International Journal of Humanities and Social Science

ISSN 2220-8488 (Print), 2221-0989 (Online) 10.30845/ijhss

An Empirical Assessment of the Effects of Minimum Wage Increases on Unemployment during Democratic Governance in Nigeria
Aniekan Okon Akpansung

Conventional economic theorizing posits that increases in minimum wages depress employment. Using Ordinary Least Squares estimating technique, Granger Causality, CUSUM and CUSUM Squares stability tests on Nigerian data during the democratic governance (1999 to 2012), we find that minimum wage was highly positively correlated with unemployment with correlation coefficient of 0.8328, but there was no evidence to support the existence of causality between minimum wage and unemployment. Empirical result suggests consistent evidence that minimum wage hikes were associated with increases in unemployment. It shows that a 1% increase in the federal minimum wage decreased employment by about 6.4 percent in the current year and 9.9 percent in the subsequent year. However, the null hypothesis of stability of the empirical results could not be rejected. Our finding implies that minimum wage hikes were detrimental to employment creation policy of the Nigerian government during her 13 years of democratic governance.

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