Impact of Increased Minimum Wage on Unemployment Rate in Nigeria: An Empirical Analysis

Abstract

This study examined the impact of national minimum wage rise on unemployment rate in Nigeria. It employed the Federal Government national minimum wage from 1980 to date and unemployment rates as released by the National Bureau of Statistics 2019 series. (ADF)Augmented Dicky-fullar model was used to check the stationarity of the data used which shows the combination of some variables being stationary at 1(0) that is at level and some at 1(1) that is at first differences (ARDL). The Autoregressive Distributed Lag model of econometric technique was employed to analyse the data, keeping unemployment rate as dependent variable, minimum wage, consumer price index, inflation, and money supply as the independent variables. Data used in the study were basically secondary. The study revealed that increment in minimum wage was positive and significant in both the long and short run implying that increase in minimum wage will raise the rate of unemployment in the economy which can have a negative effect on the country’s GDP. INF, CPI, and MS were also significant in both runs, INF was negatively related to unemployment but CPI and MS were positively related to the level of unemployment.