1. Introductions

The informal sector refers to that part of the economy which does not fall under the purview of organized history. As the concern of the world community increased over lack of economic growth and perpetration of poverty in the developing countries, policy makers began to look for solutions to save the situation. The traditional wisdom of economic development, represented by Prebisch’s doctrine of Post – Keynesian development suggests that what is needed is appropriate macro – economic policies and institutions, together with sufficient funds. A planned promotion of growth in selected leading sectors of the economy would then lead to the overall growth of the economy. The primary problems were perceived to be the identification of the target sectors with maximum linkages to the rest of the economy and the mobilization of finance to enhance the growth rate of the target sectors. (CBN, 2001)

The informal sector encompasses largely unrecognized, unrecorded and unregulated small – scale activities. It includes small enterprises with hired workers or household enterprises using family labour and the self-employed. Production processes characteristically rely on high levels of working capital as against fixed capital. Formal contracts between employers and employees or between buyers and sellers are rare and the often invisible activities involved usually fall below or outside the fiscal net.(CBN, 2001)

Informal sector is generally becoming significant especially in developing countries such as Nigeria, and therefore plays an important role in employment generation, production, income generation and improvement in the standard of living. In most countries, the informal sector absorbs the high growing labour force both in the urban and rural areas. As it can be seen, informal sector activities are the necessary tools in most of the countries that have no social safety nets such as unemployment insurance or even where wages and pension are very low especially in the formal sector.

The extent of the contribution of the sector has not been exhaustively investigated as it covers a range of economic activities in the Nigerian economy. This study would attempt to bring out the impact of the informal sector economic activities and specifically, the Motor Cyclist enterprise activities in the Northern Nigeria Metropolis.

The developing world is currently facing serious unemployment challenges resulting from large population and diversification of the formal sector of the economy. Lack of jobs in the formal sector of the economy as well as lack of skills in a large part of the labour force has resulted in the growth of a substantial informal sector in which most workers are in low paid employment under unregulated and poor working conditions (ILO 1998).

The rate of unemployment in many countries has increased. The consequences of unemployment in terms of deteriorating living standard are readily visible. Since much of the formal sector employment in developing countries is concentrated in or around urban locations, they have a clear repercussion on the urban employment situation. The reasons behind this sluggish or even negative growth in employment or what the UNDP Human Development Report (1993) described as “Jobless growth” are many, chief among them, being cut in government expenditures due to Structural Adjustment Programmed (SAP), and rising capital intensity in the production and distribution of goods and services in the modern private sectors (Sethuraman, 1997).

At the natural level, the rate of unemployment has already reached an alarming situation as it affects both professionals, skilled and of course unskilled labour. In fact, unemployment rate was 19% in 1999, 10% in 2003 and 18.6% in 2006 (CBN, 2006; NBS, 2007). This implies that employment generation in the country has not been advancing due the Reform Policies at Federal, State and Local Government Areas. In recent times the incidence of unemployment in Nigeria had been deep and widespread, cutting across all facets of age groups, educational strata and geographical entities.

The main consequence of the failure of urban employment in the modern private and public sectors to keep pace with urbanization has been that, an increasing proportion of the urban work force is running to what is known as the “Informal sector”. It is these sectors which bear the brunt of adjustment that is currently taking place in these countries. If open unemployment in urban areas of developing countries such as Nigeria has shown little increase despite massive additions of urban population has been attributed largely to the presence of the informal sector (Sethuraman, 1997).

The Urban informal sector expanded correspondingly to meet the increased demand of low-income wage earners for moderately priced consumer goods and service. However, the formal sector still monopolizes much of the support that government provides, and little effort was made to foster formal-informal sector linkages between the formal and informal sectors. Contrary to what the advocates of deregulation presumes, the economic recession of the 1980s and the austerity measures that accompanied IMF-imposed Structural Adjustment Policies affected the informal sector adversely on both the demand and supply sides, as markets contracted and input costs rose, reduction in public spending, decline in real wages, and overall public sector retrenchments swelled the ranks of the informal sector beyond its absorbing capacity. Many formal sector enterprises forged new links, sometimes-exploitative links, with the informal sector to cope with the difficulties of the economic crisis. The borders between the formal and the informal sectors become blurred. Government response to this situation was contradictory in some respects, on the one hand providing incentives to the informal sector by the establishment of training and credit facilities, and on the other hand, repressing the informal sector through overzealous prosecution in the so called War Against Environmental Indiscipline (Nwake, 2005).

Nigeria labour force is characterized by dependence on public sector employment, and given the various reform policies that have negative effect on employment generation in the public service, informal sector promotion could be very vital in reducing the impending consequences. Based on that, the need to generate more employment has been very prominent in the development objectives.

In view of this unfolding reality coupled with the utmost need for information on informal sector employment nexus for good policy making in Zamfara State, this study attempts to examine Motor Cyclist and employment generation. From the foregoing issues the study questions are formulated as follows;

2. Research Objectives

The broad aim of this study is to find out the impact of Informal Sector (Motor Cyclist) on employment generation in Northern Nigeria. Specifically, the study would seek to;

1. Examine the employment generation potential of Motor Cyclist in Northern Nigeria.

2. Ascertain, whether Motor Cyclist have contributed in reducing poverty and social problems in Northern Nigeria.

3. Find out problems facing or undermining the growth and expansion of the Motor Cyclist in Northern Nigeria.

4. Suggest some policy measures for the promotion of Motor Cyclist particularly in Northern Nigeria metropolis.

3. Research Methodology

The major sources of data for this research were primary and secondary sources which were obtained from Central Bank of Nigeria (CBN), International Labour Organization (ILO), and World Bank etc and through administering of questionnaires, interview and Focused Group Discussion (FGD). Questionnaires were administered to owners of Motor Cyclist and employees. Population of the study is the entire Motor Cyclist in Northern Nigeria.

The technique of data analysis that was employed on this research was triangulation method. Triangulation is the application and contribution of several research methodologies in the study of the same phenomenon. By using triangulation method you minimize the impact of any one method and increase your confidence in the data you have gathered. It offers a balance between logic and studies.

4. Model Specification

In modeling employment opportunities and the impact of Motor Cyclist in Northern Nigeria Harris – Todaro surplus labour model was adopted. Since many efforts were made to model the ‘predicted outcome of the Harris – Todaro theory of surplus labour demand. Among many of such effort is the development of the efficiency wage theory. The efficiency wage models can be useful applications in the analysis of productivity, earnings and employment determination (Wadhwani and Wall, Levine, Sam, and Abiodun, (2004). The major assumption of the efficiency wage theory is the endogenous determination of wages through firm’s optimization behaviour. The efficiency wage model adopted in this research follows that of Riveros and Bouton (1991), which was built upon by Teal (1995) as applied by Sam and Abiodun (2004) in their studies on urban informal sector earnings, skill requirement and labour demand in . Thus the empirical specifications of this model are drawn mostly from Sam and Abiodun (2004).

In order to apply the efficiency wage model to determine the employment and earnings of the informal sector, an equation is formed which is conditioned on the actual earnings in the firm and returns to capital (cost of capital). Following Teal (1995, 1997) and Sam and Abiodun (20004), a labour demand function, where employment is determined by wage rate and cost of capital is specified as:

(1)

Where:

However, given the informal nature of the activities of firms being investigated, rK is proxies by three different factors: cost of capital/borrowing, level of investment (size of firm) and profit level. The replacement of rK by these variables can be explained in two ways.

First, in the informal sector, firm do not have access to formal credit market, where official interest rate is charged on borrowings; rather they often resort to the informal financial market where it is usually difficult to keep record of charges on loans. Second, the higher the informal cost of borrowing (capital) the lower will be the opportunity to borrow/invest and this will in turn affect the level of profit. Ultimately, this will affect productivity and employment.

The estimable labour demand function can be written as;

(2)

Where:

More so, Oswald (1995), Teal (1995, 1997) and Carneiro and Henley (1998) have shown that these variables affect employees earnings and the determination of labour demand particularly in the informal sector.

Given the cross sectional nature of the data, in order to eliminate any effect of Oscillations that may result in heaters elasticity and ensure constant variation a cross the series equation (2) is expressed in simple log form as;

(3)

Equation (3) which is estimated shows the market clearing condition, where a single labour demand function holds. It relates labour demand to the expectation of the firm, through dependence on the cost of capital, rate of profit and investment level. Also, since wage rate is influenced by the demographic and human capital variables of the informal sector workers, this yields a specification of labour demand function, which depends on price, and the estimation of the determinants of the price which is captured by wages. This implies that wage function should be specified as;

(4)

Where X is vector of individual employee’s characteristics, in terms of productivity (measure by educational level – representing human capital), experience and sex as well as the other characteristics of the employees.

The Wage function of Motor Cyclist producers can be specified as:

(5)

Where:

All the equations will be estimated using Ordinary Least Square (OLS) techniques. Equation (a) is then estimated by instrumental variable (4) estimation techniques in which case the determinants of w are used as instruments.

Variable Measurement:

The relevant variables of the model as measured as follows:

The number of employees in each firm is used as a proxy for labour demand by the firm represented as L^d in the equation.

W wage is measured by average earning per employees generated from the activities of the Motor Cyclist.

I Investment is measured as the total amount of capital invested by the firm in the business at a particular period.

Other characteristics of the workers such as age, sex, experience and time are captured by discrete values. The data will be drawn from administered structure questionnaire.

5. Data Analysis

Presentation of Regression Result

Table 1. 0 Result of OLS of labour demand as Dependent Variable. (Equation 1)

(1)

The model equation is expressed by simple regression for Motor Cyclist in Northern Nigeria as follows:

The results obtained from the estimation of the labour demand equation are presented above. The labour demand equation is estimated using OLS. The empirical results depict a positive relationship between labour demand with wage and cost of capital. This result implies that increase in the level of wage and investment will lead to an increase in labour demand with wage and investment. This result implies that increase in the level of wage and investment will lead to an increase in labour demand. However, investment is significant while wage is not significant.

Table 2. 0 Result of OLS of wage as dependent variable (Equation 2)

On the other hand, labour demand has an overall negative relationship with profit (-0.05). This indicates that increase in profit will discourage labour employment which is contrary to the theoretical issues, because in theory an increase in profit is expected to accompanied with expansion in business and by business expansion more labour is expected to be employed but because of the nature of Motor Cyclist as an informal business increase in profit will discourage employment of more labour, due to the fact that the Motor Cyclist business are mostly one man or family business were the don’t need to employ or hired more labour even if there is an increase in profit. The negative relationship between labour demand and profit can be explained by the fact the business in Motor Cyclist business is mostly informal and owners are likely to bring in their relatives into the business, rather than hire more labour from the labour market. Generally the results show that wages and profit are not important in the determination of labour employment in the Motor Cyclist business, because of the informality nature of Motor Cyclist.

From the above equation the coefficient -4.97 is the intercept. It gives the mean or average effect on labour demand of the entire variable excluded from the model. If the explanatory variables are equals to zero then the values of regression is -4.97 which means logLD = -4.97.

According to our data mean labour demand went up only by 0.00002% for a naira increase in wage. On the other hands, holding other regresses (Wg and Pr) constant, a 1 percent increase in investment led on average to about 0.64% increase in labour demand and the coefficient is statistically significant. The coefficient of profit (-0.05) tells us that, with the influence of other regressors held constant as profit increases, say by a naira on average labour demand goes down by 0.05 percent.

The coefficient of multiple determination shows that our regression equation exhibits a good fit and has a strong predictive power. It indicates that about 65% variation in the labour demand function is explained by the variables captured in the model. The goodness of fit is reaffirmed by an adjusted R² (0.64) of 64% implying about 64% of variation in the dependent variable is accounted for by the regressor. The probability F statistic (151.11) is sufficiently low to confirm that the variables in the model are jointly significant. The combination of F statistic, t statistic and R² also confirm that our variables are correlated. The Durbin Watson statistic of 1.20 however indicates presence of autocorrelation in our residuals. Although with the presence of autocorrelation our OLS estimation are no longer efficient, they remain unbiased, consistent and a significantly normally distributed.

(2)

The model equation is expressed by simple regression for Motor Cyclist in Northern Nigeria metropolis as follows:

The results obtained from estimating the wage equation is presented above. The wage equation is estimated using OLS. The empirical results depict a positive relationship between employers wage with wage of other firms (competitors), experience and profit. The result implies that an increase in the level of competitors wage, profit and number of year of experience will lead to an increase in wage rate. The more experience one has, the greater will be his wage rate. The higher the competitors wage rate, the higher will be the wage rate. The higher the profit, the higher the wage rate.

On the other hands, wage rate has an overall negative relationship with age. This indicates that increase in age discourages increase in wage. The negative relation is explained by the fact that one output decreases with age. Generally the results show that competitor’s wage, age, experience and profit are not important determinants of wage.

The elasticity of wage with respect to competitors wage is about 0.93, suggesting that if competitors wage goes up by 1%, on average, wage goes up by 0.93%.

With the influence of other regressors held constant the wage/age elasticity is about -0.12. A year increase in age led on average to about -0.12 decrease in wage.

0.04 measures the change in the mean value of wage per year change in experience holding all other regresses constant. Estimates reveal that profit has a positive and insignificant relationship with wage.

The coefficient of multiple determination shows the regression equation exhibits a good fit and has a strong prediction power with 87% of variation in our dependent variable explained by our regresses. The Durbin Watson statistic of 1.93 shows absence of autocorrelation. The F statistic of 419.03 and Prob (F – Statistic) of zero confirm that our coefficients are jointly significant.

The importance to do Motor Cyclist activities out weights the total costs incurred. The benefits are mostly quantified in terms of employment and income generation.

The study estimated the possible employment opportunity as a result of Motor Cyclist activities in the study area that engaged various individuals. It also estimated the possible income earned by Motor Cyclist owners as a result of the Motor Cyclist activities through the sales of the products they produce, the factors that determine the likelihood of Motor Cyclist activities owners to engage in the business.

The result of the study confirms that Motor Cyclist in Northern Nigeria are high labour intensive and dominated by small size operators in terms of number of people employed compared with other formal sectors of the economy. In general, employment size between 1-9 people was dominant. Out of approximately 20 people trained by Motor Cyclist in the study area, about 59.6% of them are retained. The low retention is due to low capital, small size of the workshop, and mostly is a family business. And it was also revealed that most enterprises that employed few workers derived a greater proportion of their raw-materials and other inputs locally and largely from the informal sector.

More so, from the regression result the study found out that wages are not important in the determination of labour employment in the Motor Cyclist enterprise business in the study area. This can be explained by the fact that the business of Motor Cyclist and owners are most likely to bring in their relatives and families into the business, rather than hire or employ more labour from the labour market. However, from the regression result it was found out that investment is significant and important toward labour demand or employment generation in Motor Cyclist business in the area of the study.

The study also discovered that in the wage regression result there was positive relationship that exit between employers wage with wage of other firms (competitors), experience, and profit. The result shows that increase in the level of competitor’s wage, profit and number of years of experience will lead to an increase in the wage rate generally, that is the more experience one has the greater will be his wage rate, the higher the competitors wage rate, the higher will be the wage rate, and the higher the profit the higher the wage rate. While the study found out that there was an overall negative relationship with age and wage rate that is old age discourages increase in person wage rate this arises as a result of informality of the Motor Cyclist business and the business need young skilled people than old age. Also the negative relationship is explained by the fact that individual output decreases with age.

Among the important findings of the study was that the Motor Cyclist business is highly dominated by Male because from the sampled study area 100 percent of the Motor Cyclist study has their manpower or employed labour force as Male, no single Female was found the reasons for these as found out by the study was the issue of religion and culture of the people in the study area.

6. Conclusions

It can be observed from the findings of the study that Motor Cyclist actually helped in generating employment in Northern Nigeria State. Over 70% of the respondents maintained that each of the sampled Motor Cyclist was employing 1 to 30 employees, over 20% indicated 31 – 40 employees and 8% reported about 41 – 50 employees annually. That when compared with the number of the industries in the State will bring about significant employment generation. Moreover, about 90% of the respondents submitted that Motor Cyclist contributes immensely towards generating employments in the State. That could be buttressed by the fastest advancement of Northern Nigeria in physical structure, population and marriages that are contracted intermittently.

The informal sector in general in the State has been absorbing to a reasonable extent the unemployed. This could be evidenced by the influx of emigrants from the rural areas, neighboring States and foreign countries. However, such contribution were restricted due mainly to poor power supply, high interest rate on loans/difficulties in accessing the loans, lack of assistance from the government and keen competitions.

Another important conclusion from the findings is that wages paid to employee is not a barriers to employment in the industry. This was because there exists a traditional ways of engaging labour in Northern Nigeria. That is, trainees who are mainly relatives and families were engaged as trainees and latter graduate to employees. And mostly, the wages are not in determining the acceptance of the offer.

Basically, Motor Cyclist enterprise is male oriented business perhaps based on cultural and religious ground.

7. Policy Recommendations

Based on the above findings the following recommendations are made;

Motor Cyclist activities are among the major informal sector activities that provide employment opportunity to vast people, therefore, needs to be encouraged and helped by the government through mediating on the taxes charged by local, state and federal governments so that Motor Cyclist owners can be made to pay reasonable and convenient tax.

Also there is the need for the local, state and federal governments to promote Motor Cyclist activities so that to compete with the international standard, this can take the form of provision of necessary working equipments/tools like various type of wood cutting machines, modern spraying machines, hand globes, masks and capital to add to the one they have.

Another problem face by Motor Cyclist is proper cooperative/association which makes the job to be informal and unorganized market. It is recommended that Motor Cyclist cooperative/association be form so that they make common goal collectively. Therefore, government and nongovernmental organization should enlighten them through campaigns and workshops.

There is also the need for local, state and federal governments to undertake a comprehensive survey and statistics on the number Motor Cyclist and the number of labour they employed and various activities they undertake with a view to improve the revenue generated from taxes they paid and also would help government to know the actual figures of employment contribution by the Motor Cyclist activities within the informal sector and what is the ratio compare to other sectors of the economy in general.

Another problem facing Motor Cyclist as discovered by the study is infrastructural facilities such as; electricity, good road, water etc. It is recommended that the local, state and federal governments should provide enabling environment for these enterprises, this can be in form of constant and adequate electricity, provision of good roads, water etc.

Literacy level among the Motor Cyclist workers is very low as identify by the study. It is recommended that government should for establish schools for Motor Cyclist alone which the schools will be training them on modern Motor Cyclist making and the use of modern equipments/tools. Also government should include Motor Cyclist making in it curriculum from at least primary to secondary level and should be compulsory. At the advanced level should a course which individual can specialize on it as a profession which will help in making Motor Cyclist activities to be formal and organized looking at it historical background and contribution both economic, social, educational etc.

There is also the need for both local and state governments to give tax holidays to prospective Motor Cyclist since it has been identified that it will help in boosting their activities so that more employment opportunities can be generated and tax revenue will be generated.

Loan facility from commercial banks is another problem face by Motor Cyclist. Therefore, it is recommended that federal government should make it a law that certain per cent of their profit that the use to set site by commercial banks for small-medium scale enterprises be increased and out of these percentage large amount be set site for Motor Cyclist activities alone.

Also cost of importing raw-materials and equipments/tools for Motor Cyclist is very high. The study therefore, recommends that federal government should reduce the charges on importation of Motor Cyclist raw- materials and equipments/tools. This will make them produce at low cost and at large quantity even for export which will bring more revenue to the government. And also expand the production and employ more labour to the activities. On the other hand government should reduce or banned importation of foreign Motor Cyclist so that the home made will have little competition and can expand by having more market at home.