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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.
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