005, up from in estimates 1.9 million people 1984. Most Durame town young work is
high in common sector. Relatively female are more unemployed than male. In 2008, E.C
71percent to all the female government employees earned less than one thousand birrs per
month .where more than 82% of all male employees earned more. In addition glance level of
education of government employees that are very, the high female is educated beyond secondary
school. (At Durame town youth office, 2008)

1.2. The statement of the problem.

Nowadays, so many problems have been seen in the world, especially growth of population and
unemployment is the main problem. This problem is increased without improvement of economic
development. Population growth has great impacts for the expansion of unemployment
worldwide use unemployment is high i.e. .almost three times higher than the adult unemployment
rate Moreover, young people made up 13.7 % of the world total unemployed population despite
accounting for only 25% of the working population (pilgrim,2009).today many developing
countries are plagued by a historical unique combination of a massive rural to urban movement,
stagnating agriculture productivity and growing urban and rural unemployment and
underemployment.

The challenge of youth unemployment in Africa is large. Especially, in sub-Saharan Africa youth
people aged 15-24 account for 36% of working age population. Due to population pressure, the
number of young people looking for work is expected to increase by 28% in the next 15 year,
equivalent to about 30 million people. Failure to address youth employment issues will have
serious consequences for the economy and society. Without the opportunity for young people to
earn a living inter generational cycle of poverty will persist, further affecting already made
vulnerable by HIV/AIDS, food security, and violence ).

As the youth population and grew faster than the total population and youth employment. The
share of the Youth who are employed in the youth population decline from 49.2% to 4.5%
between 1997 and 2007 and the total number of Unemployed increase from 63 million to
71million between 1997 and 2007. In particular sub-Saharan Africa the figure is estimated 8 to
10 million (pilgrim, 2009).

The problem is becoming worst in almost African countries regardless of their strategy and
political structure they follow (Ishumi, 1984). 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. Consequently,
evil crimes and gang of thieves seems to be raising them joblessness (Ayele kirus,2003).

High level of unemployment and development is one of the critical socioeconomic problems
facing Ethiopia. While the labour force grows, with an increasing proportion of Youth
employment growth is inadequate to observe labor market entrants.

As a result, Youth are especially affected by unemployment. more over youth are likely to be
employed in job of low quality, underemployed, working long hour, for low wage, engage in
dangerous work or receive only short term and or/ informal employment arrangements
In South Africa, about 42% of young people under the age of 30 age unemployed compared less
than 17% of adult over 30 ages. This is particularly the case for Ethiopia, home to one of the
largest youth population in sub-Saharan Africa. The lack of employment opportunity for Ethiopia
young people is among the critical development challenges facing the country and key barrier to
national effort toward the millennium development goal. Only about 40% of Ethiopian compute
primary education and just and 13% enrolled in secondary education, meaning the youngest
people entering the labor market (bring with them very low level of human capital (World Bank,
2004).

Ethiopia youth unemployment rate for 2021 was 5.72%, a 0.78% increase from 2020.

Similarly, in Durame town the problem of youth and unemployment growth has reached notable
of level. In 2008, Durame town have young population of 18,164. In Durame town working age
population are around 10,383 and unemployment young are 7781 According to 200 CSA. This
year unemployment rate among 18-29 age group, 30-35 age group and 36-65 age groups are
3942, 772, and 882 respectively. There are studies that investigate the study attempt to
investigate this problem in the zone (Durame town youth office 2008).

Even if different researchers have tried to study finding problem of unemployment, They did not
Concern or emphasis on the determinate of unemployment problem at micro level specially in
gullele sub city. In order to fill this gap, the study was conducted on the problem of
unemployment and its determinants in gullele sub city.

Research question

Accordingly, the researcher assess the study according to the following research questions.

What factors can create unemployment in Addis Ababa gullele sub city?

What is the effect of Unemployment in socioeconomic condition?

Find the solutions for the above questions are the main purpose of the study.

1.3. Objective of the study

1.3.1. General objective of the study

 The general objective of the study was to examine the trends and determinants of youth
unemployment in Addis Ababa gullele sub city?

1.3.2 Specific objective of the study.

To identify the current situation and trend of unemployment.

To identify the socioeconomic characteristics of unemployed youth.

To identify the major factors those contribute to youth unemployment in Addis Ababa gullele sub
city.

1.4 Significance of the study.

The socioeconomic consequences that were raised in association with high and growing youth
unemployment would cite. The study will deal with youth unemployment which is the main
problem of development. Therefore, such study may help the policy makers and other offices to
achieve reducing unemployment. The study will believe to contribute something to the process

Some of the selected respondents are not interested to give any or full information of solving
youth unemployment problem in Addis Ababa gullele sub city.. Thus importance of the study was
to add knowledge on the existing literature in identifying youth unemployment.

1.7 Scope of the study

It is true that this study will conduct in Addis ababa gullele sub city. It is probable that the
finding may not represent the reality of the unemployment conditions in Addis ababa gullele sub
city. As the concept of employment is wide and can be studied from different perspectives.
Therefore, for the sake of time and emphasis as well, the study will only be limited to exploring
the condition of youth unemployment, examining the cause and consequences of youth
unemployment in the study area.

CHAPTER TWO

LITERATURE REVIEW

2.1 Theoretical literature review

2.1.1 Definition of basic terms

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 on going wage rate”. On the other hand the current at the with
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.

Unemployment is the macro- economic problem that affects people most directly and severely.
For most people loss of a job means a reduced living standard and psycho logical
disasters. a person say unemployed if he is currently available for employment and has
actively looked for a job with in a past four week.

If unemployed worker has unable to find a job for so long that he finally gives up lope
to get one he drops out of the labour force and is no without looking for a job such a
person is called a’’ discourage worker’’ if sometimes latter new opportunities come out, he
may be stimulated again to try his chances there by re-entering the labour force.( Broman
and jacoby,1970) as cited by Gizachow.2012). Unemployment or joblessness occurs when
people are without work and actively seeking work. The unemployment rate is admeasure
of the prevalence of unemployment and it is calculated as a percentage by dividing the
number of unemployed individuals by all individuals currently in the labor force.

So unemployment occurs when a person who is actively searching for employment is

unable to find work. unemployment is often used as a measure of the health of the
economy. During periods of recession an economy usually experiences a relatively high
unemployment rate.

2.1.2 Types of Unemployment

There are four types of Unemployment. These are

A. Frictional unemployment:

Frictional Unemployment is finding a job takes time and sometimes the reason a person is
unemployed is because they are waiting to a job that works for them or taking time to decide
between multiple job offers. In addition, it takes time for employers to interview potential
candidates and decided which individuals they want to hire.

Frictional Unemployment is defined as voluntary Unemployment because it results from the time
needed to match job seekers to job openings, according to one Eco guru-com. One example of
frictional Unemployment is voluntary quitting one job and taking time off to find another one.

B. Structural unemployment:

Structural Unemployment is cause by a mismatch between the need of employers and the skills
that a work force in a country has, according to Drexel University. For example, Law schools in
the United States train more lawyers than the country needs, which can make it difficult for a
lawyer to get a job as a lawyer. As a result a lawyer may be able to get a job working at a retail
store, but he declines the job because it was not the field of work he was trained for. Structural
Unemployment can be also because by geographical problems. For example, individuals who
are willing to do construction work might live in a rural area, but the construction job only
available in urban areas.

Structural Unemployment can be reduced by government provision or subsidization of training

program. With Structural Unemployment job vacancies and unemployed workers co-exists in the
market and in the long run are not easily matched. Unlike frictional unemployment it tends to be
concentrated among certain groups that had been adversely by technological changes, the
decline of major industry, or the movement of jobs to other parts of the country (Kaufman, 2006).

A. cyclical Unemployment:

Cyclical Unemployment is the type’s unemployment that’s caused by economic recessions and is
the types of unemployment talked about frequently in the news. Cyclical Unemployment is cause
by negative economic growth. In other words, Cyclical Unemployment is when there is not
enough demand to supply jobs for people with in a country. This type of unemployment can result
in widespread unemployment with in a country.

Cyclical unemployment sometimes it is called demand deficient unemployment. It is the result of

in sufficient aggregate demand in the economy to generate enough jobs for those who seek one.
Cyclical unemployment is closely linked to the movement of the economy up and down of the
business cycle. Public policy might reduce the extent of cyclical unemployment in several ways
(Ibid, 2006).

A. Seasonal unemployment; .

seasonal unemployment is when a person is unemployment because certain types of jobs are only
available at certain times of the year. Seasonal unemployment is simply caused by decreased
demand for goods or services during particular times of the year. Seasonal unemployment is the
most predictable type of unemployment because it happens each year.

For example, the demand for agricultural employs declines after the planting season and
remains tow until the harvest season. Similarity the demand for production workers falls in
certain industries during the season of the year when plants are retooling to handle annual
model changes (Ehen berg and smith, 2006)

2.1.3 Youth unemployment.

Youth unemployment is one of the most critical challenges the world is facing today .young
people make up almost half of the worlds unemployed, despite accounting for only one quarter of
the working population.

Youth unemployment is the unemployment of young people, defined by the United Nations as 14-
28 years old. an unemployed person is defined as someone who does not have a job but is
actively seeking work .in order to quality as unemployed for official and statistical measurement,
the individual must be without employment, willing and able to work .of the officially designated
working age and actively searching for position .youth unemployment rates are historically four
to five times more than the adult rates in every country in the world. In 2012, youth made up to
40%of the world unemployed, with a global youth unemployment rate of 12.6%.close to 75
million youth were unemployed world .

2.1.5 Causes of youth unemployment

There are multiple and complex causes behind youth unemployment among them, the quality and
relevance of education, inflexible labor market and regulations, which in turn create a Situation
of assistance and dependency, are the main causes discussed to the following.

A. from education to employment:

The quality and relevance of education is often considered as the first root cause of youth
unemployment. In 2010, in 25 out of 27 developed countries, the highest unemployment rate was
among people with primary education or less. Yet, high education does not guarantee a decent
job.

B. youth wage: wages are likely to have a negative impact on youth unemployment in as much as
the higher the relative wages of young workers with respect to those of adults, the more incentive
there are to empl0oyee adults as opposed to young people.

C. Assistance and dependency

Many countries around the world provide income Assistance to support unemployed youth until
labour Market economic conditions improve. Although this support is strictly related to
obligations interim's of active job search and training, it has led to an emerging debate on
whether or not it creates dependency among the youth and has a detrimental effect on them.

D. size of the youth labor force: recently much concern has been expressed about the negative
consequence of rapidly growing of youth population developing countries.

2.1.6 Consequence of youth unemployment.

Youth unemployment brings with it many adverse consequences. .

A, Economic consequence: there are no positive aspects of unemployment it really bad for the
production of the economy. Unemployment is on economic problem because use it represents
waste of valuable resources when unemployment rate group. The economy is an effective
throwing a way the goods and services that the unemployed workers could have produced the
economic less during the periods of high unemployment mans that the economy would be
producing less that its productivity (I10,20066).

According to Mishanga (1992) idle human resources resident were a loss of goods and services
and therefore a loss of real income that unemployed resources could have been contributed to the
society’s well being.

B. social consequence: youth unemployment is a major social problem because it causes

enormous. Suffering as unemployed workers struggle with reduced income, it is a well-known
fact that unemployment, a direct relationship with some social problem or antisocial activities
increase poverty, social unrest theft, robberies violence potential psychological harms, loss of
motivation and increase in crime rate. If people do not have as much disposable income as
before as it is very likely that crime level with the economy will be increased (mankiewu, 2002).
Early unemployment has a negative effect not only on the future employability of young people
but also on their self-esteem, their role in the society and can represent a serious economic
burden on state finances.

C. Waste of Human resources; a highly level of unemployment implies that a large number of
countries human resources in most cased training and skillful workers is wasted during long
period of unemployment workers can lose their skill, causing a loss of human capital the cost to
society could be enormous as hinders of millions of Birr may have been sent training staff only
for them to end up being unemployed (mankiew, 2002).

D. Demoralization and hopelessness: high and sustained unemployment could prove to be

source of demoralization and hopelessness in the youth

E. lack of confidence: people who have been unemployed for a long time, losses confidence in
themselves in terms interacting with other, speech and even going employment again.

Theories of unemploymen

The four major theory of unemployment are discussed as the following.

(A) Classical theory of unemployment

The main characteristic of this theory is that the labor market forces of supply and demand
respond to changes in real wages.

Thus, unemployment is the consequences of real wages being and remaining to high to allow the
labor market to clear government wage legislation and trade unions are identified as a
significant casual factors. Consequently, unemployment in the classical system relies up on
markets not clearing .The policy recommendation forwarded from classical analysis of
unemployment is that reduces government regulation and reduces trade union router to make
labor competitive in the market (Smith,1997).

A. Neoclassical theory of unemployment

The NEO classical economic school focused on choice of techniques,i.e the best cost
minimization bundles of factors production. This approach avoids focusing on the social process
which determines the incorporation of labor power in to production. Labor and capital are
viewed as factors of production, as objects and not as social relation with one another, therefore,
unemployment is explained either as a result of factor price, i.e the relative cheapness of capital
in relation to labor, or on terms of technological consideration related to the non-sustainability
of capital for labor or what has been dominated as factor of production problem
(schervish,1983).

A. .Keynesian theory of unemployment

Keynesian economics emphasizes the aggregate conditions of economic and labor force
disequilibria that emerged from the instability of market forces to re-establish full employment
equilibrium.

Keynes recognized some unemployed meant result from the voluntary flow of workers from one
job to another (Schervish,1983). Level these in the make of the great prison, Keynes (1936)
formulated his history of involuntary unemployment in which workers are unable to locate jobs
even when offering to work at the wage level paid to other worker with the same skill. Demand
for the labor lags because the demand for goods and services lend to lags behind the capacity of
the economy to produce them.

(D) Marxist theory of unemployment

Marxist analysis like the Keynesian a production is at the aggregate level, “in the Marxist
tradition, unemployment drives from the general and normal anarchism of the market economy
in which what proves beneficial for an individual firm is dysfunctional for the system as a whole.
Thus individuals firms maximize profits and enjoy their cost efficient production at level of
employment that fails to provide employment for the labor force as a whole”(Schervish,1983).

2.2 Empirical literature reviews.

from 1997 to 2007 worldwide youth participation rates decreases will youth in activity rate (non-
participation in labor force) increased(55.2 to 50.5 and 48.8 to 49.5 percent respectively.

These changes are explained by increase participation in full time participation rate for the
standard definition of the youth age group 15-24 does not hold true for the age group 15-
29(I10,2008),

The labour force participation rates for this group remains constant over time, indicating that
the decline in youth labor force participation rate (for the formal group) is mainly a passive side
effect of longer education terms. Namely, the postponding of labor force entry beyond the years
that defines youth (ILO, 2008).

O’Higgins (1997) ill poor force participation in full time education. He also showed that the rate
for teenagers (15-19) and youth adult issues that youth face in the labor market (ILO, 2006). In
both developing and industrialized countries, youth are most susceptible to issue such as “long
working hours, work with short term or informal contract low pay and little or no social
protection” (ILO, 2004).

The challenges youth face in living with unemployment as Kieselbach and Traiser (2002:3)
argue were mainly examined from monetary aspects. However, unemployment related social
problems have called for a broader focus of non monetary factors and subjective dimensions
unemployed people encountered in unemployment. Unemployment caused personal glitches such
as economic, social, and psychological and health problems are subjective account. Moreover,
unemployed youth subjective experiences capture the intrinsic values of having paid job and
personal feeling it causes when missing (Kieselbach, 2003:69).

In developed countries Crotty et al (2008) in Jeffrey (2010a:500) highlight that the neo liberal
economy has transferred the responsibility of social reproduction from the state to households.
Family provides emotional and financial supports to their young ones (Gilles 2000:221).

2.2.1 Unemployment in the developing countries

In many countries, different researcheres have been conducted on the topic of unemployment
with different perspectives and case studies. Some of them are discussed as follows for Europe of
understanding the main economic analysis.

Nature and trends of unemployment in developing countries Historically, the economics of

developed countries have been described in terms of coniferous transfer of economic activity
and people from rural to urban areas. As urban industries expanded new employment
opportunities were created, and over the same period. Labor saving technical progress in
agriculture reduced rural manpower needs. (Todarro,1994).

The dimensions of the unemployment’s problem in developing countries go beyond simple lack
of work opportunities. The state of unemployment is different from new developed countries
unemployment problem in the third world have much complex causes and dimension of
unemployment in third world countries. It is associated with poverty low living standard, etc that
have not experienced in the now developed countries (Ibid,2003).

Developing countries in general and African countries in particular have been experiencing long
high unemployment rates the rise in urban unemployment in the regions has been paralleled by
increasing urban poverty. It is this phenomena of “Urban poverty” that forced development
theorists to depart from pass thinking that development constituted to the increase in output in all
sectors of the economy. On the contrary rapid increase in population led to a rapid increase in
poverty and unemployment (Teshome,1998).
(ILO, 2008) reported that the number of unemployed people through the world has 150 million
people that they were seeking and available for a work but could not find it. However, few years
earlier, the number of unemployed people in the world countries become of serious and chronic
problems in every least developed countries. According to ILO, 2008, report unemployment
amount youth is particular problem in African. The youth population in sub –Saharan Africa was
estimated at 138 million people in 2002, 2003 with 28.9 million 21 percent of them unemployed.
This is second highest youth unemployment rate on the world on current trends, sub-Saharan
African a youth labor force will be even more difficult to accommodate in the future. In fact, the
ratio of the youth unemployment to adult unemployment was 3.6 in 1993 and remains virtually
unchanged at 3.5, 2003.

Over the last decade the rate youth participation in employment in Sub-Saharan and African
rose from 64.4% to 65.4% but it dropped on the rest of the world from 58.8% to 54.7% they
youth labor force in sub-Saharan Africa is projected to grow by 28.2% between 2003 and 2005,
compared with mire 3.8% increase in south east Asia and 3.1% decline industrialized economies
including the transition economic. Sub-Saharan Africa is also the only region where adult and
youth labor force will grow at similar rate around 30% with further adverse repercussion for the
youth labor market (Icon, 2004)

2.2.2 Youth unemployment in Ethiopia

Unemployment in Ethiopia has declined markedly since 1999, both for youth and for the
economy as a whole. However, while the economy has demonstrated impressive reductions in
unemployment in urban areas and for women, unemployment figures remain high. A working
paper by NzingaH.Broussard (ohio state university and Geberkidan Teklesillsie university of
Sussex has examined the youth labor market in Ethiopia and provided a comprehensive
description of the main characteristics of the youth labor market in Ethiopia.

Tegegne (2011) examined the association between socio-demographic variables and

unemployment in Addis Ababa. The econometric analysis has confirmed that sex and age are
statistically significant and have negative relationship. Regarding migration status, in spite of
the type of job, a migrant is more likely to be employed than a non-

migrant.

The report provides information on the structure and trends of unemployment or unemployment
in Ethiopia and the authors identify important policy inputs in designing government
interventions in the labor market, poverty, reduction strategies and economic growth plans that
could help to improve the labor market out comes of Ethiopian youth. Unemployment among
women is also a significant issue, as in Ethiopia display significantly higher unemployment rates
than their male counter parts and are often confined to the informal sector. Furthermore, In
Ethiopia there has been significant increase in educational attainment; however, there has not
been as much job creation to provide employment opportunities to the newly educated job
seekers. Youth unemployment is a problem that affects most countries the ability of youth to
engage in productive activities has both social and economic consequences for an economy