Relationship between unemployment and economic growth in Uganda (1991-2022)

Abstract

Uganda is one of the fastest growing economies in the world with an average growth of 6% per annum yet it is still faced with high level of unemployment which has been erratic over the past years (UBOS, 2017). This study investigated the relationship between unemployment and economic growth in Uganda in the period 1991 to 2022, the studies objectives were to examine the relationship between unemployment and economic growth in the short and long run. The study used secondary annual time series data from Uganda Bureau of Statistics and the World Bank data and considered the difference version approach of Okun’s law. The annual time series data used covers the period from 1991 to 2022, the data was then analysed with Stata and presented in a tabular format, Augmented Dickey Fuller test was used to test for the presence of the unit root and the existence of the long run relationship between economic growth and unemployment was tested using ARLD test. . The result indicated that unit increase in economic growth leads to a reduction in unemployment by 2.76%. . The study recommends that there is need to accelerate economic growth if unemployment is to reduce. The government should invest more in human capital development because increasing labor force skill levels and training directly benefits economic growth. Additionally, government should invest in value addition in the agricultural sector rather than focusing solely on exporting raw materials that fetch low prices. Finally, government should utilize the available natural resources, such as oil and gas, which have the potential to create numerous jobs and boost economic growth.