EMPLOYMENT AND EARNINGS IN THE

URBAN INFORMAL SECTOR

OF IBADAN

BY

ISAIAH OLURANTI OGUNRINOLAB.SC. (ECONS. UNIVERSITY OF IFE, 1983)

M.SC. (ECONS. IFE; 1986)

A THESIS SUBMITTED IN PARTIAL FULFILMENT OF THECONDITIONS OF THE AWARD OF THE DEGREE OF DOCTOR OFPHILOSOPHY IN ECONOMICS OF THE OBAFEMI AWOLOWO

UNIVERSITY ILE-IFE, NIGERIA.

1

1991

ACKNOWLEDGEMENTS

I wholeheartedly give all glory to God for giving me both the opportunity

and the ability to undertake and complete this study.

My sincere gratitude goes to my supervisor, Mr. A.O. Olaloye whose

incisive criticisms, helpful suggestions and untiring guidance helped me at

various stages of writing this thesis. I am also indebted to Dr. S.I. Oladeji who

stimulated my interest in the study of urban informal sector. His assistance at

every stage of this study is gratefully appreciated. Furthermore, the constructive

criticisms of Dr. Olanrewaju, Dr. Alade and Dr. Ikhide on the earlier drafts of

this work are appreciated.

The financial assistance towards data collection and the preparation of

this thesis that was generously provided by the council for the Development of

Economic and Social Research in Africa (C.O.D.E.R.I.A.) is gratefully

acknowledged and appreciated. Also, I am grateful both to the Obafemi

Awolowo University , and the Department of Economics that provided a

conducive environment for the conduct of this study. I am grateful to Messrs.

‘Lekan Adegoke and James Odelade for typing and retyping the drafts this

project report.

My wife, ‘Bunmi Ogunrinola, gave me a wonderful and unforgettable

support. Her prayerful, moral and financial supports at all stages of this work

have contributed immensely to its success. Also, the understanding of my

2

children: Ibunkunoluwa, Ifeoluwa and Iyanuoluwa, who missed my fatherly care

at the time they mostly needed it, is also gratefully acknowledged.

Ogunrinola, Isaiah Oluranti

October, 1991.

TABLE OF CONTENTS

PageTitle Page ………………………………………………………………………………… iAcknowledgements………………………………………………………………………. iiTable of Contents………………………………………………………………………… iiiList of Tables …………………………………………………………………………….. viiList of Figures ……………………………………………………………………………. ixAbstract ………………………………………………………………………………….. x

CHAPTER ONE: Introduction 1.1 The Urban Informal Sector ……………………………………………………… 21.2 Statement of Problem …………………………………………………………… 3 1.3 Objectives of the Study …………………………………………………………. 81.3.1 Hypotheses …………….………………………………………………………… 9

CHAPTER TWO: The Urban Labour Market in Nigeria

3

2.1 The Urban Economy: It’s Origin and Growth …………………………………...10

2.2 The Growth of Informal Sector of Ibadan ………… …………………………...14

CHAPTER THREE: Literature Review3.1 Definitional Issues ……………………………………………………………….. 183.2 Some Views on the Urban Informal Sector ………..…........................................ 193.3 Previous Empirical Studies On Nigeria ………………………………….............

213.4 Empirical Studies on other Developing Countries ……………………………….

24

CHAPTER FOUR: Conceptual Framework andMethodology 4.1 Conceptual Framework………………………………………………………….. 294.1.1 The Urban Labour Market………………………………………………………. 294.1.2 Factors Affecting Entry into the Mats Subsector Of Urban Informal Sector

…………………………………………………………………………………… 344.1.3 Urban Labour Demand and Supply Analysis…………………………………….

394.1.4 Employment Condition in the Urban Labour Market…………………………….

434.2 Methodology……………………………………………………………………… 484.2.1 Research Instruments……………………………………………………………... 484.2.2 Planned Coverage and Sampling Procedure………………………………………

494.2.3 Data Collection…………………………………………………………………… 504.2.4 Model Formulation and Analytical Techniques…………………………………..

53

4

CHAPTER FIVE: Structure of Enterprises and Socio-Economic Characteristics of Enterprises

5.1 Structure of Enterprises……………………………………………………… 645.1.1 Ownership Structure and Age of Business…………………………………. 645.1.2 Structure of Capital Employed ……………………………………………… 675.2 Operation Characteristics of Enterprises …………………………………….. 715.3 Socio-Economic Characteristics of Entrepreneurs……………………… 73

CHAPTER SIX: Employment in the Urban Informal Sector

6.1 Employment………………………………………………………………………. 766.2 Generation of New Entrepreneurs through Skill Formation……………..806.3 Employment Functions…………………………………………………………… 866.3.1 Level of Commitment and Satisfaction among Urban Labour Force …………………………………………………………… 896.4 Informal Employment Probability Functions………………………………. 91

CHAPTER SEVEN: Earning and Status Mobility of UrbanInformal Sector Labour Force7.1 Earnings …………………………………………………………………………. 967.2 Occupational and Status Mobility of Urban Informal Labour Force ….

102

CHAPTER EIGHT: Summary of Findings and PolicyRecommendations 8.1 Summary of Findings……………………………………………………………. 1088.1.1 Employment Generation, Skill Development and Utilisation in the Urban

Informal Sector………………………………………………………………….. 1088.1.2 The Urban Informal Sector: Marginal or Dynamic? ……………………. 1098.1.3 The Urban Informal Sector: In Transition? ………………………………………

1128.2 Policy Recommendations………………………………………………………… 1138.3 Problems and Limitations of the Study……………………………………….. 115

5

8.4 Areas for Further Research……...........................................................................116Bibliography…………………………………………………………………….. 117

Appendix A: Survey Questionnaire on Informal Sector Enterprises in Ibadan……..…………………………………………………………………………….. 127

Appendix B: Survey Questionnaire on Employment and Earnings in Ibadan

…………………………………………………………………………………… 134

LIST OF TABLESTablePage1.1 The Nigerian Labour Market……………………………………………………… 44.1 Variables Used in the Probability and Earnings Model ……………………605.1 Distribution of Sample Enterprises…………………………………………… 655.2 Percentage Distribution of Enterprises by Age of Establishment ..............

665.3 Sources Of Initial Capita……………………………………………………. 685.4 Percentage Distribution of Initial Capital by Type Of Enterprise………….

695.5 Percentage Rate of Growth of Capital by Type of Enterprise…………….

695.6 Percentage Distribution of Present Capital by Type of Enterprise……..

705.7 Percentage Distribution of Entrepreneurs by Level of Education and

Type of Enterprise………………………………………………………… 735.8 Percentage Distribution of Entrepreneurs by Age and Type of Enterprise..

746.1 Percentage Distribution of Paid Employees by Type of Enterprise……..

76

6

6.2 Percentage Distribution of Total Number Engaged by Type of Enterprise..77

6.3 Percentage Distribution of Employment Growth by Type of Enterprise…..79

6.4 Present Location and Occupation of Ex-Apprentices ……………………..81

6.5 Percentage Distribution of Apprentices by Future Aspirations……………83

6.6 Annual Rate of Generation of New Entrepreneurs by Type of Enterprise..84

6.7 Percentage Utilisation of Effort by Type of Enterprise…………………... 866.8 Employment Function for the Urban Informal Enterprises Manufacturing

and Technical Services……………………………………………………………. 876.9 Informal Sector Employment Probability Function………………………. 917.1 Mean Monthly Earnings in Ibadan Urban Labour Market………………..

967.2 Percentage Distribution of Urban Labour Force by Monthly Income andBy

Sector of Employment …………………………………………………… 987.3 Earnings Distribution Functions for the Urban Labour Force in Ibadan.

1007.4 Percentage Distribution of Informal Sector Labour Force According to

Job History ………………………………………………………………… 1047.5 Percentage Distribution of Informal Labour Force According to theirPresent

Status, Employment Status in Preceding Job and Type of Enterprise inCurrent

Employment………………………………………………………………………. 1057.6 Percentage Distribution of Informal Labour Force by Current Employment

Status and Labour Market Experience………………………………………. 1067.7 Income Profile (From Job History) of the Self Employed Labour Force

in the Informal Sector………………………………………………………… 107

7

LIST OF FIGUREFigure

Page1 Movements within the Urban Informal Sector ……………………………. 322 Dynamics of Formal – Informal Relations Within the Urban Labour

Market (ULMA)………………………………………………………………… 333 Skill Formation and Entrepreneurship Development Process in the Urban

Informal Sector…………………………………………………………………. 354 Factors Influencing Entrepreneurship Development in the Manufacturing

and Technical Services Enterprises………………………………………… 355 Demand and Supply Curves for Labour………………………………………... 41

ABSTRACT

This study examined the contributions of the urban informal sector of Ibadan toincome, employment generation and skill formation. It also investigatedwhether or not the sector provides permanent employment for some membersof the urban labour force. The methodology of the study involved the use ofquestionnaires to elicit desired information from informal sector enterprises as

8

well as formal and informal sector workers in manufacturing and technicalservices from selected enumeration areas of Ibadan. The analytical techniquesrelied on the use of employment and earning regression models as well asinformal employment probability model. Also, summary statistics like mean,mode, median, ratios and percentages were used. The estimated employmentmodel shows that the level of capital employed, earnings, amount of educationof owner, quality of training of owner and the type of industry where anenterprise operates significantly affect the level of employment. Suchemployment is found to be permanent for 86 percent of informalsector .operators, while 94 percent of the formal sector workers interviewedexpressed strong desire of moving to the informal sector whenever they cansave up the required starting capital. This fact is also confirmed by the informalemployment probability models estimated for the urban labour force of Ibadan.Thus, the result of our study does not uphold the probabilistic migrationhypothesis with respect to the role of informal sector in the urban labour marketof Ibadan. With respect to earnings, the informal sector workers comparefavorably with their formal sector counterparts. Sixty-one percent earn morethan N200 per month while the mean monthly earnings is N583. Our earningsdistribution model estimated shows that variables like sector of employment,migration status, education, quality of training, labour market experience andthe type of industry in which an enterprise operates significantly affect thedistribution of earnings among the urban labour force. In terms of skilldevelopment, the apprenticeship system is the most dominant form. Ninetypercent of current entrepreneurs were thus trained, while a total of 2,200apprentices had been previously trained by these masters. At present, the 544enterprises sampled have a total of 2,119 apprentices that are being trained.However, in terms of the extent of skill utilization, it is found that a considerableamount of underemployment ranging from 21 to 36 percent exists in the sector.Apart from its contributions to employment, earnings and skill formation; thisstudy shows that the urban informal sector, rather than disappearing with time,is a major and growing element of development in the urban labour market ofIbadan. Thus, the government and its agents (e.g. the National Directorate ofEmployment), private formal organizations and researchers are called upon tofocus more attention to the sector to sustain and enhance the sector’scontributions to development.

9

CHAPTER ONE

INTRODUCTION

Economic development literature is replete with the account

of open unemployment as well as various facets of

employment problems in less developed countries. This is

premised on the fact that in many third world cities, as

many as about 15 – 25 percent of the labour force are

openly unemployed with a greater incidence on the educated

youths.

Apart from open unemployment which has received greater

attention, other employment problems in less developed

countries are also more rampant. These employment problems

arise as a result of the imbalance between the size and

growth of the labour force on the one hand, and the

opportunity for economic activity offered by existing

economic structure on the other hand (Joshi and Joshi,

1976). Some of the dimensions of the problems include:

(a)Frustration arising from the type of work available

which are often at variance with aspirations of the

labour force, especially the young educated ones. This

occurs in form of those in ‘wrong’3 joys as well as

those wanting to work longer hours or want to work more

intensively.

10

(b)Low income even when workers are physically busy most of

the working day.

(c)Underutilization or inefficient utilization of efforts.

These problems have received little attention in the

literature as compared to open unemployment (Kritz and

Ramos, 1976). As a matter of fact, scholars have questioned

the applicability of the term ‘unemployment’ to

underdeveloped countries where:-

(a) Majority of the labour force are self – employed, and;

(b) Those that are without full time regular wage jobs do

usually eke out subsistence by engaging in any informal

odd jobs since full – time unemployment is the luxury of

the rich ones (Weeks, 1971; Udall and Sinclair, 1982).

By this, one is not denying the seriousness of

open unemployment with the social and political problems

associated with it. However, the employment problems and

poverty in third world cities equally deserve serious

attention.

For example, given the relatively small size of the

formal economy, most workers in the informal sector (NFS)

are self employed. But their conditions of work have been

of little concern to the government. In spite of this, it

has been reported that most of these workers constitute

crop of new generation of entrepreneurs contributing their

quota to development (Callaway, 1973). That these

entrepreneurs and their enterprises contribute to

11

employment generation for those who would have otherwise

remained unemployed has been supported by I.L.O. (1972).

However, the optimistic conclusion of I.L.O’s study has not

remained unchallenged (Moser, 1978). As such, there

exists controversy as to the contribution of the sector to

development.

However, in a nation where social security system in

form of unemployment benefit is non-existent, the need for

job creation to absorb the ever-increasing labour force

cannot be overemphasized. It is also important that

employment problems be closely looked into to enhance the

level of living of workers. It is our conjecture therefore

that the above could be achieved by evolving policy

measures that will improve the informal sector of the

economy where a significant proportion of Nigerians are

currently making a living.

The fact that the government sector realizes the

importance of this sector (Third National Development Plan)

in terms of its potential contribution to employment makes

this call imperative. Moreover, the skill development

function, in recent times, of the National Directorate of

Employment ( N.D.E.) via the skilled entrepreneurs in the

Informal Sector (NFS) is an indication that the sector

might have to play a much more important role now and in

the future in terms of skill formation, employment and

income generation for most Nigerians. This explains the

topicality of this study.

12

Our study therefore, will focus on employment and

earnings of the informal sector workers. This seems to be a

departure from the usual norm whereby most research efforts

are concentrated on the small- based urban formal sector.

Our study therefore is an attempt to redress this

imbalance.

1.1:THE URBAN INFORMAL SECTORInterest in the study of urban informal sector dates

back to the early 1970’s in an attempt to deal with the so-

called underemployment and unemployment that have assumed

enormous dimension in many third world countries. The term

‘informal sector’ was used by

Hart (1973)10 in his study of employment opportunities in

Ghana. The term has since been popularized by ILO/UNDP’s

employment mission to Kenya (I.L.O., 1972). It was then

used to describe enterprises that are outside government

regulations and operate outside the incentive system

offered by the government and other private institutions.

Thus, the informal sector is synonymous with “unprotected

sector” (Weeks, 1975) since it is not covered by various

government regulations offered to large formal business

organizations.

As Amin (1981) and Joshi, et. al. (1976) have also

observed, operators in this sector are subjects of

harassment and humiliation by government officials. In

Nigeria, this situation became more pronounced during the

Buhari / Idiagbon regime when they launched, and actually

13

carried out the “War Against Indiscipline” between 1984 and

1985. This programme was meant to promote environmental

sanitation and rid cities of illegal structures that had

served as ‘workshops’ to most in formal sector operators.

However, in most developing countries, government’s

attitude to informal sector is changing. This is because

most governments are now realizing the potentials of the

sector in terms of skill development through the age-old

apprenticeship system and employment generation. In

Nigeria, for example, the National Directorate of

Employment works together with master-craftsmen in the

informal sector in giving school leavers.

For the purpose of this study, our notion of informal

sector enterprises refers to all economic activities that

are permissible by the State. However, these activities are

carried on in a way that does not totally comply with

government regulations. For example, such businesses are in

most cases, not registered; they do not pay the legal

minimum wage to their employees (if any) ; their output are

not usually inspected by the Nigeria Standard Organization;

and more often than not, they operate beyond the 40 – hour

working week.

1.2:STATEMENT OF PROBLEMA careful scrutiny of the statistics relating to the

Nigeria labour market (Table 1.1) shows the importance ss

well as the preponderance of the self – account workers.

14

Majority of these are operators in the informal economy of

Nigeria.

TABLE 1.1: THE NIGERIAN LABOUR MARKET, 1970

-1975

1970 1975 1980 1985No

(Million)

Percentage Share

No(Millio

n)Percentage Share

No(Millio

n)Percentage Share

No(Millio

n)Percentage Share

1.Labour Force:

(Made Up of) 26.08 100 29.22 100 32.2 100 36.08 100 a. Unemployment Gap 2.03 7.8 1.31 4.5 4.5 1.4 1.48 4

b. Gainful Employment 24.054 92.2 27.91 95.5 30.8 98.6 34.6 96

2. Those gainfully employed a.

Wage Employment 1.385 5.8 2.18 7.8 3 9.7 3.75 10.8 b. Self-account, unpaid

household workers and unpaid apprentices. 22.669 94.2 25.73 92.2 21.8 90.3 30.85 89.2

Sources: Second, Third and Fourth National Development Plans: 170 - 74; 1975- 80; and 1981 - 85 respectively

In 1970, out of the total gainfully employed of 26 million,

about 23 million are self-account workers while about 1

million are in wage employment. By 1985, the self-employed

15

class has grown to 31 million representing 89 per cent of

the gainfully employed. In contrast, the wage employment in

Nigeria in 1985 was still as low as 4 million representing

10 per cent of total gainful employment.

In spite of their statistical importance and predominance

in the urban labour market, informal workers relative to

their formal counterparts are usually neglected by

government in terms of job and wage protection, enumeration

in official surveys, access to formal capital and product

markets and so on. In contrast the relatively small-based

formal wage employment sector enjoys appreciable government

and union protection in terms of job security, wage

stability and other conducive conditions of work. Worse

still, much emphasis of the government in terms of man

power planning and development is directed away from the

small-scale enterprises, but towards the medium and large

scale establishments of wage sector.

The neglect of the urban informal sector, in most

cases, is in terms of non-implementation of the provisions

made in the development plan documents regarding the

sector. For example, the second National Development Plan

document (1970 – 1974) 15recognised the low absorption rate

of primary school leavers into the secondary school (11.7%)

and as a result provided that young school leavers be

trained in such skills that are designed to improved their

prospects for employment through the apprenticeship scheme.

The plan also provided for the establishment of a National

16

Youth Corps which should provide training in skilled manual

work for young school leavers. These policies were aimed at

removing thousands of youths aged 15-23 from the labour

market through skill improvement schemes that will

eventually create jobs for them as self-employed artisans

and craftsmen in the economy.

The third National Development Plan (1975 – 1980)

made similar provision for creating employment for the

educated youths and even went further to acknowledge the

role the informal sector can play in job-creation process.

In this wise, the plan in unequivocal terms, stated that:

“……..(given the) decline in the employmentpotential of the agriculture sectorAnd ……… the increasing capital intensity ofthe growth sector – (mining and large-scalemanufacturing) – small scale enterprises andthe informal sector may provide the mainopportunity for expansion of employment’ (p.385).

The Fourth National Development Plan (1981 – 1985)

also came up with several elegant provisions for solving

school-leaver unemployment problem which has assumed

enormous dimensions in the urban labour market. It also

provided for ways of upgrading the skills of informal

sector workers. The Plan agrees that increasing primary-

secondary school transition rate alone may not solve the

school-leaver unemployment problem but that they should be

trained toward self-employment. This was supposed to be

17

achieved through the Industrial Training Fund that was

charged with the vocational training programmes for 7,000

unemployed school leavers, artisans and craftsmen in

various industries. Other agencies charged with similar

training functions include the Centre for Management

Development, the Industrial Development Centre, and the

State governments’ employment-oriented training programmes

for unemployed school leavers and artisans.

These provisions have received little or no attention

from the government in spite of the seemingly high priority

they should deserve. Thus, these urban unemployed most of

whom now operate in the informal sector suffer a great

neglect from the government. Furthermore, enterprises in

the sector do not benefit from participating in the

organized product and capital markets.

Similar situation as in Nigeria prevails in most

developing nations (I.L.O; 1972), Apart from neglect,

operators in the informal sector, are, more often than not,

subjected to harassment and humiliation by government

officials for alleged infringement of bye-laws relating to,

say, street-trading, public health, road safety, and so on.

Apart from government neglect, the informal sector

also suffers from the academia. There is paucity of

research into the sector especially in Nigeria. Thus,

little or no effort is being made to address the many

constraints of informal firms and their operators. However,

as shown in chapter three below, the research efforts of

18

Callaway (1964)17 and Fapohunda (1985)18 have shed some light

in these respects.

Recently however, the Nigerian government seems to be

changing its attitude towards the sector. This explains the

recent trend whereby the National Directorate of Employment

collaborates with informal sector master-craftsmen in the

skill development of young school leavers.

Therefore, it is our view that the sector should

benefit more from research in order to be able to asses,

and make relevant policy recommendations for enhancing its

contributions to economic development. This becomes

imperative when it is realized that studies in other

countries (developed and developing) show that small

enterprises (formal and informal) contribute significantly

to growth and employment relative to large-scale

enterprises. For example, between 1969 and 1976 in the

United States of America, small enterprises employing

between zero and twenty persons generate 66 per cent of new

jobs for the same period; while large enterprises employing

at least 500 persons account for 13 per cent of new job

creation (Birtch, 1983, p. 5)19. Similar, Liedholm and Mead

(1988)20 reported that informal sector enterprises in a

dozen developing countries contribute significantly to

income and productive employment.

The promotion of these microenterprises seems greatly

attractive because research outputs show that they grow

even during slack periods. Evidences in America (Bishop,

19

1983)21 support this fact. In the American economy, for

example; despite the oil shock of the 1970’s, significant

new incorporation of small firms was experienced at a time

when many large ones were folding up. Thus the slack labour

markets of the 1970’s and 1980’s have helped to stimulate a

dramatic increase in the number of small businesses.

The fact that competition is relatively high, thus

ensuring wage flexibility in small enterprises, accounts

for the better performance of small scale non-unionized

industries in terms of job creation. In contrast, union

militancy in large-scale enterprises prevent wage decline

in the face of rising costs. Therefore, lay-offs are

unavoidable, but most of these are usually either rehired

at lower wages in small firm sector or set up own

enterprises. Thus, the supply of entrepreneurs in the

informal sector tend to increase with economic downturn.

Given the importance of the informal economy

therefore, it should be the target of policy and project-

focused attention from the government and researchers in

place of current apathy and/or complacency to the plight of

the over four-fifths of the labour market. In their own

submission, Staley and Morse (1965)22 vividly revealed a

part of this problem when they observed that:

………in countries striving to industrialize,small industry has been regarded as aninevitably backward and lagging part of theeconomy, perhaps to be aided for socialreasons and in a rather defensive and

20

protective spirit, but not as a promisingopportunity for development. This is amistake. In most industrialization, too littleattention has been paid to the benefit to begained by helping existing small industry tomodernize and by stimulating the growth ofnew, modern small factories. Thus, a latentresource has been overlooked and neglected’(p.v).

And precisely with respect to Ibadan, Onyemelukwe (1982, p.

133)23 affirms that over 1,000 small industrial units

employing less than 10 persons each contribute

significantly to the economy progress of the city and its

environs. However, he laments that not much is known about

them.

Furthermore, this study is considered relevant to the

present day Nigerian economy on several grounds:

First, due to the high rate of urbanization and the

resultant high labour force growth in Nigerian cities, it

is evident that the urban-based large-scale formal sector

enterprises cannot generate enough jobs for present and

future job seekers (Callaway, 1964, Third National

Development Plan, 1970 – 1975). Thus, there is a need to

intensify research efforts aimed at evolving policy

measures to promote and sustain employment generation in

the urban informal sector.

Second, there is a need to focus attention on the

employment situation of the working poor most of whom have

been identified as informal sector operators (Mazundar,

21

1976; 24 Merrick, 1976; 25 Guisinger and Irfan, 1980)26. Such

studies on informal labour market operators will therefore

provide policy measures to increase productivity and hence,

earnings in the sector.

Third, as a result of the present Federal Government’

efforts in skill development and generating employment for

the young school leavers through the Open Apprenticeship

Scheme, social research aimed at examining the skill

acquisition process and manpower needs of the sector over

time is a step in the right direction.

Fourth, paucity of research effort into the sector

gives an indication that deliberate attempt must be made to

encourage researchers into this area, data problem

notwithstanding.

It is our submission therefore that this neglected

sector should begin to receive greater attention and this

is one of the factors motivating this study.

1.3:OBJECTIVES OF THE STUDY Basically, this research project is aimed at examining

the contribution of the urban informal sector of Ibadan to

income, employment generation and skill formation. This

becomes imperative given the low and dwindling labour

absorptive capacity of the formal sector enterprises and

the associated high level of open and disguised

unemployment within the urban labour market.

22

Specifically, the study is designed to:

(1) Examine the nature and extent of economic

activities in the urban informal sector and find

out how the sector operates given the hostile

policy environment it finds itself.

(2) Examine whether the enterprises in the sector are

characterized by marginal existence or dynamic

growth given resource constraints in the sector.

(3) Examine the importance of the sector in terms of

employment and earnings generation as well as skill

acquisition and entrepreneurial development.

(4) Identify the factors affecting the level of

employment and personal distribution of earnings in

the sector.

(5) Suggest policy guidelines in line with our

findings.

1.3.1 HYPOTHESES

In line with the above-name objectives, the following null

hypothesis are tested;

(i) The informal sector enterprises contribute

significantly to employment generation.

(ii) The enterprises, apart from contributing to employment

generation, also serve as important source of skill and

entrepreneurial development.

(iii) The informal sector operators are temporarily

employed in the formal sector pending the time they

will find the desired formal sector alternative. In23

other words, we are postulating that the probabilistic

migration thesis – (which maintains that the informal

sector employment is a waiting ground for most urban

workers en-route to the formal sector) can be upheld

for our sampled entrepreneurs.

(iv) Earnings of workers in the sector is substantial to the

extent that informal sector labour force cannot be said

to be synonymous with the urban poor.

(v) Irrespective of the sector of employment, human capital

variables, among others, are important factors

affecting distribution of earnings.

CHAPTER TWO

THE URBAN LABOUR MARKET IN NIGERIA

2.1: THE URBAN ECONOMY: Its Origin and Growth

The pre-colonial Nigerian did not find himself tired

to the two cultures of formal and informal labour market

situations. Using the production process later described as

‘unorganized’, he has been producing nothing more than the

necessities for subsistence in the informal labour market

in his settlement, whether rural or urban. In either of

these settlement types, agricultural pursuits are combined

with local or indigenous crafts like dyeing, weaving,

blacksmithing, iron-smelting, pottery, carving and so on,

at the subsistence level.

24

However, the advent of the colonial government brought

about a revolution which led to the polarization of both

the labour market and the labour force. Regional,

divisional and local authority headquarters became the seat

of government which makes these settlements attract a more

than proportionate development efforts relative to

surrounding areas. Moreover, colonial establishments

(public and private) made the demand for wage labour

indispensable in these settlements. Workers were therefore

induced (or at times forced) to accept wage work in these

urban formal establishment (de Briey, p. 1955; Berg, 1965;

Miracle and Fetter, 1970; Browse, J.O. 1977). As a result,

a greater part of the subsistence economy was displaced in

favour of a small and urban-based formal market economy.

From then on, economic activities were classified as

either; traditional’ or ‘modern’. The traditional

activities are those which existed before and continue in

the face of Western Capitalist penetration, while the

modern ones are those which arose from investments by the

colonial administrations and other foreigners; using

imported capital – intensive technology.

As a result of these developments, wage employment in

plantations, mines and industry became important especially

in urban areas which attracted a good number of prospective

wage workers from the rural agricultural settlements. Thus,

in almost all urban centres, it is not common to find the

small-based modern colonial enclaves of formal wage work

25

alongside with traditional self-employment in both farm and

endeavours.

The advent of the colonial administration, therefore,

ushered in what is now commonly known as dualism in all its

ramifications. In general, dualism refers to “economic and

social divisions in an economy such as differences in level

of technology between sectors

or regions, differences in the degree of geographic

development and differences in social customs and

attitudes between an indigenous and an imported social

system” (Thirwall, 1986)31.

Dualism in production is manifested in the imported

capital-intensive technology in the formal high

productivity sector while the informal sector of the

economy still rely on traditional, labour-intensive

technology. In spite of its backwardness relative to the

formal sector, the informal sector is more dominant min

terms of size (Table 1.1). It has been reported that the

proportion of urban labour force making a living in the

informal sector I s about 70 per cent (Fajana, 1981, p.

194). Todaro (1989, p. 267 – 273) writing on the urban

informal sector in developing countries, maintains that

between 20 per cent and 70 per cent of urban labour force

are engaged in the informal sector. For instance, while

Lagos (Nigeria) records 50 per cent, Kumasi (Ghana) and

Calcutta (India) record 60 – 70 per cent and 40 – 50 per

26

cent respectively of urban labour force in the informal

sector.

The supply of labour to the urban labour market

(formal and informal) derives mainly from the surrounding

areas both far and near. The urban-ward migration from the

surrounding areas (notably the rural-urban migration) has

been explained using various models in economic literature.

One of such models is the structural change model which

maintains that as economic development progresses, the

decreasing share of agriculture in the Gross Domestic

Product induces labour transfer to the expanding urban

industrial sector. This is said to be beneficial to the

economy due to the structural shift necessitating

intersectoral labour redistribution in the growth process.

This explanation of the process of urbanward migration

has not been justified in the light of realities in less

developed countries in general and Nigeria in particular.

This is because the rate of growth of wage employment

remains relatively low and has been outstripped by the

rapid rate of growth of labour force. Surplus labour

arising from this imbalance are usually content to stay on

in cities while the rural areas are experiencing labour

shortage.

The urban sector therefore remains a plethora of the

unemployed to a limited extent, as well as the mass of the

underemployed, to a large extent. This situation calls into

27

question the validity of the structural change theory in

the labour allocation process.

The probability migration model views rural-urban

migration as a process of investing in inter-regional or

inter-sectoral movement, information gathering and job

search in order to maximize lifetime stream of earnings.

Thus, migration from low opportunity area to a high

opportunity one to take advantage of employment and

enhanced earnings opportunity is a rational economic

decision. Thus, the critical factor in rural-urban

migration is the higher urban wage which attracts rural

residents among other push and pull factors. And since

wages in urban jobs are rigid in the downward direction,

quantity adjustment rather than wage adjustment is the

norm. The ensuring surplus labour in the urban labour

market may decide to remain openly unemployed or readjust

expectations and take advantage of the informal sector’s

income and employment opportunities. The latter option

seems more relevant to urban surplus labour in Nigeria as

in any other developing nations.

Rural-urban migration for improved economic conditions

in the areas of destination therefore accounts for the

rapid population (and hence labour force) growth in cities.

Such rate of city population growth is usually higher than

national population growth rate. Studies have also

confirmed that a significant proportion of population

growth in cities is accounted for by migration while the

28

rest is due to natural increase (Population Reports,

1983)34.

Between the years 1960 and 1975, the annual rate of

growth of population in Lagos was 8.6 percent while

comparative figure for Ibadan since the 1970’s is 6 percent

(Population Reports, 1983 Table 2; Ayeni, 1982). Fifty-nine

per cent of the growth rate of population in Lagos is

reported to be due to net migration while the rest (41 per

cent) is due to natural increase. Similar situation as in

Nigeria cities prevail in other Third World cities and this

under-scores the importance of migration in the population

growth and hence increasing labour supply to the cities.

Apart from the rural-urban wage differential which

stimulates migrants to move, urban bias in development is

another critical factor. This situation has a historical

antecedent since the colonial days in Nigeria when colonial

settlements like Lagos, Ibadan among others, received a

more proportionate share of development efforts. Apart from

intercity dualism in development, there also exists intra-

city dualism. Thus, it is not a thing of surprise any

longer that Maroko, Ajegunle, Mushin and so on, exist side

by side with Victoria Island, Ikoyi, etc. in Lagos. The

Colonial settlement within the city receives greater

attention than other areas.

Similar development pattern as in Colonial days

continues in post-colonial Nigeria. In a recent study on

Nigeria, Okowa (1987) confirmed the urban bias thesis.

29

Using the per capital allocation of pulic resources between

the urban areas as a proxy variable, he confirmed that the

urban areas where only 30 per cent of Nigerians are

located, have a disproportionate share of per capita public

expenditure allocation since independence.

Such dualistic development pattern cannot but have its

impacts on the urban labour market. The protected and high-

wage formal sector jobs are not growing fast enough to

absorb the labour force attracted from the surrounding

areas. However, the rapid urbanization process makes it

profitable (relative to rural employment) to be engage in

providing goods and services to urban dwellers on own-

account basis in the informal sector. Such informal

enterprises are necessarily small and can therefore quickly

adapt to changing needs of the rapidly growing urban

economy.

For example in the past, the informal sector

enterprises engage principally in providing traditional

goods and services but the dynamic changes in the demands

of urban dwellers have influenced changes in the supply of

services provided by these informal sector enterprises.

Nowadays, most enterprises specialize in motor-vehicle

repairs, tailoring, photography, furniture-making, among

others, as a result of modernization; rather than in dyeing

and potmaking, among other traditional crafts. The sector

is thus responsive to dynamic changes within the urban

economy.

30

These modern informal sector activities in Nigerian

cities are characterized by self-employment, loose

arrangement in wage employment, long hours of work,

‘workshop’ scattered around the town, and in general, the

informality inherent in its operation. The latter is

succinctly described by Callaway (1965, p. 28).

“…… tinsmiths hammer out metal cases andcontainers in intricate tones and rhythms. Atailor on the veranda of his house sews theseams of an agbada on his treadle machine. Atthe side of a main road, a carpenter and hisapprentices are sawing boards and building thebody of a bolekaja (a passenger and producelorry). A mechanic works in an area under thetrees between two buildings; his apprenticescluster around the vehicle being repaired.These self-employed men work long hours ….”

On the other, the formal sector is made up of paid

employees while the few self-employed are the high income

earning professionals in the liberal professions as in law,

medicine, and accountancy; as well as proprietors of formal

small-scale enterprises.

2.2:The Growth of Informal Sector of Ibadan

The rural-urban wage differential, reinforced by urban

bias in development is one of the most important factors

explaining the observed rapid rate of urbanization in

Nigeria. This explains why in the last four decades, the

rate of urbanization has increased phenomenally in Nigeria

(Fapohunda, 1985; p. 3).

31

In 1963, Ibadan, the largest truly indigenous urban

centre in Africa south of Sahara, had a population 627,380.

But by 1988, the population of the city had grown to about

i.4 million people. This means that the city more than

doubles its size in twenty-five years.

Up to 1973, the rate of growth of population of the

city was as modest as 3 per cent per annum. Since 1973,

however, the rate of population growth of the city is

estimated to be about 6 per cent per annum (Filani, 1982).

The city is second to Lagos both in terms of population

size and annual rate of increase. Nevertheless, Ibadan is

reported to be a truly African city characterized by small

non-African population, preserving in an almost

unadulterated form, and all those characteristics of the

typical Yoruba City. Such characteristics include a central

market, a remarkable social structure and a peculiar

pattern of rural-urban migration.

The rural-urban pattern of migration is said to be

peculiar when it is noted that the city is closely

connected economically and politically with its rural

hinterlands. This is because Ibadan is more of a ‘region’

than a city. This probably motivated Filani (1982) to

caption his edited works on Ibadan as ‘Ibadan Region’

rather than ‘Ibadan City’. Moreover, the region of Ibadan

was explicitly defined by Akintola (1963) as “the area

extending for about 55 kilometers from Iroko in the north

to Mamu in the south”. The people of this region usually

32

maintain dual home ownership and residential pattern: one

in Ibadan township and the other in one of the satellites.

Studies have shown that farmers in the rural hinterlands

spend a considerable part of the week in the city and the

rest on the farm (Ayeni, Bola, 1982, p. 80). Such dual

residency pattern is also confirmed by Callaway (1973)7

when he observed that, Ibadan serves as urban home for a

large number of farm families who are linked to about 3,000

satellite villages.

Apart from the peculiar pattern of rural-urban

migration due to the link of Ibadan with other satellite

villages, the historical development of Ibadan shows that

the colonial incursion into the city is an important factor

for population as well as informal sector growth.

Historically, the city of Ibadan started in 1829 as a

war camp for the soldiers of Ife, Ijebu and Oyo after

having successfully destroyed the neighboring kingdom of

Owu. These soldiers and other inhabitants engage in the

informal economic pursuits of trading (in local commodities

and slaves), crafts and farming.

The year 1893 witnessed a new labour market

development in Ibadan, when the British Colonial government

took over the rulership of the city after having signed a

peace treaty with the representatives of the dwellers. From

then on, Ibadan started to emerge as a major administrative

and commercial centre. This is consequent upon the fact

that the city became the seat of government.

33

The labour market development became more pronounced

in the 1900’s when the railways was extended to Ibadan.

This heightened commercial activities as existing European

businesses rapidly expanded while new ones sprang up in

Gbagi, and Dugbe areas that serve as the Central Business

District (CBD) of European and Lebanese businesses. Among

other factors, the relative proximity of these areas of

Ibadan to the railway station influenced their evolution as

the central business district.

These businesses, in contradistinction to existing

informal sector enterprises, were formal in all respects,

as they were characterized by regular wage payment to

employees, and more disciplined work regulations that are

alien to the traditional work arrangement of the informal

sector. The duality ensuring from this development can best

be illustrated by the CBD of Gbagi and its environs and the

informal arrangement of informal businesses in Iba market

(Oja’ba) and other local indigenous market places.

The growth of modern sector business consequent upon

the extension of railways to Ibadan exercised a magnetic

pull on the other ethnic groups in Nigeria. The Hausas,

Fulanis, Ibos, Ibiobios, Edos among others, migrated in

large scale to Ibadan and settled in different parts of it.

The young and educated people from the satellite villages

as well as other Yoruba towns around Ibadan were not left

out in migrating to Ibadan to seek formal work. Majority of

these migrants who did not possess the requisite skills or

34

did not have the opportunity of obtaining formal wage work

in the government or private sector settled down to

informal self-employment in craft or trading activities.

The development of the urban labour market of Ibadan

received additional boost when in 1946 the city became the

headquarters of the defunct Western Region. Increased

employment opportunities in the civil service created an

increased impetus for migrants from the surrounding areas.

The resultant high urban population growth also led to

increased demand for informal sector services. Moreover,

demand for domestic servants by the in-coming expatriates

and the growing class of local elicits employed in the

private and public sectors, increased phenomenally.

Another factor leading to the labour market

development was the economic progress of the post-war

years. This period was marked by high prices for export

crops with a resultant increase in income to farmers. Most

of the farmers and traders (especially the produce buyers)

from the satellite villages and other areas invested their

profits in house-building and transport enterprises, among

other investment outlets. Also, the government increased

its spending and the multiplier effect of such increased

expenditure stimulated both private formal and informal

enterprises.

Thus, Ibadan, apart from Lagos, became not only the

largest but also the most cosmopolitan city in Yoruba land.

Its labour market, especially the formal sector, continued

35

to grow and attract labour from the surrounding areas. One

single most important factor for this development is the

fact that Ibadan has remained the seat of the government

since the advent of Colonial administration. This explains

why the city has highly developed social and economic

infrastructures, why federal and state government’s

institutions are concentrated there, and why many private

formal and informal sector enterprises are located within

the city.

In spite of the increasing importance of formal sector

establishments in the city, informal sector enterprises,

rather than being strangled, are growing in terms of

employment generation and value of capital employed. The

formal sector enterprises due to the labour displacing

technology employed in its production process, cannot

generate enough jobs for the burgeoning labour force with

little or no skill streaming to the urban labour market

(Callaway, 1973). With no social security payment

forthcoming from the government and little or no familial

support in urban destination, those with no formal sector

jobs do, more often than not, settle down to informal jobs.

Thus, rather than go into extinction with increased

formal sector jobs consequent upon the changing

circumstances affecting the labour market, the informal

sector of Ibadan is rather growing (Onyemelukwe, 1982).

However, the magnitude of its impact in recent times is

36

little known, and hence this study is embarked upon to

examine its role in the development process.

CHAPTER THREE

LITERATURE REVIEW

3.1:DEFINITIONAL ISSUESMost of the literature on informal sector activities

starts with the definition of the term ‘informal sector’.

This, we suppose, is due to the fact that the definition

adopted has a tremendous impact on the method of analysis

37

on one hand, and the policy prescription emanating from

such analysis, on the other hand (Compare I.L.O., 1972 with

Moser, 19789).

The term ‘informal sector’ (NFS) was introduced into

economic analyses by Hart (1973) in his study of employment

opportunities in urban areas of Ghana. His definition is

conterminous with the activities of the self-employed in

the traditional sector of urban areas. The sector is

unenumerated in government surveys and due to technology of

production, productivity is low. By his definition,

informal income opportunities might be legitimate or

illegitimate and that the term refers to activities or

roles and not to persons since an individual can be

operative in either or both of the sectors at the same

time.

The term ‘informal sector’ was also adopted, and in

fact, brought to prominence by the I.L.O’s (1972) study on

the Kenyan economy, having borrowed the term from Hart’s

earlier version of his paper presented in a seminar in

1971. The I.L.0.’s study, like Hart’s identified a host of

income generating activities outside the relatively small-

based urban formal sector (FS) and such activities are said

to be concentrated in the ‘unorganised’ sector of the

economy (see also Mazundar, 1976). Such activities are

reported to be dominated by recent migrants, the very

young, the very old, and women, who are unable to obtain

regular employment in the formal sector.

38

According to the I.L.O. group, the informal sector

enterprises are characterized by ease of entry, small-scale

and labour intensive operation. Furthermore, technology is

adapted and skills are acquired outside the formal school

system and they operate in highly competitive labour and

product markets. In his analysis, weeks (1975) adopts the

formal/informal dichotomy but regards the informal sector

as ‘unenumerated’ since it is usually not covered by the

governments’ surveys. Mazundar (1976) regards the sector as

‘unprotected’ because income and employment in the sector

lack appreciable degree of security. In other words,

employment in the sector is viewed as being casual rather

than permanent when compared to the protected (formal)

sector where the actions of trade union, government or of

both acting in concert ensure security of income and

employment.

The dualistic approach to the analysis of the analysis

of the urban labour market (ULMA) as explained above does

not satisfy the Marxian economists. Rather, they conceive

the ULMA to be made up of several subsectors e.g. self-and

wage-employment (at the extremes). In a broader

perspective, therefore, they content that it is more

realistic to think of a continuum of heterogeneous

activities in the labour market, stretching from stable-

wage-work’ to ‘true self –employment’. Between these

extremes are intermediate activities; that is, casual work,

which are equally important as there exists transition from

one to the other during the lifetime of a typical worker in39

the sector. Work in the informal sector is said to be both

unstable and highly dependent on the capitalist sector in

terms of, say, subcontracting or the supply of spares,

capital, and so on, at exploitative prices. Moreover,

whether in true self-employment or wage, informal sector

workers are said to lack security of employment and

stability of income as compared to those in formal

employment (Bromley and Gerry, 1979).

Davies (1979) sees the formal-informal dichotomy in

terms of the differences in the mode of production, which,

he argues, is the single most important factor responsible

for exploitation of the masses of petty producers (i.e. the

informal sector workers) by the relatively few capitalist

class of the formal sector. Thus, it is opined that the

latter thrives on the misery of the former. In this

respect, Moser (1978) was unequivocal in her conclusion

that:-

‘petty production is dependent on capitalismwhile at the same time the capitalist mode ofproduction benefits from the existence andrelative viability of petty production for themaintenance of a low level of subsistence anda low cost of labour reproduction …………Because of the dependent relationship …policysolution designed to assist the latter(informal sector) almost invariably end up bypromoting the later (formal sector).

40

3.2:SOME VIEWS OF THE URBAN INFORMAL SECTORAs stated above, the Marxian economists have a rather

pessimistic view of the informal sector in contributing to

development as it is argued that the dependent nature of

the sector will prevent its transition towards the growth

of small indigenous capitalism. However, most empirical

observations do not lend support to this view (Staley and

Morse, 1965).

The Marxian conclusion notwithstanding, the reality in

most developing nations since the early 60’s that the

formal economy cannot generate enough jobs for its

burgeoning labour force led to an upsurge of research into

the urban informal economy. These are supposed to evolve

policies aimed at: (i) increase absorption of labour force

to keep pace with its rate of growth; (ii) adoption of

technology that is appropriate to resource endowment in

developing countries; and (iii) development of human

resources through the spread of basic skills (Amin, 1981).

One of the pioneering research works on the potentials

of the urban informal sector is that of I.L.O. (1972)

carried out on the Kenyan economy. The result of the study

shows that the informal sector is dynamic and capable of

generating jobs and profits for reinvestment. Therefore,

the report advocates positive government approach towards

the promotion of efficiency in the sector.

41

However, diverse opinions in academic circle have been

expressed as to the credibility/justification or otherwise

of the I.L.O.’s conclusion and recommendations. For

example, Schmitz (1982) believes that the recommendation of

the report have political undertone rather than a result of

sound academic research. In contrast, other eulogized the

research findings which are highly optimistic of the

potentials of the informal sector’s role in providing

opportunities for employment and earnings in the urban

economies of developing nations (Weeks, 1975; Amin, 1981).

Others hold caution optimism of the sectors’ potential role

in development (Mazundar, 1976; Merrick, 1976, Guisinger

and Irfan, 1980); while others hold a pessimistic view

(Moser, 1978; Gerry, 1978, Davies, 1979).

Despite this diversity of opinions, research work on

the sector is growing. Sethuraman (1977) gave a summary

report of a seminar organized in Ghana from 27 March to 2

April, 1977. The purpose of the seminar was to provide a

forum for an exchange of information about the formal

sector with respect to its size, potentials in terms of

income and employment generation; problems and constraints;

the role of government in its development; and so on. This

was done with a view to putting forward necessary policy

recommendations that will assist the sector in combating

the problems facing its growth.

The report supported the view that the sector is a

source of employment generation despite government

42

indifference/neglect/hostility as the case may be in

different countries. Given this finding, a host of policy

recommendations that will enhance optimal allocation of

resources so as to increase the sector’s contribution to

development were highlighted.

3.3:PREVIOUS EMPIRICAL STUDIES ON NIGERIAI n Nigeria, few studies exist on the urban informal

economy and even the existing ones are not very recent as,

for example, the data used for the most recent one

(Fapohunda, 1985) were collected in 1976.

The first known works on the urban informal sector are

those of Callaway (1964, 1965, 1973). These studies were

based on a rather comprehensive survey of all the

indigenous craft enterprises and small industrialists as

well as their apprentices, employees and/or journeymen in

the city of Ibadan. The survey was conducted in 1961, in

which 5, 135 enterprises were covered and from these, 250

apprentices were selected for further questioning in other

to examine the process of skill acquisition through the

apprenticeship system (Callaway, 1964)17. The 1965 study

made use of the same data set, and examined among other

things: the dimensions of the indigenous industries in

Ibadan in the 60’s as well as the nature of employment and

training they provide for young primary and secondary

school leavers. In his 1973 study, the author’s efforts

were concentrated on 225 craft and small-scale enterprises

in the informal sector of Ibadan. The study highlighted

43

various important operational characteristics of informal

sector enterprises in manufacturing, services, building and

printing. His research findings show that the sector

contributes to employment and skill development of young

school leavers who would have otherwise remained

unemployed.

A survey of small-scale industries was undertaken by

the Industrial Research unit of Ife (now Centre for

Industrial Research and Development of Obafemi Awolowo

University, Ile – Ife) in 1972. In the then Western State

(now Oyo, Ogun and Ondo States) 13,592 industrial units

were covered in the 24 divisional headquarters of the

state, while 1,673 industrial units were covered in 25

other towns and villages.

Originally, the industrial survey of the Unit was not

planned for informal sector enterprises alone but for all

small-scale industries in general. However, by the

definition of small-scale industry adopted, which, industry

adopted, which is:

‘one whose total assets in capital equipment,plant and working capital are less than$25,000 (i.e. N50,000) and employment fewerthan 50 fulltime workers. It includes afactory or a non-factory establishment. It maybe a household, a cottage, a craft or afactory industry. It may or may not use motivepower’ (p. vi).

44

One can then infer that the survey includes a reasonable

number of informal sector enterprises.

The study is a comprehensive survey of every

industrial activity that was willing to cooperate with

field workers. The unit was able to achieve a high response

rate of 75 per cent and this success was as a result of

wide publicity engaged in before and during the data

collection exercise. The result of the survey shows that

about 52 per cent of the enterprises were engaged in

tailoring, 10 per cent in carpentry while 5 per cent were

in gold-smithing. Other significant ones are motor-

repairing 4.8 per cent; bicycle and shoe- making, 4.20 per

cent. It is however interesting to learn from the survey

report that the structure of small-scale industries is the

same in both urban and rural centre. It was also reported

that the majority of the industries covered in the survey

render services rather than actually manufacturing.

However, this survey did not cover operators in the

wholesale and retail trades. This subsector of the informal

sector is too significant to be neglected in small-scale

industrial survey.

Adepoju (1975)47 conducted a survey on the non-formal

vocational training in the small-scale industries of

Western Nigeria. His study focuses on the mode of skill

acquisition of the urban youths in the formal sector jobs.

Using part of the data collected by Aluko et. all. (1972)46,

the author was able to find out that the apprenticeship

system is an important mode of vocational training for the45

urban informal small-scale establishments. It is an

alternative to unemployment in cities and farm-work in the

villages. The apprentices, as revealed by the study, were

of low education, young, have low preference for

traditional crafts like pottery, dyeing etc., and quite a

number of them are recent migrants to the cities. The study

also shows the importance of the informal economy in skill

development and labour absorption.

However, one wonders why the researcher did not include

Ibadan, the capital city of Western State which is the

focus of his study, in his analysis.

Using 1976 cross-section data on 2,074 informal sector

enterprises of Lagos, Fapohunda (1985) critically examined

the factor affecting the size and structure of enterprises

in terms of income and employment generation, the extent of

linkages between enterprises and possible constraints

affecting growth. The sampling procedure adopted in the

study is the 2-stage random sampling technique, that is, a

minimum of ten enterprises were selected from each of the

delimited 200 enumerated areas. The analysis of data

revealed that the sector provides a wide range of income

opportunities for those not having the skill and/or the

opportunity of entering the wage formal sector enterprises.

In terms of sample size used, the study is considered

to be an improvement over Callaway’s (1973) that studies

225 enterprises in Ibadan. However, we have a reservation

as to how 1976 data used for the study published in 1985

46

(without any specified modification to the data) could have

possibly revealed present trend in the sector. Also, the

International Standard of Industrial Classification (ISIC)

adopted for the study may be suitable for formal sector

large-scale production units, but its adoption for small

units in the formal sector may not be very adequate. This

is because ISIC does not bring into sharp focus the type of

activities grouped together under the international

classifications of ‘Paper and Paper products’,

‘communications’, ‘utilities’ and ‘Inadequately Defined’,

among others. However, the fact that the study was

conducted on behalf of an International Organization

(I.L.O.) might have motivated the author to adopt ISIC as

this makes international comparison possible.

Mabogunje and Filani (1984) conducted a study of the

informal sector in the city Kano. Like this study on

Ibadan, the Kano study concentrated more on NFS workers in

the manufacturing and technical services enterprises. It

was reported that the 505 enterprises sampled employed a

total of 903 persons including the entrepreneurs. This

gives an average of 1.8 persons per enterprise.

Like any other NFS enterprises, NFS businesses in Kano

were set up mainly to provide employment and income

opportunities for the owners. This is shown by the fact

that about 67 percent of the enterprise did not have any

other worker apart from the owner.

47

In terms of income, it was reported that average

monthly earning of Kano entrepreneurs were higher relative

to those in Lagos. The earnings also compare favorably with

formal sector earnings.

More striking about the Kano study is the evidence

shown by the study that recent migrants had put together

enough capital to establish own enterprises and are earning

modest level of income not lower than the minimum wage

Informal sector has thus contributed to social mobility of

this group given their pre-migration economic conditions.

At first sight, the study gives an impression that the

preponderance of NFS labour force is males and natives of

Kano. However, one needs to take this with caution given

that the study‘s sampled enterprises consists mainly of

manufacturing and technical services where males and

natives are likely to be dominant. A proportional

representation of activity like trading would have shown a

different picture of the sex distribution and migration

status of the NFS labour force.

However, evidences from both Kano and Lagos studies

suggest a substantial employment and income opportunities

in the urban informal sector of Nigeria.

3.4:EMPIRICAL STUDIES ON OTHER DEVELOPING

COUNTRIES

48

In spite of the paucity of research on the NFS

activities in Nigeria, research into employment and

earnings potential or urban informal sector in other

developing countries are numerous. The Kenya study,

(I.L.O., 1972) reports that the sector is dynamic and

capable of generating jobs and profits for reinvestment.

According to the report:

“the bulk of employment in the formal sector,far from being marginally Productive, iseconomically efficient and profit making”.

In line with this conclusion, Sethuraman (1984, p. 35)

maintained that NFS activities are not only profitable, but

they have been reported in several developing countries

(like Kenya, Togo and India, among others) to be generating

surplus even when they are known to be operating within

hostile policy environment. Moreover, such activities have

been shown to be capable of generating more employment and

output for a given level of investment than the FS

enterprises.

A follow-up to the I.L.O.‘s study on Kenya was carried

out by House (1984)51 and its results support those of the

I.L.O. ‘s with minor qualifications. Instead of presenting

a generalized view of the urban informal sector, House

identified two sub-sectors made up of a reservoir of

dynamic entrepreneurs with adequate and growing level of

profit, and second; the ‘community of the poor’ eking out

meager existence in the sector. House, however, did not

offer possible explanations for the observed state of

49

abject poverty of the members of the ‘community of the

poor’. What readily comes to mind as an important factor

influencing the level of living of the ‘community’ is their

uncommitted state within the NFS of the ULMA 52. That this

argument is with some merit can be supported by House’s own

definition of the ‘community of the poor’. They are those

“attached to the city in order to gainentrance to employment in the formal sector.Because they view their current plight astemporary, they maintain hope of admission tothe protected sector” (p. 380).

It can then be argued that their uncommitted state in the

nefs sector or ULMA is a possible explanation for their

living condition and not necessarily because they are

located in the NFS rather than FS.

The findings of Guisinger and Irfan (1980) in their

study of urban informal sector in Pakistan lends support to

the above view. Using the family poverty index 53 as a

benchmark, the study concludes that the NFS and FS do not

seem to be significantly different in terms of the

proportion of poor workers in the two sectors.

Rather than using an aggregate analysis of all urban

NFS labour force, Amin (1981) 12 disaggregate total

employment within the urban NFS of Dhaka City (Bangladesh)

into two categories: the self-employed and the employee.

His study shows that the self-employed enjoy better

economic reward especially in terms of earnings, employment

stability and enhanced scope for upward mobility. For

50

example, not less than a third of all enterprises studied

are reported to have considerable growth potentials as

compared to about a quarter that can be considered

marginal. The others are said to be making at least an

average living within the sector.

Given the rapid labour force growth in most cities of

developing countries it is fast becoming a mirage that

urban formal economy can provide all the required jobs. In

fact in most countries, formal sector jobs are not only

stagnant but are declining. In contrast, evidence in

Lusaka, Scott (1985) reports that the NFS provides self-

employment as marketers, craftsmen, manufacturers and shop

owners for many of the labour force entrants and re-

entrants. These are people that have little or no hope of

being given the bleak employment situation in the formal

economy.

In their study of employment status of migrants into

the labour market of the city of Ludhiana in the Indian

Punjad, Oberai and Singh (1984 p.515) show that one third

are own account workers in the informal economy. Similarly,

Sethuraman (1985) discovered that over 50 per cent of the

non-agricultural workforce are in the informal economy of

urban Indonesia. He maintained that such NFS, units played

a significant role in labour absorption process.

Also, in terms of earning, the study corroborates

others from other countries that income from such urban

informal employment are comparable to those in the formal

51

economy in Indonesia. However, a good number are earning a

very low level of income.

Thus, given its importance in labour absorption and

income opportunities, Sethuraman puts forward a host of

policy prescriptions that are capable of improving the

performance of the sector. Such include more government

involvement in the sector as well as provision of credit to

the entrepreneurs.

The informal sector in Manila, as in any other third

world city, exhibits the preponderance of trading

activities (being at least 60 per cent) relative to others.

A stratified random sampling procedure adopted by Jurado

et. Al. (1984) for the Manila NFS survey led to a heavy

concentration of the sample enterprises in trade activity

(71%). Findings from the subsample of the Manufacturing

(MS) enterprise show that wages are low compared to both

the FS enterprises and national minimum wage. Such low wage

is particularly worse for female members of the labour

force in the NFS.

One important feature of the informal manufacturing

enterprises of Manila is the importance of capital and raw

material recycling among entrepreneurs. This is one of the

NFS approach to solving the problem of capital and raw

material inadequacy. Of equal importance is the efficiency

of these enterprises. For the same amount of investment, it

is revealed that informal manufacturing enterprises

52

generate more employment and value-added as compared to

formal sector manufacturing concerns.

In Freetown, similar impressive report of NFS was

reported by Fowler (1984) 58 in terms of income and

employment generation as well as innovative and adaptive

skills of the entrepreneur. For example, most of the

capital equipment were locally manufactured and are

circulated within the sector, thereby easing capital

constraints. Moreover, rather than being frustrated as

hypothesized by dependency theorists, workers (especially

the self-employed) are reported to be living impressive

social and job mobility. It is also reported that such

phenomenon is dominant among migrants who constitute the

bulk (80 per cent) of the entrepreneurs.

The general trend of argument with respect to

employment and earnings in the urban informal sector seem

to be in two directions. The conventional economic approach

which recognizes the importance of the NFS in terms of its

ability to provide considerable employment and income

opportunities despite some problems within the sector.

To these class of researchers:-

“the informal sector’s role is too importantto be ignored in the prevailing socio-economic conditions…… (as it is) helping toabsorb the growing urban labour force, puttingmaterial resources to their maximum use,adapting a technology that responds to factoravailability and over which the users have

53

command, providing some basic needs ataffordable prices”. (Amin, 1981, p. 108).

The opposite view which is rather based on dependency

theory as postulated by Marxian economists, views the

sector as occupying a subordinate position in relation to

the formal sector and therefore, its growth potential in

terms of employment and earnings is hindered. Vale Souza,

etl al. (1988) among others, using data collected in a

sample survey of Greater Recife argue that hindrances to

growth arises from the disadvantaged position of the

enterprises in NFS relative to those in FS. In line with

this argument, the question of the NFS operators subjecting

themselves to “self-exploitation” rather than being

exploited, do not arise (Amin , 1981). This is said to

arise as a result of several factors hindering growth of

NFS enterprises. These are:

(i) Lack of access to government assistance;

(ii) Price and other constraints in the input market;

(iii) Subcontracting arrangements which severely

limit the scope for setting their own prices

(Vale Souza, et. Al. 1988).

Similar arguments have been put forward, at varying

levels of sophistication, by Bose (1974), Beinefeld (1975),

Moser (1978), Bromley and Gerry (1979); and Gerry (1978),

among others.

The above-mentioned constraints, notwithstanding, not

all studies have supported the dependency theory claim. For

54

example, using multiple regression analysis, House (1984)

established that subcontracting arrangement (an element of

dependence of informal sector enterprises as it

significantly affected the profit level of the NFS

entrepreneur in a positive direction. Thus, reacting to the

exploitative theory, House, among others, concludes that:

“Far from being exploitative …. Linkages withthe formal sector appears to succeed inraising the income of subcontract recipientsabove those of non-recipients” (p. 290).

It is our attention to subject these opposing

theoretical positions to empirical test using data

collected from the urban informal manufacturing and

technical services enterprises in Ibadan.

CHAPTER FOUR

CONCEPTUAL FRAMEWORK AND METHODOLOGY

4.1 CONCEPTUAL FRAMEWORK

4.1.1 The Urban Labour Market (ULMA)

55

Much ink has been split on whether the urban labour

market should necessarily be dichotomized into the formal

and informal segments. While various authors support such

dichotomization (I.L.O., 1972; Mazundar, 1976; Sethuraman,

1976) yet, others have contested such dual classification

(Moser, 1978; Gerry, 1978). Thus, the latter group

perceived the market as a continuum of heterogenous

activities ranging from stable wage work to true self

employment at the entremes. Within these extremes exist

myriads of other activities (Bromley and Gerry, 1976).

Rejecting this contention, Mazundar, (1976) presents two

reasons:

(a)“whether the relevant characteristics represent a

continuum or not is itself a subject of research, and,

if we are to go by casual empiricism, then certainly the

view that the ‘formal’ sector is separated sharply in

some way from the rest of the urban market is more valid

than the contrary one for many LDC urban markets.

(b)Even if the difference between two types of employment

is one of degree rather than of kind; so long as it is

of marked degree the methodology of economics can be

applied successfully by operating with models which

assumes that the market is split into two different

sectors”.

Akin to the above, evidence s of dualism in the mode

of production and employment predominate in urban

economies. Thus it is not uncommon to have well-organised

56

enterprises using capital-intensive production method and

small-scale self-employment, unorganized and labour

intensive activities to exist side by side in the urban

labour market. Evidences from weeks (1975), Hart (1973)

among others support this view. Thus, activities that are

in the unorganized sector and fall outside both the

encouragement and the data-collection activities of the

government are said to belong to the informal sector

(Sethuraman, 1984, p. 11; ILO, 1972, p. 5). On the

contrary, enterprises that are covered by the data-

collection activities of the government, where jobs and

employment conditions are protected and have access to the

organized product and factor markets are said to be in the

formal sector (FS) (Amin, 1981, p. 11; I.L.O, 1972, p. 6).

The nature of protection of jobs and wages in the FS by

government and unions is an important reason for market

segmentation (and possibly distortion), in the urban labour

market and hence the failure of the market to equalize the

marginal social productivity of homogenous labour operating

in different sectors of the market. The union and

government attitudes in the ULMA have contributed to the

observed segmentation in the market. In such a situation,

human capital endowments may not be equally rewarded as a

result of operating in different sectors of employment

within the labour market.

The powers of union in pushing up wages in the FS are

usually influenced by (a) the elasticity of demand for

labour in a particular industry; (b) the size of the57

protected sector relative to the rest of the ULMA, and (c)

the strength and militancy of the union (Berry and Sabot,

1978, p. 1207). Apart from these institutional factors,

these are other factors that can explain the high non-

market clearing wage in the FS. First, for firms to attract

workers committed to organizational goal on a long term

basis, high wage need be offered. This is because low wage

and effective worker commitment are mutually exclusive.

Thus, to induce a more permanent labour, family migrants

having higher supply price (relative to individual migrants

retaining rural ties) need be enticed with higher wage.

Second, even under free market situation, the protected

high wage might still persist in the formal sector. This is

due to the observed direct relationship between the wage

level and the efficiency of a worker. In this respect,

Mazundar (1976 p. 656) maintain that:

“up to a certain point, an icrease in the wageper worker increases efficiency more thanproportionately to the increase in the wage,so that wage cost per unit of work suppliedfalls. After a point, of course, the increasein wage will lead to a less than proportionateincrease in efficiency, and there will be noincentive for management to set the wage levelfor an individual worker higher than thislevel. Thus even in the presence of an excesssupply of labour it will not pay management toset the wage at the lowest level possible. Theestablishment wage will be that which ensurethe minimum wage cost per unit of effortsupplied”.

58

Formal sector firms employing capital intensive modern

technology pay such higher wages to increase and sustain

efficiency and secure worker attachment to the firm. Such

stable body of worker is able to acquire more firm-specific

human capital through learning by doing, and this enhances

efficiency and productivity.

Even in the presence of surplus labour in the ULMA,

such wages are not lowered; rather, firms engage in flating

job requirements in order to select the relatively highly

qualified employees. Others not possessing the requisite

skill and education and therefore cannot cross the entry

barrier are ‘bumped’ out (of the FS) and are therefore

constrained either to operate in the urban NFS, or to join

the queue of the urban unemployed in order to invest

intensively in urban FS job search (Fields, 1975, p. 911)

if the latter course of action is taken, the dual effect of

full-time investment in information and intensive job

search enhances the probability of being employed in the FS

at a later period. However, these groups of the unemployed

are those that are confident of means of support either

through previous savings, familiar support or both. Without

this, full-time investment in job search is not a probable

phenomenon in LDCS due to prevailing level of poverty of

most ULMA operators (Udall and Sinclair, 19826; Blaug,

1974a).

On the supply side, two important ULMA signals to the

surrounding areas encourage urban-ward migration.

59

Additional job opening in the FS, and the demonstration

effect of the ‘success’ of NFS workers who migrated few

years before. In other words, operators in both sectors

send signals back to their origin and these encourage their

peers to migrate.

Apart from rural-urban migration, another important

source of urban labour supply is the rate of natural growth

of the cities themselves with the resultant effect of high

labour force growth. Not less than 60 per cent of urban

population growth is accounted for by natural increase

while the rest are migrants from the surrounding areas

(Population Report, 1983).

The ULMA labour force seeking NFS employment can be

categorized into two broad classes. The first group are

those with some education who initially desired FS

employment but have not succeeded. To support themselves

while prospecting for FS job, they might enter the NFS with

a hope of moving to the FS later. The second group are

those that are either primarily interested in taking up a

job in the NFS or those that have readjusted their

previous unrealistically sanquine labour market expectation

and have later decided to avail themselves

of the income opportunities of the NFS. Most of those in

the latter group are usually interested in acquiring skill

through the apprenticeship system with a view to owning an

enterprises after training.

60

Thus, entrants into the urban NFS, initially can

either be committed (e.g. the second group or uncommitted

(e.g. the first group). In subsequent periods, movements

between committed (C) and uncommitted (U) states are not

uncommon. For example, a person in C state in the NFS in

period one may later be enticed to a steady high wage

employment in the FS in another period, and vice versa.

Also, movements from the FS to the NFS are not uncommon and

workers in such case, more often than not, do occupy the C-

state. However, exception to this rule might occur with

those involuntarily laid off from FS job but are still

interested in re-entering the FS (Figure 1).

In the manufacturing and technical service (MATS)

subsector of the NFS, those that are likely to predominate

in the C state are those with some skill. Having been

trained either through the apprenticeship system or in

their previous formal sector jobs, and have established or

are looking forward to establishing own enterprises,

incentives towards leaving are dampened. They are likely to

stay on until the left (L) state is reached. For those in

the C- state, the L state is reached either through

voluntary withdrawal due to old age or through involuntary

withdrawal as a result of either infirmity or death.

Majority of those in the U-state are more likely as

opportunity presents itself to move to the FS to take up

the much sought-after job, or failing that, go back to

61

Left

UncommittedCommitted

school to acquire further literacy or technical skill that

can enhance their chances of entering the FS.

However, it should be stressed that movements

discussed above is not peculiar to NFS only. Within the

ULMA, dynamic relations exist which ultimately affect

labour allocation. Assuming the ULMA can be neatly

compartmentalized into the FS and NFS then the dynamic

relations as shown in figure 2 below are possible. Supply

of labour to the urban labour market (ULMA) takes place

from the surrounding areas (SA) and from within ULMA

itself. Those from the SA can either enter the FS or the

NFS initially.

Fig.1: MOVEMENTS WITHIN THE URBAN INFORMAL SECTOR

Entrants/Re-Entrants

Movements within the sectors are possible while some

may withdraw from ULMA for further education. These

62

FORMALINFORMAL

URBAN LABOUR MARKETS

EDUCATION

movements between and within subsectors of ULMA and

education sector continue until wastage occurs.

Thus, rather than being static, movements of labour

within and between sectors of ULMA do take place and such

labour allocations and reallocations in line with labour

market signals (real or anticipated) go on constantly in

the ULMA. The resultant effect (as a result of the

structure of FS and NFS) is a downwardly rigid high wage

above the market clearing level in the former; and a

relatively low but market-clearing earning in the latter

which is also characterized by a not-too-difficult entry

and high rate of turnover.

Thus, contrary to Todaro’s hypothesis that entrants

into ULMA are attracted by high-wage FS job, our model

postulates that income opportunities within the NFS itself

is an important source of attraction to workers who may or

may not eventually remain in the sector for a considerable

length of time (I.L.O., 1972, p. 227).

Fig. 2: DYNAMICS OF FORMAL-INFORMAL RELATIONS WITHIN URBAN LABOUR MARKET

FROM SURROUNDING AREAS

63

WASTE

4.1.2 Factors Affecting Entry into the MATS Subsectorof Urban Informal Sector

An important distinguishing factor between the small-

scale enterprises and the NFS enterprises is the mode of

production adopted. According to Sethuraman (1984, p. 17),

most, if not all, of the small-scale enterprises use a mode

of production somewhat similar to that in the FS

enterprises, albeit, on a relatively smaller scale.

However, the NFS enterprises due to shortage of capital use

local or adapted technology and are established primarily

to create employment for their owners (and others if

possible) rather than an opportunity for investment

motivated by short-run profit motive.

Thus, the level of capital, educational attainment and

skill of the entrepreneur are likely to be low in the NFS

compared with the FS.

In contrast to other operators in the NFS, operators in

the MATSs subsector need some level of technical skill

usually acquired through the apprenticeship system or other

64

formal mode of training. On completion of such training

these operators may decide to:

(i)Set up own enterprise immediately if parents/guardians

can afford to provide the necessary initial capital.

(ii) Become journeyman with his master or other master to

be able to raise initial capital for setting up own

enterprise in case parent/guardian are not able to

finance this;

(iii) Secure formal-sector job in the technical or sub-

technical category;

(iv) Engage in casual employment to raise capital.

(v)Return to school (vocational or literary) to obtain

formal education to enhance entry into FS.

These trained workers are much more likely to settle

down as enterprise owners in the FS. The hypothesized mode

of skill development and entrepreneurship development in

the NFS, MATS subsector are depicted in figure 3.

Entry into the MATS subsector for the purpose of skill

acquisition and eventual settlement as enterprise owners

can be posited to be influenced by several factors. These

factors can either be voluntary or involuntary. Voluntary

factors are: the influence of culture

and individual’s response to economic motivation.

Involuntary factors include the influence of education and

the state of the economy, that is, whether the economy is

buoyant or going through a recession/depression. The line

diagram in figure 4 depicts each of these factors as

65

JOURNEYMANFORMAL / INFORMAL WAGE EMPLOYMENT

MASTER / ENTERPRISE OWNER

APPRENTICESHIP FORMAL MODE OF TRAINING

EDUCATIONECONOMIC SITUATION:

NOT BOUYANT

ECONOMIC SITUATION BOUYANT

ENTREPRENEURSHIPDEVELOPMENT

(+)

(+) or (-)

(-) (+)

CULTURE

RESPONSE TO MOTIVATION

(+)

(+)

(+)

(-)

(+)

(-)

Fig. 3: SKILL FORMATION AND ENTREPRENEURSHIPDEVELOPMENT

PROCESS IN THE URBAN INFORMAL SECTOR

Fig. 4: FACTORS INFLUENCING ENTREPRENEURSHIP DEVELOPMENT INTHECRAFT SECTOR

66

Well as our a priori expectation regarding its direction of

influence on entrepreneurship development.

Influence of Culture

Within traditional family structure, the culture of

passing family skills to descendants is widely prevalent.

Thus, families which are known for hunting, carving,

weaving, blacksmithing, native medicine and so on, are

culture-bound to pass such skills to their sons or

daughters who will in turn pass it to their descendants.

This cultural influence is prevalent among rural migrants

and those that were born in the sector and have low

education. A priori, we expect cultural influence to have

positive, though very low, impact on entrepreneurship

development. We expect it to be low because the prevalence

of formal education has a negative impact on it, making

fathers to prefer their sons/daughters to be well-educated

and to go into the formal sector. However, those with

little or no education will still be influenced by cultural

attitude towards entrepreneurship in the informal sector.

Education

Education enhances the opportunity of an individual to

participate in the formal high-productivity sector of the

67

economy. Those with little or no formal education (in an

economy where the rate of growth of labour force exceeds

the rate of job creation) are ‘bumped’ out of the skilled

labour market and are forced either to remain in the formal

sector as applicants or move into the informal sector. As

the educational attainment of applicants increases in the

aggregate, employers tend to inflate educational

requirement for jobs. This worsens the chance of those that

are less educated into being absorbed into the high-wage

formal sector. Given this situation therefore, an applicant

with a relatively low education in the urban economy has

the following options:-

(i) Migrate backwards to the rural sector and get an

agricultural occupation;

(ii) Continue in urban sector job search until a job is

eventually found;

(iii) Engage in urban informal sector activity either

as an employee or an apprentice with a view to owning

an enterprise in the future.

Option (i) is probable but not highly likely as rural

immigrants will be prepared to remain in the urban economy

at all costs given the deplorable conditions of rural life.

Moreover, these people aim at maximizing lifetime utility

by participating in the urban economy. Option (ii) is also

not likely. This is because urban immigrants are often too

poor to afford the luxury of full-time unemployment for a

long time (Blaug, M. 1974a) 65 . Option (iii) seems, the

68

most likely. Those who intend to own their enterprises in

the future, in most cases, get apprenticed to a master for

training while a host of others engage in petty trading or

obtain informal wage employment.

Thus, we expect a priori that educational attainment

and entrepreneurship development in the informal craft

sector to be inversely related. That is to say, the higher

the formal educational attainment of an individual, the

less likely it is for that individual to be motivated

towards entrepreneurship in the informal sector (Aluko,

1966)67. This expectation seems reasonable given the kind of

education that creates aversion for manual work that is

prevalent in developing countries. Moreover, opportunity

for entering the desired highly productive and protected

formal sector increases with education.

Response to Motivation

Motivation towards entrepreneurship may arise from the

independence and pride of ownership associated with owning

one’s enterprise. Also, motivation may result from the

possibility of maximizing life-time income stream in urban

self-employment. Those that are likely to come under this

influence are:

(i) Rural migrants from the traditional sector with little

or no education who are not culture-induced but are

probably influenced by the demonstration effect of

69

home-coming of friends and relatives. This class of

people had previously migrated to the cities to become

enterprise-owners after a few years of apprenticeship.

(ii) Those who initially, with low education, accepted the

urban formal wage employment as clerical workers or

messengers, but were later trained on-the-job as

artisans by their employers.

(iii) Those trained through the apprenticeship system,

but had to work as journeymen or get formal wage

employment in order to obtain initial capital.

Educational attainment of these classes of people is

low, and if given the chance to receive further education,

their orientation will shift from informal sector

employment to formal wage employment. Hence the negative

relationship postulated between education and response to

motivation of becoming an entrepreneur in the urban

informal sector (Fig. 4).

For those in group (i), their interest was stimulated

by those who went into the informal sector before them who

are now ‘successful’. Thus, wanting to be like

predecessors, these youths migrate to the urban sector and

get apprenticed to masters, and all other things remaining

equal, set up own-enterprises after training. Those in

groups (ii) and (iii) are motivated by the ‘successes of

their counterparts who have set up their own businesses. In

most cases, these people maintain a dual role in the urban

labour market. That is, they work for wages in a firm or

70

for a master, and engage in part-time jobs after

office/workshops hours in the informal sector. Their

earnings from such part-time work encourage them to be

thinking of setting up on their account and be proud

enterprise owners free from control associated with their

current employment. Those that are risk-loving tend to give

up current employment even before reaching retirement age

while those that are risk-average may not likely set up

their own enterprises until after retirement from current

employment.

Thus, we expect a positive relationship between

motivations identified and entrepreneurship development.

Economic Situation

Economic situation in terms of whether the economy is

buoyant or going through a recession/depression is expected

to be an important factor in entrepreneurship development.

In each period of boom and depression, income opportunities

open to individual economic unit differs at different costs

and benefits. During a boom, economic activities are

stimulated and employment and income opportunities abound

in both the formal and informal sub-sectors of the urban

labour market. Urban formal jobs are available for many

applicants that are qualified by previous educational

attainment. Also, motivation towards indigenous

entrepreneurship increases for those not qualified to enter

the formal sector jobs.

71

However, during a recession formal urban job creation

may be zero or even negative. Most migrants to the city are

not likely to be employed in the formal sector while there

may be retrenchments and lay-offs in the sector at the same

time. Thus, having no other choice, many of the rural

migrants and those unemployed in the city may be forced to

be apprenticed to a master in the informal with a view to

owning enterprises of theirs after training. Thus, during

economic recession/depression, we expect, a priori, a

strong incentive towards entrepreneurship development in

the informal sector.

We want to mention, albeit briefly, that these factors

are not totally independent of one another. Rather, they

exert influence on each other. As shown in Fig.4, culture

is influenced by education while economic situation exerts

an influence on education and response to motivation. The

directions of influence and their possible impacts are

indicated by arrows and signs (‘+’) for negative impacts

respectively.

4.1.3: Urban Labour Demand and Supply Analysis

Urban labour market analysis attempting to suggest

policy measures to deal with the chronic unemployment

problems in developing nations usually starts with Todaro’s

(1969) migration model. This is a two-sector model dividing

the economy into the rural/traditional and the

modern/industrial sectors. Migration is thus postulated to

be an economic decision taken on a rational basis by the

72

individual migrate s in order to take advantage of better

income opportunity prevailing at the destination. Thus, it

is postulated that migration depends on: (a) the difference

in wages or earnings between areas of destination and

origin, and (b) the chances of finding a job at the

destination. The products of (a) and (b) above gives the

expected gains from migration and an individual will want

to maximize such gains over his lifetime.

The prevalence of wide differential between urban and

rural wage has exacerbated rural-urban migration in

developing nations. This explains the observed rapid urban

growth and urbanization in these nations. Such high rate of

urban growth with its concomitant high rate of urban growth

of labour force compounds employment problem in an economy

where formal-sector employment is low and even negative in

some cases (Todaro, 1989).

In the original formulation of Todaro’s two-sector

model, it is assumed that those that do not have the skill

or the opportunity of being employed in the formal sector

remain openly unemployed. However, a reformulation of the

model recognizes the importance of the informal sector as a

temporary staging post for recent migrants pending the time

they are able to get the desired formal sector job (Harris

and Todaro, 1970; Harberger, 1971).

The informal sector in this situation performs labour

market clearing function in a situation where the

infinitely elastic migration-fed labour supply exceeds the

73

demand in the high wage formal sector. Thus, rather than

remain unemployed, new entrants into the labour market get

engaged in any informal sector jobs such as hawking,

street-vending, shoe-shining and getting apprenticed to

masters in trades like motor-vehicle mechanic, carpentry,

barbing, welding and so on. It is still a controversy in

economic literature whether these migrants merely take up

informal sector in order to invest in formal sector job

search or whether they are permanently settled in the

sector (Banerjee, 1983). For the Nigerian situation, this

has to be empirically verified in this study.

No matter their location in the urban labour market,

it has been reported that migrants usually benefit by their

moves and make more money than before, even at unskilled

jobs (Population Report, 1983). The net effect of this is

to induce migrants peer group in the village to migrate and

the tendency is for this trend to continue as long as urban

bias in regional development and job creation continue

unabated. The resultant increase in urban labour supply

vis-a- vis the increased inability of modern industries to

generate enough jobs, has given rise to high rate of urban

open unemployment.

Economic literature is replete with the analysis of

unemployment since economics as a discipline is concerned

with optimal allocation of scarce resources in a world of

unlimited ends. Therefore some macro-economic theories of

unemployment will be reviewed in order to see how such

74

theories help in explaining and prescribing right policy

measures for the chronic involuntary unemployment in

developing nations.

Macro-Economic Theories of Unemployment

The classical employment analysis was based on the

Walrasian general equilibrium model in which price

flexibility is the key factor in the correction of any

labour market disequilibrium. The flexible ruling market

price also helps to maintain the system-wide market

clearing equilibrium.

Thus, in the labour market, shortages or surplus of

labour is dealt with by wage movement: the wage falling

below the equilibrium to mop up excess labour supply, and

rising above the equilibrium when there are shortages. By

so doing, the incidence of involuntary unemployment is

removed from the classical labour market. However, at the

ruling market clearing wage, unemployment that can exist

are the voluntary and frictional types.

Voluntary unemployment manifests in the economy when,

due to market imperfections or institutional rigidities

(e.g. union influence, minimum wage legislation), workers

are reluctant to take up jobs at the going wage rate.

Frictional unemployment arises as a result of the

imperfection of the market to match labour supply with

demand instantaneously. Imperfections in knowledge and

75

mobility are the chief causes and it is usually of short

duration.

In the classical world of flexible wages, chronic

involuntary unemployment is a misnormal. This is because

the self-regulating character of the economy through

flexible prices can always ensure that no involuntary

unemployment exists. The level of market clearing wage thus

determines the level of employment in the economy.

In Keyne’s analysis, the classical view of wage

flexibility and its acceptance by labour was rejected.

Keynes assumed that workers will not be willing to accept

wage cut to secure more employment even if they will accept

reduction in real wage brought about by rising prices at

constant money wage. His weight of analysis rests on the

level of aggregate demand in the economy.

Given the marginal productivity (i.e. demand) curve

for labour, and the supply intersecting it at a point E

(Figure 5), a fall in aggregate demand will manifest itself

in the labour market in form of reduced demand for

services. Thus, the demand for labour moves up the labour

demand curve to a higher real wage W2 from equilibrium level

of W1. At W

2,

Fig. 5: DEMAND AND SUPPLY CURVES FOR LABOUR

Real Wage D S

L L

76

W2 A

B

W1 E

Employment O Na Ne N

Source: Hughes J.J. $ Perlmon. R. (1984) p.54.

Excess labour supply equal to AB results and this gives to

involuntary unemployment. Full employment will only be

restored through an increase in aggregate demand and not

through the classical prescription of failing money wages.

This is because, Keynes belived wages to be inflexible in

the downward direction, as workers through their union will

resist wage cut. Thus, the combined influences of union

militancy, worker’s obstinacy in resisting money wage cut

and the fact that product price might fall in the same

proportion with wage cut thereby leaving real wage

unchanged; might make classical predictions unrealistic.

Instead of relying on wage flexibility, Keynes

recommended fiscal policy measures in form of, say,

government deficit budgeting spent on public works. This

77

has the potentials of increasing aggregate demand and

hence, removing the incidence of involuntary unemployment.

For a developed economy, Keynes remedial policy for

removing involuntary unemployment might be applicable but

its potency for solving unemployment problem in developing

countries are rather very doubtful for two reasons.

First, the nature of unemployment in these countries

differ from that in developed nations. While developing

countries suffer from chronic unemployment for a long

period of time due to either deficiency or inefficient use

of capital and other cooperant factors, unemployment in

developed nations is cyclical resulting from low level of

aggregate demand. Thus unemployment in poor nations might

not be receptive wholly to demand-augmenting policies due

to structural rigidities especially with regards to the

supply of output (Jhingan, 1984) . As a result, increases

in demands will only lead to rising product prices rather

than increasing employment.

Second, Keynes’ policy prescription relates to open

unemployment rather than disguised unemployment which has

assumed enormous dimension in developing nations. However,

this did not receive attention in his analysis since it is

not an important phenomenon in developed nations.

In spite of these, however, Keynes analysis reflects

labour market behaviours in developing nations. For

example, in the formal wage sector of the economy, the

78

market is not usually cleared. This results from too high a

wage level which is policy, rather than market-determined.

Moreover, the actions of unions and government minimum wage

laws help to

keep wages above the market clearing level. In most cases,

this wage does not decline appreciably despite the usually

long queue of the unemployed willing to take up formal

sector jobs. However, with time, workers who are not able

to get formal sector job usually lower their expectations

by taking up informal employment at the going level of

earnings.

4.1.4 Employment Condition in the Urban Informal

Sector

Having reviewed the macroeconomic theories of

employment, it should be emphasized that urban informal

sector is characterized by underemployment rather than open

unemployment. For a good number of jobless educated youths,

temporary engagement in the informal employment may be a

preferred option rather than be openly unemployed. This

situation can be described as a preference for search –

underemployment with a view to investing in urban formal

information and vacancies while holding temporarily to

informal employment.

79

This possibility seems reasonable for the unemployed

in developing countries where there are no doles and where

familial support while in the urban areas may not be

forthcoming. However, it is suspect if those primarily

interested in urban formal jobs will engage in urban

informal skill acquisition in Manufacturing and Technical

services (MATS) subsector while still prospecting for white

collar jobs. Rather, they may be engaged in trading, casual

jobs, or other informal wage employment. Those that have

fully readjusted their expectations are likely to be those

that will invest in the acquisition process of the urban

informal sector with a view to owning an enterprise after

training.

With respect to those that are in the urban informal

sector therefore, there can be none that are openly

unemployed. They may however, be unemployed in disguise or

underemployed as a result of a particular task being

performed by more labour than is necessary (Sen, 1969).

Also, informal workers may be underemployed if engaged in a

work of a sporadic nature, or if the demand for their

services do not fully use their full productive capacity or

if their jobs do not fully use their qualifications and

experience (Kritz and Ramos, 1976).

In general, the concept of underemployment has been

defined in various ways as:

80

(a) The degree to which the worker’s job fails to use his

full productive capacity (Kritz and Famos, 1976 p.

116).

(b) those persons who work on their own account and who are

so numerous, relative to the resources with which they

work, that if a number of them were withdraw for work

in or other sectors of the economy, the total output of

the sector from which they were withdraw would not be

diminished even though no significant reorganization

occurred in the sector (U.N. 1951) 74.

(c) The adoption of inferior jobs by the workers laid off

from their normal jobs due to lack of effective demand

during depression (Robinson, 1936)75

(d) The quantity of labour for which the marginal product

lie below the wage rate (Mohabbat, K.A. 1972, P. 1676

).

(e) Overstaffing in paid employment especially in the

public service (Blaug et. al,. 1969)70

(f) A situation in which numbers of workers, relative to

jobs available are so numerous that they have to work

at a slow pace (Sen, 1960).73

(g) An employment of persons at jobs that call for less

than their highest current level of skill and at wages

less than those to which their skills, if fully

utilized, would normally entitle them.

81

These definitions lay emphasis on the fact that the

underemployed uses less skill than that possessed by him and

as such his contribution to production is less than his

potentials. Also, following from low output is the

probability that the workers may not be satisfied with his

current employment where his skill is under-utilized.

In the past, the concept of disguised unemployment is

usually discussed in relation to the agricultural sector;

however, it has now been extended to cover the urban labour

market of dual economies. With respect to both the

agricultural an urban sectors, the concept represents an

attempt to state the fact that the labour force engaged in a

certain type of economic activity is idle during a part of

the working period, or if working, is unproductive (Myrdal,

1968, p. 2041)77.

From this view, it is implied, and usually pointed out, that

the marginal productivity of surplus labour is lower than

the average productivity, and in some cases, marginal

productivity is zero or even less. Thus, it is always argued

that the withdrawal of surplus labour 78in such activities

is possible without resulting in diminution in total output

(Nurkse, R. 195379; de Navarrete, A. Jr., and de Navarrete,

I. M. 195380; Rosenstein-Rodan, P. N. 195781). Such surplus

labour is thus viewed to be a latent source of capital

formation (Jhingan, 1984, p. 26472). Worried about the

rationality of labour working up to the point when the

82

marginal productivity is zero, Sen (196073) asks; “If

marginal productivity of labour over a wide range is zero,

why is labour being applied at all? Does it not go against

rational behavior?” he provides a clue to this paradoxical

situation when he explains that this confusion arises as a

result of the failure to distinguish between labour and

labourer. Such distinction makes it clear that “it is not

that too much labour is being spent in the production

process, but that too many labourers are spending it”. Thus

it is the marginal productivity of the labourer that is nil

over a wide range while that of labour may be just equal to

zero at the margin (Meier, 1989, p. 118)82.

Myrdal (1968)77, in his own contribution to the

development of the concept of underemployment rejected the

above definitions. He maintained that the concept is defined

in static (comparative) terms as it assumes that under

unchanged conditions of capital input, production techniques

and institutional framework, the same aggregate output could

be obtained even if a part of the labour force was moved (p.

1007). Moreover,the measurement of such surplus labour

bottled up in disguise unemployment is based on external set

of norms that obtain in the developed economies. Such norms

include the performance on farms where labour is intensively

utilized; or the use of standard working hours in formal

sector employment, among others; and such norms are taken as

corresponding to full employment in LDCs. To illustrate his

point, he cited the Robinson’s (1947) definition that used

the concept to denote the conditions of workers pushed out83

of formal wage work into less productive occupation as self-

employed in order to make ends meet. According to Robinson,

disguised unemployment results when a reduction in effective

demand leads to diminution in employment level. The

dismissed worker usually resorts to taking up inferior self

employment occupation such as “planting potatoes if he can

get an allotment, selling match-boxes in the strand, hanging

round railway stations to carry bags to hotels”. Such

disguised employment is viewed as being temporary as workers

will be recalled when the level of aggregate demand, hence

the level of employment, increases.

Myrdal contends however, that the situation in less

developed countries is different from that portrayed by

Robinson and that such differences should be reflected in

the definition of under-employment in such countries. He

argues that in such developing countries, self-employment

predominates and is permanent for workers rather than being

a temporary occupation taken up after being dismissed from

wage employment. Thus to Myrdal, the concept of

underemployment or its various synonyms – ‘hidden’,

‘concealed’, ‘invisible’, ‘disguised’, ‘potential’ and

‘latent’ unemployment refer to:

“The vast and long term underutilization ofhuman resources in which more labourers aretied up permanently and structurally invarious lines of production than are necessaryfor the output of the product”. (p. 2044).

84

His ‘more realistic approach’ to the determination of

the level of underutilization of effort places greater

reliance on the level of average productivity of the

potential labour force. And thus, the level of utilization

of effort is viewed as a product of three ratios:

participation rate i.e. working members divided by the

labour force; duration of work i.e. man-hours divided by

working members and labour efficiency i.e. output divided

by man-hours.

Although Myrdal criticized incisively the use of

external norms in the evaluation of underemployment in

Asia, yet, he came back, full circle, to similar notion in

his new alternative approach. According to him:

“The total labour input achievable throughcomplete participation of the population ofworking age at an assumed standard of workduration can be calculated. First thedifference between the labour input obtainedfrom actual participation and duration and thelabour input maximally achievable under theassumed conditions can be expressed as aproportion of maximum labour input assumed tobe available”. (p. 1014).

The reliance on the ‘assumed standard of work

duration’ implies value judgment, which Myrdal himself

acknowledges. Thus, the recourse to the use of external

norms regarding such standards is highly inevitable as a

second-best option if the value premise will have any

objective base as well as uniformity. Moreover, his measure

85

of the level of idleness as defined earlier relies heavily

on the use of macro-data obtainable through census figures.

Such figures on current basis are not easy to come by in

most third world countries.

However, apart from the question of definition and

measurement, the existence of underemployment in less

developed countries has never been in dispute. The urban

informal sector also exhibits this trait. It is not

uncommon for enterprises to remain open from dawn till dusk

but having not much work to occupy its work force for a

considerable part of the day. The operators are therefore

unemployed in disguise for as long as they are

involuntarily idle. Increased employment for these classes

of workers reveals itself, in the first instance, by the

productive use of idle hours and later by increase in the

number of workers.

The above reveals the basic difference between

employment situation between the formal and the informal

sector operators. Motivated by profit consideration, formal

sector entrepreneur will not engage labour that are likely

to be idle for a considerable part of the day. In contrast,

the formal sector entrepreneur whose business is

established primarily to create employment for himself,

makes himself and his apprentices, if any, available for

work. He is only productively employed for the number of

hours he receives work from his customers. This is because

86

shortage of adequate capital (both fixed and working

capital) precludes his continuous production of goods in

anticipation of demand. Moreover, in most cases, most of

the enterprises are engaged in the production of direct

services (e.g. motor vehicles repair, barbing among others)

which cannot be produced prior to consumer demand.

The foregoing, therefore, leads to the following a

priori reasoning as regards employment and earnings in the

urban informal sector. An increase in the level of

employment comes about as a result of increased demand for

the enterprises goods and/or services. This enables the

entrepreneur to put his current idle productive capacity

into use. More resources (especially labour) can only be

hired if the current man-hours engaged (i.e. those of

himself, apprentices and employees, if any) cannot

effectively cope with the work within the period of which

the work is to be done. Thus in most cases, paid workers

are usually not permanently employed but are engaged for

such period as the project lasts. If the project will not

last a considerable length of time or consumers’ patronage

is sporadic in nature rather than regular, employment

arrangement with journeymen is by day or at most by the

week. However, if such project is of long duration or the

demand situation is constantly high, the paid worker may be

engaged for a longer period but the ensuring employer-

employee contractual obligation is rather informal and

based more on mutual trust and confidence rather than on

formal arrangements.87

Engaging workers especially those in the skilled

category may not be very easy for the entrepreneur. This is

because of the absence of a pool of overtly unemployed

workers standing at his gate from which he can easily draw.

The best he can do is to offer a reasonable earning

arrangement that is able to induce workers currently

underemployed either in self or wage employment in the

formal sector. Therefore, it is not unreasonable to expect

a positive relationship between the level of earnings and

employment level in the urban informal enterprises.

4.2 METHODOLOGYStudies on the urban informal sector have in most

cases been directed to the question of employment

opportunities and income distribution within the sector. As

a result, the target groups are the enterprises,

entrepreneur as well as employees (if any), journeymen, and

apprentices in the informal sector enterprises. Thus our

methodology involved the selection of enterprises and

operators on a sample basis from our enumeration areas.

Like most other studies (Amin, 1981, Merrick 1976;

Callaway, 1964; Fapohunda, 1985), ours is a city study –

the city of Ibadan. The choice of Ibadan derives from the

fact that:

1. Ibadan is one of the most populous cities in Africa.

The city is a typical urban centre in terms of population

and type of economic activities engaged in. as a result,88

urban informal activities in the city will no doubt

reflect the situation in most other cities of the

country.

2. The city of Ibadan looks attractive for this study

because our study will facilitate comparison with the

earlier works of Callaway on craft enterprises as well as

the apprenticeship system of the informal sector of

Ibadan. However, our study will go a little further by

formulating and estimating employment and earnings models

for the sector.

4.2.1 Research Instruments

We have engage two research instruments in obtaining

the necessary information from our respondents. The first

one is the questionnaire addressed to owners of enterprises

in manufacturing and technical services. The questionnaire

sought information relating to the enterprise in the

following areas:

(a) Product of the enterprise

(b) Ownership structure

(c) Capital level (initial and present)

(d) Quantity, age, quality of training, etc. of employees,

journeymen and apprentices.

(e) Operational characteristics of the enterprise

(f) Extent of linkage with formal sector as well as other

informal sector enterprise

(g) Problems facing the enterprise

89

(h) Assistance received/desired from the government or any

of its agencies;

(i) Training and skill development functions of the

enterprise.

The second questionnaire was designed to elicit

information on job histories of selected enterprise owners,

employees, journeymen, apprentices of informal sector

enterprises as well as formal sector employees. Information

sought are, to a great extent, confined to the personal

characteristics and the job history of the respondents.

Some of the information requested include: sex, age, years

of experience on present and previous job, number of jobs

ever held, formal and non-formal education, migration

status, parent’s occupation, reasons for preferring present

job to formal or informal alternative, job satisfaction,

future aspirations, and so on.

Copies of these questionnaires are reproduced in full

in Appendix A and Appendix B.

4.2.2 Planning Coverage and Sampling Procedure

Constrained by time and fund, we were unable to cover

every informal enterprise and operator within the city of

Ibadan. Therefore we had to take a sample of informal

enterprises and operators as well as formal sector

employees in manufacturing and technical services for this

study.

90

To obtain reasonably large and representative sample

of enterprises, a two stage sampling technique was adopted.

The first stage units are the enumeration areas (EAs) while

the second stage units are the enterprises, workers, and

apprentices. We therefore divided the city into thirty-five

enumeration areas from which not less than a third will be

purposively selected. From each of the selected EA, not

less than 50 enterprises were to be interviewed therefore

having not less than 600 enterprises for our study.

After the owners of the selected enterprises had been

interviewed, in order to obtain enterprise-related

variables, we decided to randomly select about 500

operators (owners, employees and journeymen) and 300

apprentices for detailed personal job history. Also for

comparative purposes, 200 formal sector workers in

manufacturing and technical services were to be interviewed

using same questionnaire as for informal sector operators.

The formal sector workers were to be drawn from both the

public and private sector establishments in Ibadan.

4.2.3 Data Collection

Informal Enterprises Survey

The city of Ibadan was divided into 35 enumeration

areas and they are as listed below.

1. Mokola / Sabo

*2. Sango/Polytechnic Road/Eleyele

*3. Agbowo/Orogun/Bodija/Ojoo

91

*4. Ekotedo/Race Course/Adamasingba/Salvation

Army

*5. Oke Padre/Olorisa Oko/Yeosa/Abebi

6. Inalende/Oniyanrin/Ode-olo

7. Idikan

8. Gbagi/Felele

9. Onireke/Dugbe

10. Moor Plantation/Ago Taylor

*11. Apata-Ganga/Owode

12. Oke Bola/Agbokojo

13. Bishop Philips/Monata

14. Agbeni/Amunigun

*15. Oke Foko/Gege/Oke-Ado

16. Aperin/Akanran Road

*17. Molete/Ibuko/Challenge/Felele

18. Isale-Osi/Opopo Yemoja

19. Isale-jebu/Idi Arere/Agbongbon

20. Oja-Oba/Kannike

21. Bere/Mapo/Oritamerin/Alekuso

*22. Oke-Are/Agbede Adodo/Ayeye

*23. Adeoyo/Oke Aremo/Igosun/Yemetu

24. Itutaba/Gbenla

25. Oke-Irefin/Oke Adu

26. Agodi/Idi Ape/Iwo Road

*27. Oluyoro/Loyola/Ife Road

*28. Oje/Oke Ofa/Atipe/Ode Aje

29. Agugu/Idi Obi/Ore Meji/Ogbere

*30. Labiran /Isale-Afa/Beyerunka/Alafara

92

31. Itabale/Olugbode/Oranyan

32. Oja Igbo/Aremo/Aperin

33. Elekuro/Labo/Odinjo

34. Idiaro/Eleta

35. Oke Oluokun/Kudeti

Note: * = Areas selected for the survey

This division almost coincides with that of Callaway’s

(1964) but we have introduced some modifications to take

account of the expansions that have taken place since then.

In preparing the sampling frame, a preliminary visit was

made to each of the EA’s to identify areas of concentration

of MATS activities. Twelve of such EAs were purposively

selected from which enterprises and later, operators were

selected for interview.

With respect to location pattern, two kinds of

enterprises were discovered. The first type is those that

are concentrated within the city and, secondly, those that

are located at the outskirt of the city. The latter kind of

enterprises are those that are either land-intensive like

saw-milling and block-making, or those that have been

forced by the government to leave the city centre e.g.

vehicle repair enterprises. However, some of these are

finding their ways back into the city. The observed

location pattern was considered in the choice of EAs for

the study.

93

With respect to the method of enquiry, the interview

method using well-trained enumerators to administer

questionnaires was used. Our field work on informal sector

enterprises was restricted to those enterprises outside the

organized capital and product markets. Such enterprises are

not formally registered under the Business Registration

Act, and employ between zero and nine full-time paid

workers. In such enterprises, full-time paid employment is

an exception rather than the rule. Production activities of

most of our target enterprises are carried on in temporary,

or at best, semi-permanent structures like rented shops,

uncompleted buildings, open spaces by the roadside, part of

own-rented accommodation and so on. In these enterprises

the entrepreneur himself is physically involved in the

production process.

Individual production unit is regarded as an

enterprise. In this regard, the roadside mechanic or metal

workers with or without employees, journeymen and unpaid

family helpers etc. were regarded as individual

enterprises.

As earlier expressed, sample survey was limited to

enterprises in Manufacturing and Technical Services as

listed below:-

I. Manufacturing

(a) Wood works – Carpentry, Furniture making, wood

Carving, Saw-Milling.

94

(b) Leather works – Shoemaking and Shoe repairing, Car

Upholstery, Bag making.

(c) Cloth and Garment Manufacturing-Tailoring, Weaving,

Knitting.

(d) Metal works – Welding and Metal Fabrication,

Blacksmithing, Goldsmithing.

(e) Blockmaking

(f) Printing.

II Technical Services

(g) Automobile repair works – Auto-mechanic, Auto-

electricians, Panel beating, Vulcanizers, and Vehicle

sprayers.

(h) Electrical works – Electrical repairs, Electrical

installations.

(i) Other Technical Services – Barbing, Hairdressing,

watch Repairing, Dry Cleaning, Sign writing and Glass

Cutting, Plumbing, Photo-framing.

The data collection exercise took place between

February and March, 1990. A good number of the enterprises

owners contracted cooperated with our field workers and

gave the desired information if they were contacted at the

time they were not too busy. Given the level of education

of these entrepreneurs and their openness is highly

unexpected. What probably accounted for this might be the

NDE’s training activity within the informal sector that is

gradually becoming popular among enterprise owners. Since

most of them are desirous of getting involved in the NDE’s

95

apprenticeship programme due to the financial returns to

the trainers, many of the entrepreneurs are thus encouraged

to cooperate with our field workers in order to know more

about the involvement of the government through the NDE in

the hitherto neglected urban informal sector. Also they

sought to know the means by which they can be enlisted as

trainers for NDE.

In contrast to the above, some of the entrepreneurs

refused to answer our questions claiming that previous

similar surveys had yielded no positive returns from the

government. Several others even thought that the survey had

to do with taxation and as such they were not prepared to

divulge any information regarding their enterprise.

In all, five hundred and forty-four enterprises were

successfully interviewed. This gives an achievement rate of

about 91 per cent.

Formal and Informal Labour Force Survey

The informal sector enterprises sampled had 647

owners, 341 workers, 2, 119 apprentices and 106 family

helpers. From these operators, we randomly selected 351

workers (made up of 278 owners, 73 employees and

journeymen) as well as 213 apprentices for a more detailed

interview.

In selecting formal sector workers for interview,

enterprises dealing in activities of interest to the study96

were listed. From the list, a random sample of 7

establishments (4 private and 3 public) was made. From the

list of workers engaged in manufacturing and services, we

were able to interview 111. Forty-nine of these workers

were from private formal sector while the rest (62) were

from the public formal sector.

4.2.4 Model Formulation and Analytical Techniques

1. Structure of Enterprises and Socio-Economic

Characteristics of Operators

The structure of enterprises in terms of size

distribution, year of establishment,

forms of ownership, number engaged, value of initial and

present capital and so on are analyzed.

Also, socio-economic characteristics of owners,

employees and apprentices are analyzed using summary

statistics in form of cross-tabulation, frequency

distributions, percentages and means of relent variables.

2. Skill Development and Utilization

The human capital model postulates that investment in

additional training yields both pecuniary and non-pecuniary

benefits. Apart from the current consumption benefits

derived from education and training, the acquired skill

97

yields future streams of income over the recipients

lifetime.

Thus, the process of acquiring human capital through

the process of skill and entrepreneurship development are

investigated using employment history of our sampled

population. Using data generated from our survey, we

estimated the annual rate of entrepreneurship generation

through the skill formation process in the urban informal

sector.

Let E be the current stock of entrepreneurs in

manufacturing and technical service enterprises and let ∆E

equals change in the level of stock per annum. The

postulation is that change in stock depends on the number

of apprentices in training (N), average number of years

spent in training (T), proportion of apprentices wanting to

establish own enterprise immediately (A) and later (B), and

the average waiting period for those not starting

immediately (t).

That is;

E = f (N, T, A, B, t) …………………… (1)

Assuming a linear and additive relationship, then

equation (1) can be stated as:

Ni Ai Ni Bi ….

………………… (2)

∆Ei = Ti Ti ti

98

Where I stands for an enterprise.

The expressions in equation (2) simply means that

addition to entrepreneurs in enterprise I in one year

equals the average annual rate of producing entrepreneurs

that will immediately set up own enterprises (first term on

the RHS) plus those wanting to delay entry into

entrepreneurship by ‘t’ years (last term on RHS).

Clearing all fractions in (2) and arranging we have:

∆Ei = Ni ( ti Ai + Bi) …………………………. (3)

Ni Ti ti

= ti Ai + Bi = 1 A + Bi or

Ai Bi

Ti ti T ti Ti

Ti + ti

Equation (3) is used to measure the average annual rate of

generation of new entrepreneurs in the urban informal

sector.

The extent of skill utilization, (or its converse,

skill underemployment) of workers in each enterprise are

measured in two ways. Firstly, the number of hours actually

employed in production (HEP) in previous week as compared

to the standard 40 – hour week (SWK) (Oberia and Singh,

1984, p. 519).

SU1 = HEP 100 ………………….. (4)

99

SWK 1

The level of underutilization of effort S’ ul can

then be defined as unity minus Su1. That is:

SU1 = 1 - SU1 ……………………..

(5)

Secondly, the previous peak income (PIP) per week

is compared to the income realized in the week

preceding the survey (PAI) (Kritz and, Ramos, 1976)4.

Thus:

SU2 = PAI 100 ………………

(6)

PIP 1

And 1 - SU2 indicates the extent of

underutilization of effort.

EMPLOYMENT GENERATION FUNCTION

Employment of labour in NFS enterprises depends on a

variety of factors. The effects of such factors can be

measured empirically using an adapted Cobb- Douglas

production function.

Thus, an employment function is specified following Bowers

and Beird (1971)84; Irvin,

(1978)85 Olaloye (1978); and Ndebbio (1987) as

Ei = f (W, K, Z) ………………………………. (7)

Where:-

Ei is the level of employment in firm I.

100

W is the wage rate

K is the level of present capital

Z is the vector of other variables affecting the

level employment.

Two models were tried: one assuming linear

relationship, and the other assuming a non –linear

relationship as shown in equations (8) and (9).

That is: n

Ei = ao + a1w1 + a2ki + a∑ jZi + ui ………………. ……. (8)

And, Ei = +bo w∏ i b1 ki b2zi1

b3 ………. Zij bj exp ( b∑ kzdk +Ui)

………………… (9)Linearising by taking logarithm on both side of

(9), we have:

n

LN Ei = Ln bo + b1 LN Wi + b2LN Ki + ……..+ bj LN Z∑ ij + J+3

m

b∑ kzdk + Ui …………………………. (10)K=1

Where ZdK are other variables expressed as dummies.

For analytical purposes, we have defined employment

level within a given firm in several ways.

EMPT 1: Total number of man hours per week actually put in

to productive use by all worker, paid and unpaid. This is

made up of efforts actually used for production by the

owners (s), paid employee, journeymen, apprentices and

unpaid family helpers within the enterprise.

101

EMPT 2: The homogeneity of different grades of labuor

assume in EMPT 1 is relaxed. Thus, total employment per

enterprise is assumed to be made up of all unweighted

efforts (man power re week) actually used in production by

entrepreneur (s) and employees 88; plus half of those

supplied per week by apprentices one year and over in the

enterprise, plus one- tenth of those supplied by

apprentices who are less than one year old and those

supplied by unpaid family helpers.

EMPT 3: Unweighted sum total of actual efforts used for

production per week by owner, paid workers and all

apprentices per week.

EMPT 4: Total man-hours actually used for production by

owners and all paid

employees per week.

Explanatory variables included in the models are:

VAR 8: Average level of wages.

VAR 2: Skill utilization – both SU1 and SU2 are tried in

a stepwise fashion.

X4: Age of business – this is measured by the numbers of

years the establishment

had been in existence.

102

X11A: This is amount of education received by

enterprise owner. It is measured by the number of years

spent in school by the entrepreneur.

X142: this is dummy variable which takes value 1 if

owner was trained in formal sector and 0, if otherwise. Its

purpose is to measure the impact of the quality of training

received by owners on the level of employment.

X202: this is a dummy variable that takes value. 1 for

TS enterprises and 0, otherwise. It is to measure the

contribution of type of enterprise to the level of

employment.

X27: level of present capital employed. It is expected, a

priori, that coefficient estimate of all, but X202,

variables have positive impacts on the level of employment

while the sign and magnitude of type of industry dummy

(X202) cannot be predetermined.

Formal/Informal Employment Participation Model

The controversy as to whether migrants into the urban

labour market take up informal sector job in the first

instance in order to be able to invest informal sector job

search or whether they are permanently settled in the

sector is still unsettled.

Therefore, in testing the probabilistic migration

hypothesis, we specified an estimated a linear probability

model which is expected to give the characteristics of

urban labour market operators which best allows one to103

predict the probability of remaining in one sector rather

than move to the other sector. The model:-

Pj = bo + b∑ i Xij + Uj ………………….

(11)

i = 1, 2, 3………. n; and j = 1,

2, 3 …, m.

Where i stands for a variable, j stands for an individual

and Xij ……………. Xnj are n-observable characteristics while Uj

is the error term.

Separate models using (11) above were estimated for

formal and informal sector workers respectively. Depended

variables for each of the models are:

Pj1=¿

employment)

(0, Otherwise

Pj2=¿

¿theformalsector ¿

Otherwise

It is often argued that linear probability models are

subject to statistical problems of heteroscedasticity on

one hand, and probability going beyond the range of zero

and unity on the other hand. The effect of these problems

is:

104

1. The standard test of significance may not strictly

hold since the distribution of errors are not

normal; and,

2. The predictive power of the model is severely

restricted.

As a result of these, a more appropriate modelsuggested in the literature is the logit probability modelspecified as 90:

Pj

Log 1-Pj = bo + b∑ iXij + Uj

……………… (12)

Where Pj, and Xij are as defined in (11) above.

The model simply shows the logarithm of odds that

individuals with attributes Xi will choose to stay in the

informal sector. The beauty of the logit model is that it

transforms the problem of predicting probabilities within

(0,1) interval to the problem of predicting the odds of an

events occurring within the range of the entire real line.

However, since (12) is non-linear, the application of

ordinary least squares (OLS) estimating technique is not

without some problems, moreso when P is either 0 or 1. To

facilitate estimation, the data have to be grouped and for

each group, one has to find the frequency, say ri, of

people preferring to stay in the sector relative to the

number, say ni of people in the sub-sample.

Theratiori

ni=P̂i∧(12)becomes:

105

log

ri

ni

1−ri

ni

=logri

ni−ri=bo+∑

i=1

kbiXij+Uj……………………..(13)

¿otherwords:

logPi

1−P̂i=bo+∑

i=1

kbiXij+Uj……………………………………….. (14)

Equation (14) is linear in parameters and can be

estimated using the OLS approach.

Also, estimating (14) using OLS may also throw up

heteroscedasticity problem since Pi does not equal P

identically, thus resulting in the variance of error term

to vary with the number of grouped observations. Therefore,

a better estimating technique suggested in the literature

for (12) is the maximum likelihood procedure which allows

the use of ungrouped data thus allowing each individual

observation within the sample to have a probability

associated with it. However, the dear of estimating

facility for maximum likelihood procedure did not allow us

to use (12). We have, however, tried our best with (11) as

it has been successfully applied in economic research using

OLS estimating technique (Alonzo, 1979).

5. Earning Distribution Function

An analysis of earnings was carried out in order to

determine the pattern as well as the influences of several

explanatory variables on earnings distribution of urban

labour market operators. Basing our analysis on the human

capital variables; migration characteristics, sector of106

employment in ULMA and other relevant variables, we

postulated that these variables explain the distribution of

earnings.

Using the semi-logarithmic earnings function specified as:-

lnYi=Co+∑j=1

nCiXij+Ui…………………………………………….….. (15)

(Mincer, 1970; Blaug, M. 1974; Haque, 1977).

Where j stands for a variable, I stands for an individual

and y is the level of earnings or wage. X1j …… Xnj are n-

observable characteristics (numerical and binary or dummy)

and Ui is the error term.

The list of variables used for the probability models

and the earnings model are as listed in Table 4.1.

TABLE 4.1: VARIABLES USED IN PROBABILITY AND EARNING

MODEL

No. Basic Variables Dummy/Derived Variables

1. Position in the X501 = (1, if

household head

Household (X5) (0, otherwise

107

X502 = (1, if other

household member

(0, otherwise

2. Reasons for being X051 = (1, if personally

interested

In the Sector of (0, otherwise

Employment (X05)

X052 = (1, if influenced by

parents

(0, otherwise

X053 = (1, if job is taken to

survive

(0, otherwise

X054 = (1, if no other job could

be obtained.

(0, otherwise

X055 = (1, if parents cannot

afford higher education

(0, otherwise

X056 = (1, if retrenched in

previous job

(0, otherwise

X057 = (1, if respondent

withdrew from previous job

(0, otherwise

108

X058 = (1, if current job is a

post-retirement exercise

(0, otherwise

No. Basic Variables Dummy/Derived

Variables

3. Monthly Income X11 = (1, if X1 ≤ N100

(X1) (0, otherwise

X12 = (1, if N100<X1≤200

(0, otherwise

X13 = (1, if N200<X1≤500

(0, otherwise

X14 = (1, if X1 > 500

(0, otherwise

4. Sex (X38) X381 = (1, if male

(0, otherwise

X382 = (1, if female

(0, otherwise

5. Marital Status X391 = (1, if Single

X39 (0, otherwise

X392 = (1, if Married

(0, otherwise

X393 = (1, if divorced/Separated

(0, otherwise

6. Previous X121 = (1, if informal self-

employment

Occupation (X12) (0, otherwise

109

X122 = (1, if wage job/schooling

(0, otherwise

X123 = (1, if domestic/Casual Job

(0, otherwise

7. Father’s X521 = (1, if now schooling

Education (X52) (0, otherwise

X522 = (1, if primary Education

(0, otherwise

X523 = (1, if Secondary Education

(0, otherwise

X524 = (1, Post-Secondary

(0, otherwise

No. Basic Variables Dummy/Derived

Variables

8. Migration Status X431 = (1, if born in Ibadan

(0, otherwise

X432 = (1, if Migrant

(0, otherwise

9. Type of informal

Sector Enterprises X201 = (1, if Manufacturing

(0, otherwise

X202 = (1, if technical Services

(0, otherwise

10. Respondent’s X421 = (1, if no Schooling

Education (X42) (0, otherwise

110

X422 = (1, if Primary Education

(0, otherwise

X423 = (1, if Secondary Education

(0, otherwise

X424 = (1, if Post-Secondary

Education

(0, otherwise

11. Form of Employment X031 = (1, if private

Sector

(0, otherwise

X032 = (1, if Public Sector

(0, otherwise

X033 = (1, if Informal Self-

Employment

(0, otherwise

X034 = (1, if Informal Employee

(0, otherwise

No. Basic Variables Dummy/Derived

Variables

12. Quality of Training

(X14) X141 = (1, if Informal

Apprenticeship

(0, otherwise

X142 = (1, if Private Sector

Trained

111

(0, otherwise

X143 = (1, if Civil Service

Trained

(0, otherwise

X144 = (1, if Technical/Vocational

(0, otherwise

13. Labour Market Actual in yearsExperience (X54)

14. Square of Labour Market Experience Actual in years(X55)

15. Weekly Earning(Y)

16. Log of WeeklyEarnings (LNY)

112

CHAPTER FIVE

STRUCTURE OF ENTERPRISES AND SOCIO-ECONOMICCHARACTERISTICS OF ENTREPRENEURS

5.1 STRUCTURE OF ENTERPRISES

The survey of informal sector of Ibadan covered five

hundred and forty-four enterprises. These enterprises have

647 owners, 341 workers, 2, 119 apprentices and 106 unpaid

helpers. In all, the enterprises engaged 3, 213 operators

with an average of about 6 persons per enterprise. The

enterprises sampled are from Manufacturing (53%) and

Technical Services (47%). Table 5.1 shows the distribution

of sampled enterprises.

The manufacturing sub-sector (MS) dominated by cloth

and garment enterprises, has the highest absolute

frequency. In the Technical Services sub-sector (TS)

however, it is the automobile repairs that predominate with

163 establishments out of the total of 256 for the

subsector.

In all, there are 25 different economic activities in

our sample and these have been reclassified into 9 main

branches. Six of these are in the MS while the rest are

classified into the TS.113

5.1.1 Ownership Structure and Age of Business

Majority of the enterprises sampled operate as sole

proprietors. Thus 85 per cent are sole proprietors, 13 per

cent are partnership while the rest are in the ‘others’

TABLE 5.1: DISTRIBUTION OF SAMPLED ENTERPRISESACTIVITIES NUMBER PERCENTAGES

A. MANUFACTURING 288 531.Wood Works 76

Carpentry and Furniture 68 12.50Wood Carvin 02 0.37Saw-milling 06 1.10

2.Leather-Works 40 Foot-wear 29 5.33 Car-Upholstery 08 1.47 Bag-making 03 0.55

3.Cloth and garment 87Tailoring 79 14.52Weaving & Knitting 08 1.47

4.Metal-Works 61Welding 45 8.27Blacksmithing 14 2.57Goldsmithing 02 0.37

5.Block-making 12 12 2.21

114

6.Printing 12 12 2.21

B. TECHNICAL SERVICES 256 477.Auto-Mechanic 87 163 16.00

Auto-Electrician 26 4.78Panel-Beating 18 3.31Vulcanizers (Tyre &

Tube Repair)15 2.76

Auto Sprayers 17 3.12

8.Electrical Works 51Electrical Repairs 48 8.82Electrical Wiring 03 0.55

9.Other Technical Services

42

Barbing/Hairdressing 24 4.41Watch Repairing 08 1.47Signwriting and Glass-cutting

05 0.92

Photo-framing 03 0.55Plumbing 02 0.37

ALL ENTERPRISES 544 544 544 100.0 100

Source: Author’s field survey.

Unclassified category. Most of these enterprises are young

as the average age for all enterprises is about 11 years.

In the MS, the modal age-group is 10 – 15 years to which 34

per cent of enterprises belong. In the TS, however, the

modal age group is 1 – 5 years and this accounts for about

34 per cent of enterprises (Table 5.2). This suggests that

relatively young enterprises predominate in the TS compared

to MS. Either high rate of establishment of new

enterprises, or high attrition rate of existing ones, or

both, are the possible reasons for the observed young age

structure of enterprises in TS.

115

For all enterprises, however, the modal age group is

10 – 15 years. It is therefore suspect if most enterprises

do live beyond 30 years as only 5 per cent in MS and 3 per

cent in TS ever survive above 25 years. Such situation

appears to be dominant in electrical works and cloth-

weaving where zero and 1 per cent respectively are able to

attain to over 25 years of age. In contrast, there is a

considerably high survival rate in blockmaking and metal

work enterprises, as each of these has 13 per cent and 17

per cent of enterprises respectively in over 25 years age

group.

Compared to Callaway’s (1973)7 study of Ibadan where

the modal age of enterprises is 6 – 10 years, there seems

to be an improvement in the survival rate of enterprises in

present times as compared to the late 1950’s and early

1960’s. In his 1976 study of Lagos informal sector

TABLE: 5.2: PERCENTAGE DISTRIBUTION OF ENTERPRISES BY AGE OFESTABLISHMENT

ENTERPRISES 1 –5

6 –9

10 –15

16 –24

25 andOver

MANUFACTURINGWoodLeatherClothMetalBlockPrinting

TECHNICAL SERVICESAuto-Repairs

21.921.125.024.18.425.0

26.929.617.529.926.725.016.718.819.6

33.938.037.529.940.025.033.325.030.1

12.09.812.514.911.78.30.019.216.9

5.31.47.51.113.316.78.33.53.7

116

ElectricalOthers

41.633.530.123.641.3

19.615.2

17.68.7

19.628.3

0.06.5

ALL ENTERPRISES 27.6

23.0 29.6 15.5 4.4

Source: Author’s field survey.Enterprises, Fapohunda (1985)18 notes that the modal age-

group of enterprises is 2 – 5 years. This suggests a lower

survival rate relative to Ibadan’s enterprises in the past

and now.

Several factors can be put forward to explain the

increasing life-span of enterprises in recent times. First,

the low and dwindling absorptive capacity of the formal

economy led to increased unemployment of the educated

youths and most of these have resorted to the urban

informal employment for survival. The ensuing increasing

educational attainment of informal operators has influenced

the managerial ability and hence, income and the life span

of enterprises. Two, the urban informal enterprises are

always quick to respond to the varying demand patterns of

their clientele. As such, there has been a gradual and

increasing shift of emphasis of these enterprises from

traditional/indigenous crafts (e.g. pot-making, dyeing,

wood carving etc. which are less rewarding and attractive

to young educated ones) to modern type of enterprises whose

117

output is being increasingly demanded by urban dwellers. It

is to be remarked, however, that dynamic changes from

modern to traditional goods is not common (e.g. increasing

demand for ‘aso-oke’, that is, traditionally woven cloths;

and ‘adire’ i.e. ‘tie and dye’ cloths) and the informal

sector enterprises do not fail to take advantage of such

opportunities. Third, the high level of commitment of

workers to the sector led to increased emphasis of the

entrepreneurs towards saving and investment. The increasing

availability of credit through informal savings and credit

organizations has therefore led to improved capital

formation among the entrepreneurs in the sector.95

These, among other factors, explain the relatively

longer life-span of enterprises in recent times.

5.1.2 Structure of Capital Employed

One of the major constraints facing informal sector

enterprises is shortage of capital. Due to their relatively

low educational attainment and absence of required

collaterals, many of these entrepreneurs do not have access

to formal banking credit facilities. Thus, in setting up

own enterprises, heavy reliance is usually placed on

informal rather than formal sources of capital. This fact

is revealed in Table 5.3.

Less than 1 per cent of entrepreneurs in our sample

were ever able to obtain loan from formal commercial banks.

Eighty-eight per cent relied on informal sources.

118

It is thus no wonder that initial capitals are

generally very low. For all enterprises, the average level

TABLE 5.3: SOURCES OF INTIAL CAPITALS/N. SOURCES PERCENTAGE OF ENTREPRENEURS

USING SOURCE1.2.3.

4.

5.6.

Gift from Relations/FriendsOwn Informal Saving from Casual WorkLoan from Relation/FriendsTotal Informal SourcesLoan from Commercial BanksTotal Formal SourcesOther (Unclassified Source)Sources not StatedTotal

42.340.85.3

0.4

7.73.5

88.4

0.4

11.2

ALL SOURCES 100.0

Source: Author’s field survey.

Of initial capital is N1, 111 while it is N1,092 and N1,

130 in MS and TS respectively (Table 5.4). Majority of the

enterprises (24%) belong to the N(200-499) group. Average

initial capital is lowest among wood-work enterprises while

it is highest among block-making and printing enterprises.

The latter with relatively high initial capital are

enterprises that require high level of capital. In general,

the TS enterprises seem to be more capital-intensive

initially than MS enterprises.

119

Although these enterprises started with a relatively

low capital, it is however interesting to note that on the

average, a modest rate of growth of capital is observed. TS

enterprises record a higher rate of annual growth of 12.5

percent while MS enterprises have 10 per cent. On the

average, all enterprises grew at an annual rate of 11 per

cent (Table 5.5).

Impressive as this result may seem, it should be

realized that some of these enterprises experience zero and

even negative growth while others experience a somewhat

phenomenal growth. For example, 97 enterprises representing

18 per cent of total enterprises sample experienced

negative and/or zero growth rate, while 25 per cent grew at

over 21 per cent per annum. Disaggregated by type of

enterprises, Table 5.5 shows that a greater number of

enterprises in TS (19%) experienced negative and/or zero

growth rates as compared to MS (17%). However, 42 per cent

of enterprises in each subsector experienced over 11 Per

cent growth rate

TABLE 5.4: PERCENTAGE DISTRIBUTION OF INITIAL CAPITAL BY TYPEOF ENTERPRISE (N)

ENTERPRISESLESSTHANN200

200TO499

500TO999

1000TO2999

3000TO4999

5000ANDOVER

AVERAGECAPITAL(N)

MANUFACTURING Wood WorksLeather ClothMetalBlocPrinting

23.315.530.028.725.016.716.7

24.429.622.529.

18.719.712.520.

23.425.425.018.428.333.316.7

4.97.05.02.35.016.70.0

5.32.85.00.05.025.033.3

1092.00972.001066.00572.001209.002681.003180.00

120

TECHNICAL SERVICEAuto RepairsElectricalOthers

20.520.815.721.8

916.78.316.7

22.723.319.623.9

720.00.016.7

23.527.617.617.4

22.719.029.426.1

6.96.111.84.3

3.83.15.96.5

1130.001009.001500.001174.00

ALL ENTERPRISES 22.0 23.9

21.0

23.0 5.9 4.6 1111.00

Source: Author’s field survey.

TABLE 5.5: PERCENTAGE RATE OF GROWTH OF CAPITAL BY TYPE OF ENTERPRISES

ENTERPRISES NEGATIVE ZERO 1-5 6-10

11-20

31-30

31+ AVERAGE GROWTH

A. MANUFACTURING Woodworks Leather Cloth Metal Block Printing

B. TECHNICAL SERVICES

Auto-Repairs Electrical Others

7.14.210.03.410.08.38.3

8.58.07.815.2

9.57.07.59.28.38.333.3

10.88.017.615.2

25.128.222.520.728.350.00.0

24.623.821.632.6

18.119.720.012.621.78.333.3

14.616.613.78.7

23.325.415.033.316.716.716.7

14.614.713.78.7

5.34.22.510.31.78.38.3

14.29.25.96.5

11.611.322.510.313.40.00.0

8.519.619.613.0

10.411.112.913.46.56.37.8

12.514.210.68.8

ALL ENTERPRISES 7.7 10.1 24.8 16.4

18.9 7.0 15.1

11.4

Source: Author’s field survey.121

Note: The rate of growth of capital is calculated by the

formula:

[(CtCo )1n−1]x100 ¿

After both Ct and Co have been adjusted to constant

1960 prices per annum. The modal rate of annual growth is

between 1 and 5 per cent; while the median rate is 4 per

cent with a standard deviation of 2 per cent.

The relatively starting capital growth rate in

these enterprises is rather impressive. It counters the

dependency theory hypothesis of stagnation and marginalized

position of these enterprises. Such annual growth rate as

discussed above explains the observed increase in stock of

capital over time as given by the present level of capital

of these enterprises. While the average initial capital is

a little over N1, 000 (Table 5.4), the observed average

level of present capital employed is over N8, 000 (Table

5.6). This is impressive when it is realized that the mean

age of these enterprises is about 11 years.

For all enterprises, the modal level of present

capital is the “N10, 000 and over” group and this situation

is true for TS and MS enterprises. For all enterprises the

mean level of capital is around N8, 000. However, printing

enterprises has the highest mean capital level of about

N28, 000 while cloth enterprises record the lowest of N5,

122

253. It should be noted however that at the tail end of

capital distribution (as shown in Table 5.6) is about 8 per

cent of all enterprises recording a capital level of less

than N500.00.

TABLE 5.6: PERCENTAGE DISTRIBUTION OF PRESENT CAPITAL BY TYPE OF ENTERPRISES

ENTERPRISESLESSTHAN200

200TO499

500TO999

1000TO2999

3000TO4999

5000TO9999

10000

ANDOVER

MEAN(N)

A.MANUFACTURING Wood Works

LeatherClothMetalBlock

Printing

B.TECHNICAL SERVICES Auto RepairsElectrical

Others

5.32.812.54.65.08.38.3

8.56.79.810.8

1.41.45.00.00.00.00.0

0.80.62.02.2

1.12.80.01.11.70.00.0

4.63.72.08.7

23.018.335.027.611.70.025.0

24.227.021.626.1

19.416.912.525.323.38.38.3

15.417.87.813.1

23.022.512.527.630.025.08.3

21.920.925.517.4

26.935.222.513.828.358.350.0

24.623.331.421.7

8510 108627076525380951147227864

81197725102445818

ALL ENTERPRISES 6.9 1.1 2.8 23.6

17.5 22.5

25.8

8320

Source: Author’s field survey.

This class predominates in TS enterprises (9.3%) relative

to the MS enterprises (6.7%). At the other extreme are over

123

48 per cent of all enterprises (50% in MS and 46% in TS)

that are having a moderately high capital level of N5, 000

and over.

5.2 OPERATING CHARACTERISTICS OF INFORMAL

SECTOR ENTERPRISESA considerable number of people are engaged in the

various activities of the informal sector of Ibadan.

Motivated by the sole desire of creating employment for

themselves, these entrepreneurs are found either as

technical service provider, and itinerant sellers,

manufacturers and/or repairmen. Quite a number of them

operate as sedentary enterprises – owners having stalls and

shops in market – places, open spaces and uncompleted

buildings by the roadside while others make use of part of

their rented accommodation as workshops.

In our sample, 14 per cent of the enterprises are

in ‘open sky’ garages, 31 per cent use open shed, 35 per

cent are in rented shops, 8 per cent use part of their

rented accommodation while the rest use their own acquired

premises as workshops. This shows that most of these

enterprises are sedentary and are thus located in temporary

or semi-permanent locations.

In her efforts to maintain clean and healthy urban

environment, the Ibadan Municipal Authority frowns at the

location pattern of these enterprises and in most cases the

enterprise owners are harassed and chased from one location

to the other. This is rampant particularly among those124

using open public spaces by the roadside. This situation

got to a climax during the Buhari – Idiagbon regime.

To this end, all auto-repair enterprises among

others were forced to operate outside the urban areas and

were all illegal ‘shops and workshops’ by the roadside

within the city were destroyed. Now, most of these

‘workshops’ are back in their places and this suggests the

resilience of informal sector enterprises to official

hostility. Moreover, evidence from this study suggests

growth of enterprises and of operators and these are

expected given the low and dwindling absorptive capacity of

the formal sector vis-à-vis the growing urban labour force.

Another important reason for the proliferation of

these enterprises is the low level of capital needed to

start these enterprises. Also, operators do not consider it

necessary to

obtain official permission before commencing such

businesses. For example, none of the enterprises sampled

has any government license. The only thing that is

mandatory for them to do is to register with the

appropriate trade union which is set up and run by

entrepreneurs of each trade within a given area. Failure to

register and participate in union activities attracts

sanctions. Such sanctions range from payment of fines, to

seizure of working tools until union requirements are

complied with. Thus, most of these enterprises operate

without either government licenses or government inspection

125

and assistances. Their existence and prosperity, therefore

depends on how best they can attract and retain their

clienteles’ patronage rather than on government’s (or any

of its institutions) recognition, approval and patronage.

Another important operational characteristic of the

informal sector enterprises is the observed limited

division of labour within a given enterprises. Between

enterprises, there is occupational division of labour.

These entrepreneurs specialize in different occupational

categories. For example in a typical auto-repair garage in

Ibadan, there is the vehicle; the auto-electrician; the

battery reconditioned; the vulcanizer; the spray-painter;

and of course, the blacksmith; specializing in different

aspects of motor vehicle repairs and reconditioning. Each

of these classes of entrepreneurs usually locate in a

particular ‘workshop’ with strict operational non-

interference. The limited division of labour within a firm

stems from the fact that capital is scarce and of

rudimentary type. In terms of number of people engaged per

enterprise, the number is also generally low to permit a

reasonable degree of division of labour. For our sampled

enterprises, the average number of owners plus paid workers

per enterprise is about 2, while the average of total

number engaged per enterprise in 6. Such situation

precludes any extensive division of labour in a typical

enterprise.

In terms of hours of work, these enterprises

operate for a relatively long hours as compared with formal

126

sector enterprises. While 93 per cent of these enterprises

operate for 10 – 15 hours per day, only 7 per cent operate

for 6 – 9 hours. In most cases, they do not go on annual

leave but take as holidays such days that fall on weekly or

annual religious festivals.

While these entrepreneurs and their workers are

usually physically present in their workshops for an

average of 11 hours per day, they rarely have enough work

to engage them for that long. A greater part of this period

is spent waiting for prospective customers. On the average,

these enterprises are engaged for 5 hours per day; with 55

per cent of the enterprises being fully engaged for 2 – 5

hours, 40 per cent for 6 – 9 hours while the rest did not

answer the question.

It is however interesting to note that most of the

entrepreneurs interviewed use their spare time

productively. A good number of them use this slack period

to train apprentices on the theoretical aspect of their

jobs as in electrical repairs and auto-repair works; while

others concentrate on the practical aspects of training of

apprentices as in tailoring where masters teach apprentices

the art of pattern-cutting using thick papers. In some

other enterprises, entrepreneurs and their apprentices

engage in trading or farming while several others maintain

that they do nothing in time of no job but to sit down and

wait for customers to bring jobs. On the average, these

enterprises are usually fully engaged for about 30 hours

127

per week. This contrast with the formal sector

establishments that operates a 40 hour working week.

It is however interesting to note that while

informal sector enterprises are set up with the principal

aim of creating jobs for their owners, the enterprises also

serve as a source of imparting skills to others. An

analysis of the number of apprentices that had been trained

showed that a total of 2160 apprentices had been trained by

these masters, while another 40 has been trained for the

National Directorate of Employment. Moreover, at time of

the survey, these enterprises have a total of 2,119

apprentices that are currently being trained. The time of

operators of enterprises is therefore devoted both to

income generating and skill-formation activities.

5.3 SOCIO-ECONOMIC CHARACTERISTICS OF

ENTREPRENEURSOver 90 per cent of the entrepreneurs sample is

literature with only less than 10 percent who had no formal

education. The ‘no schooling’ category is dominant in MS

enterprises (12 per cent) as compared with TS enterprises

(7 per cent). At a more disaggregated level, 50 per cent of

entrepreneurs in block-making never attended school and

this is followed by those in Leather works (15.4 per cent)

and Metal Works (14.8%).

128

TABLE 5.7: PERCENTAGE DISTRIBUTION OF ENTREPRENUERS BY LEVEL OF EDUCATION AND TYPE OF ENTERPRISES

ENTERPRISES HIGHEST LEVEL OF FORMAL EDUCATION

NO SCHOOLING PRIMARY SECONDARY TECHNICAL NOT STATEDMANUFACTURING Wood Leather Cloth Metal Block Printing

TECHNICAL SERVICES Auto Repairs Electrical Others

11.87.115.45.914.850.00.0

7.57.50.020.0

51.154.343.653.057.516.716.6

47.758.732.033.3

34.535.733.341.126.033.475.1

34.229.842.031.2

2.62.95.10.01.70.08.3

7.14.014.011.1

0.00.02.60.00.00.00.0

3.50.012.04.4

ALL ENTERPRISES 9.7 49.5 34.4 4.7 1.7Source: Author’s field survey.

As shown in Table 5.7, the modal educational level is

the primary education (49.5 per cent). And this is followed

by secondary education (34.4 per cent). It is also

interesting to note that those with higher education are

not left out in taking advantage of the income and

employment opportunities of the informal sector of Ibadan.

About 5 per cent of our sampled entrepreneurs had post-

secondary education. This is rather surprising as economic

literature postulates that informal sector operators are

usually the uneducated, the very young, the very old and

women.25 also, Callaway’s 7 study of Ibadan confirms the

preponderance of those without education and those with

primary education in the urban informal labour marker.

129

In contradistinction to the view that the informal

sector workers are at the extremes of age continuum, the

entrepreneurs in our sample span all age-groups with a

significant proportion of them in their prime. As shown in

Table 5.8, 0.4 per cent and 8 per cent of all entrepreneurs

are less than 15 years and over 50 years respectively. The

remaining 91.6 per cent are between the ages of 15 and 49

years. For the MS enterprises, the entrepreneurial age

distribution is analogous to that for all enterprises. For

the TS however, there is no entrepreneur that is less than

15 years; while only 6 per cent are beyond age 50. This

implies a more youthful age structure. Therefore,

TABLE 5.8: PERCENTAGE DISTRIBUTION OF ENTREPRENUERS BY AGE AND TYPE OF ENTERPRISES

ENTERPRISES LESS THAN 15 YRS

15 – 24

25 –34

35 – 49

50 AND OVER

MANUFACTURINGWood Leather ClothMetalBlockPrinting

TECHNICAL SERVICES Auto-RepairsElectrical Others

0.71.50.00.01.80.00.0

0.00.00.00.0

6.43.02.713.15.38.30.0

8.89.64.28.9

54.162.151.464.349.016.716.6

52.850.070.840.0

29.127.332.421.531.658.333.3

32.032.625.042.2

9.76.113.51.212.316.750.0

6.48.30.08.9

ALL ENTERPRISES 0.4 7.5 53.6 30.5 8.0Source: Author’s field survey.

130

Our observation with regard to entrepreneurs’ age

distribution reveals stability (over time) of age-

distribution as there is no significant difference between

our findings and those of Callaway’s in this regard.

In terms of training, the apprenticeship form of

training is the most prevalent among the entrepreneurs.

While 88.1 per cent are trained by informal-sector masters,

16.9 percent are formal sector trained. Of the latter, 9

per cent are trained 0n-the-job in private firm, 4 per cent

are public sector trained while the rest receive their

training in formal technical/vocational institutions. This

suggests that training through the age-old apprenticeship

system is the most popular form of skill-acquisition in the

informal sector of Ibadan. This finding is consistent with

those of Callaway7 and Fapohunda.18

CHAPTER SIX

131

EMPLOYMENT IN THE INFORMAL SECTOR

6.1 EMPLOYMENTAs argued in Chapter 4, the supply of labour to

the urban informal sector derives from the surrounding

areas to a great extent, and from the city itself.

Employment history of our respondents shows that 43 per

cent of the workers were born in the city of Ibadan,

while the rest (57%) are migrants; that is, they were

born elsewhere before moving to Ibadan. Of the latter,

85 per cent are from other Yoruba-speaking towns of

Ogun, Oyo, Ondo and Lagos state; 4 per cent are from

Bendel State, 3 per cent are from the East, 1 per cent

are from the North while the rest are non-Nigerians.

As shown in Table 6.1, the numbers of wage-

earning employees per enterprises vary from zero to

nine. Three hundred and ninety-two enterprises,

representing 72 per cent of the total, employ no worker.

Thirteen per cent employ one worker each while 8 per

cent and 7 percent employ 2, and 3 to 9 workers per

enterprises respectively.

Disaggregated by type of enterprises, it is

observed that 90 per cent of cloth making enterprises

employs no worker while in woodworking only 54 per cent

have zero workers. Printing enterprises contribute

significantly to wage employment as it has the highest

average number

132

TABLE 6.1: PERCENTAGE DISTRIBUTION OF PAID EMPLOYEES BY TYPE OF ENTERPRISES No. of paid Employees

0 1 2 3 TO9

MEAN

MANUFACTURINGWoodLeatherClothMetalBlockPrinting

TECHNICAL SERVICES Auto-Repairs Electrical Others

73.553.590.087.473.358.341.7

70.469.374.573.9

12.421.15.09.213.316.716.7

13.113.59.88.7

7.812.75.02.36.716.716.7

8.88.011.810.9

6.412.60.01.16.78.324.9

7.79.23.96.5

0.561.020.150.170.411.251.42

0.700.890.450.65

ALL ENTERPRISES 72.0 12.7 8.3 7.0 0.63 Source: Author’s field survey.Employed per enterprises of about one person while 58 per

cent of the enterprises employ at least one worker. This

situation contrasts with woodworks, with 47 per cent; cloth

making, 13 per cent and leather works 10 per cent of

enterprises employing at least one person. However, in the

aggregate, TS rather than MS enterprises contribute more to

paid employment as the former has 183 while the latter is

responsible for 158 persons employed.

With respect to the total number engaged by each

enterprise, the result is as depicted in Table 6.2. Total

number engaged is defined as the total of paid employees

plus working proprietors, unpaid family workers and

apprentices (F.O.S.: 1983, p. 13).96

133

A total number of 3, 213 people; made up of 647

owners representing 20 per cent of the total; 341 employees

(11 per cent), 2119 apprentices (66 per cent) and 106

unpaid family workers (3 per cent) are engaged by the 544

enterprises sampled. On the average, each enterprise

employs about 6 persons.

One- person enterprises (usually made up of their

sole owners) are about 16 per cent of the total and these

are more important in manufacturing (19 per cent).

Enterprises employing between two and five persons

predominate in the sector with an overall average of 49 per

cent. Such enterprises are also more dominant in

manufacturing (54 per cent) than in technical services (44

per cent).

TABLE 6.2: PERCENTAGE DISTRIBUTION OF TOTAL NUMBER ENGAGEDBY TYPE OF ENTERPRISES

ENTERPRISES NUMBER ENGAGED1 2 – 5 6 –

910 –15

16 & ABOVE MEAN

A. MANUFACTURING Wood Works Leather

Cloth Metal Block Printing

B. TECHNICAL SERVICES Auto Repairs Electrical Others

18.715.532.518.411.725.016.7

13.111.03.932.6

53.745.157.551.763.350.066.7

42.241.754.939.1

15.523.97.517.216.78.38.3

22.324.515.715.2

6.47.02.55.78.30.00.0

10.812.315.74.3

5.78.50.07.00.016.78.3

9.610.59.88.8

5.36.52.95.44.87.26.7

6.6 7.27.14.8

ALL ENTERPRISES 16.0 49.3 18.8 8.5 7.5 5.9Source: Author’s field survey.

134

Those enterprises employing between two and five

people are at the peak of the distribution. However, the

frequency distribution of subsequent groups falls

monotonically, and the situation prevails in both MS and TS

industrial subgroups. Enterprises engaging more than 15

persons are about 8 per cent in total. Six per cent of

these enterprises are in manufacturing, while 10 per cent

are in technical services. It is however surprising that

none of the enterprises in leather – and metal-works engage

up to 16 persons. This might be an indication that these

enterprises are not perceived as attractive and rewarding

as others.

With respect to each enterprises; block-making,

auto-repair and electrical repair enterprises have the

greatest (7) average number of people engaged per

enterprises. In contrast, leather-works enterprises have

least of about 3 persons per enterprises. On the aggregate,

while technical services engage about 7 persons per

enterprises, manufacturing subsector has 5 persons per

enterprise.

In general, the distribution of workers between

enterprises, among other factors, can be taken as a proxy

for the relative importance of enterprises within the urban

economy. This is because, the present demand conditions,

and hence the income-generating potentials of a given type

of occupation, shapes the motivation of both the present

and future generation of entrepreneurs in deciding whether

to invest capital (human and material) into such line of

135

business. However, this should not be drawn too far since a

high-income business line may not attract many people if

the job involved is considered ‘dirty’ or generally not

‘modern’ or is hazardous.

For most of the Ibadan informal self-employed, their

current employment is regarded as permanent while most of

those in paid employment are looking forward to

establishing own enterprises in same line of business. This

observation, among others, suggests that employment in the

MATS of urban informal sector is significant and steady,

rather than being temporary and marginal. This view is

buttressed by the fact that the average age of enterprise

is about 11 years old with about 50 per cent having been in

existence for well over 10 years (see Table 5.2 above).

Moreover, rather than contract over time, our sampled

enterprises exhibit substantial growth rate in terms of the

total number of people engaged. This is depicted in Table

6.3 below.

As reported earlier, most of these enterprises

started as single-person units, but over time, the total

number engaged is increasing at an impressive rate. For

example the TS enterprises experienced about 11 per cent

rate of growth per annum. On the aggregate, the enterprises

in the MATS experience a modest rate of growth of 8 per

cent per annum.

TABLE 6.3: PERCENTAGE DISTRIBUTION OF EMPLOYMENTGROWTH BY TYPE OF ENTERPRISE

MEAN

136

ENTERPRISES NEGATIVE ZERO 1-5

6-10 11-20

21-30

31 &OVER

GROWTHRATE

MANUFACTURING Woodworks Leather Cloth Metal Block Printing

TECHNICALSERVICE Auto-Repairs Electrical Others

8.88.510.03.415.016.78.3

7.78.07.86.5

32.223.945.036.628.333.341.7

22.320.211.839.1

21.232.415.019.515.025.08.3

18.117.823.513.0

12.79.910.010.318.30.08.3

9.612.311.86.5

11.714.112.56.9

10.08.3

33.3

20.423.319.61.1

4.62.80.06.98.38.30.0

5.84.97.84.3

8.98.47.517.25.08.30.0

16.113.417.617.3

5.75.53.97.65.54.35.4

10.710.514.97.3

ALL ENTERPRISES 8.3 27.6 19.7

11.2 15.8

5.1 12.3 8.1

Source: Author’s field survey.

In contradistinction to the positive impressive rate

of growth reported above for most enterprises, some other

enterprises experience either contraction or zero rate or

growth. In MS which is worst hit as compared to TS, about 9

per cent remain stagnant. In the TS, 8 per cent suffer a

decline while 22 per cent experience zero rate of growth of

employment over time. In all, 36 per cent of the

enterprises had either zero or negative growth rate.

A host of factors can be attributed, a priori to the

observed growth rate of employment in each enterprise. Some

of these are level of present capital, the age as well as

137

the educational level of the present of the entrepreneur,

the age of business as well as the relative modernity of

the enterprises. The latter variable can be proxied by the

existence or otherwise of electricity and/or electric

machine in the enterprises. Our empirical analysis shows

that to a limited extent, employment growth is shown to

depend on education of entrepreneur as well as the relative

modernity of enterprise. Our inability to include economic

factors discussed below as explanatory variables probably

accounts for the rather very low R2. 97

Apart from those factors mentioned above, the economic

climate in Nigeria is another crucial determinant of

employment growth in these enterprises in recent times.

Most educated youths are increasingly finding it difficult

to be absorbed into the high wage capital-intensive formal

sector enterprises. Since there is no dole from the

government to support these unemployed, while familial

support may be insignificant or even non-existent, most of

those that would have otherwise remained unemployed do

adjust their expectations and take up urban informal

manufacturing and technical works.

The increasing employment size of these enterprises is

an indication that the urban informal MATS subsector has a

tendency to be expanding rather than contracting. This

becomes reasonable when it is realized that the urban

labour force growth rate high and increasing while formal

sector employment growth rate is low and dwindling.

138

6.2: GENERATION OF NEW ENTREPRENEURS THROUGH SKILL

FORMATION

Apart from its significant contribution to

employment generation, the urban informal sector of Ibadan

contributes significantly to the generation of new

indigenous entrepreneurs through the skill formation

process. As mentioned in the previous chapter, the

apprenticeship

system is the single most important source of

entrepreneurship generation. For example, 90 per cent of

the current entrepreneurs were trained by the

apprenticeship system.

The sustenance of the training system derives from the

earnest intention of masters to take on apprentices as they

(the apprentices) contribute to output and income

generation. These are brought about by the fact that

apprentices serve as cheap labour in production, while on

completion of their training these apprentices pay out a

token sum of money to their masters. The apprentices

themselves, most of who have readjusted previous labour

market expectations are also eager to learn a skill and

later set up own enterprises.

An analysis of previous apprentices trained prior to

the time of our survey shows that all enterprises sampled

had trained a total of 2, 160 apprentices taken up by

themselves, while 40 had been trained for the National

139

Directorate of Employment (NDE). In total, 2, 200

apprentices had been trained and this represents four

trained apprentices per enterprise on the average.

The MS entrepreneurs trained a larger number of

apprentices totaling 1, 293 and 18 for themselves and NDE

respectively while similar figures for TS entrepreneurs are

867 and 22 respectively. The recognition and the eventual

utilization of the informal apprenticeship training mode by

the government – sponsored NDE is an indication of the

importance of this system of skill formation and

entrepreneurship development. Our study shows that most of

the trained apprentices are employed either as self-

employed or employees in the labour market. Table 6.4 shows

the present location and preoccupation of trained ex-

apprentices. Sixty-one percent of ex-apprentices arte

currently self-employed in the same line of business where

they received training; 11 per cent are still with their

masters as either journeymen or employees while 4 per cent

are employed in the formal sector enterprises.

TABLE 6.4: PRESENT LOCATION AND OCCUPATION OF EX-APPRENTICES

Percentage

Established own Enterprises 61

With Master as Journeymen/Employee 11

In formal Wage Employment 4

Looking for initial capital 2

Places Unknown 22

140

100 ======

Two percent of these are yet to have enough initial

capital while the rest (22 per cent) cannot be located by

masters. In all, the MATS subsector of Ibadan informal

economy has created employment for 72 per cent of these

trained technicians.

The evidence presented above suggests that training

through on-the job apprenticeship system promotes

entrepreneurship development while some of the trained ones

are considered employable by formal sector employers.

Moreover the capital formation process seems adequate given

the NDE’s patronage of the training system for its Open

Apprenticeship Scheme.

Apart from those previous trained; the enterprises

sampled have a considerable number of apprentices that are

being trained. In all, these enterprises have 2, 119

apprentices with 973 in MS and 1, 146 in TS enterprises. On

the average, each enterprise in MS and TS has about 3 and 4

apprentices respectively. For all enterprises, the average

is about 4.

Of the 213 apprentices selected for detailed study, 13

are found to be NDE trainees while the rest are in informal

apprenticeship system. A detailed study of apprentices

becomes important when it is realized that they are

necessary for future generation of urban informal

entrepreneurs. Moreover, such study will likely elicit

those factors that determine entry into the apprenticeship141

system and the generation of urban skilled workers in the

MATS subsector.

In examining the possible factors for entry into the

informal apprenticeship system, the following results

emerge. Thirteen per cent got into apprenticeship because

their parents could not afford to finance their further

education, 4 per cent cannot obtain desired formal wage

job, and 14 per cent are influenced/forced by parents while

the remaining 69 per cent got into learning a job because

of personal motivation and interest. Moreover the latter

group is interested in becoming self-employed after their

trainings.

Most of these apprentices (87 per cent) are young

school leavers with no previous job experience while the

rest had engaged in one odd job or the other before

becoming apprenticed. In terms of age, 45 per cent of them

are less than 20 years, 44 per cent are between 20 and 29

years while the rest are at least 30 years old. Seventy-

eight per cent of them are male while the rest are female.

An analysis of the educational attainment of these

apprentices shows that 0.9 per cent is without formal

education, 30 per cent had primary education, 63 per cent

had secondary education, 1 per cent had technical education

while the rest did not respond to the question. Such

observed increasing trend of educational attainment of

apprentices is a harbinger of managerial improvement in

informal sector enterprises over time.

142

Given their formal educational attainment, we found it

necessary to ask how satisfactory they feel their training

mode is. Ninety-five percent consider their training mode

(apprenticeship system) to be satisfactory, 1 per cent

express dissatisfaction while the rest did not answer the

question.

As regards the future aspiration of these apprentices,

sixty-seven per cent of these trainees intent to establish

their own enterprises in the survey city immediately after

training. Five per cent intend to stay on with their

masters as journeymen/employee in order to obtain either

more practical experience or part of initial capital before

establishing own enterprises. Another 12 per cent wish to

establish enterprises in another town, 11 per cent prefer

formal wage-employment, while 4 per cent intend to engage

in any odd job to obtain fund for initial capital. From

these apprentices, three broad classifications regarding

future aspirations are identified.

(i) Those wanting to establish immediately after

training either in Ibadan or elsewhere – 79

per cent.

(ii) Those who want to delay establishing own

enterprises either in order to obtain more

practical experience and/or initial capital

– 9 per cent.

(iii) Those preferring wage employment in the

formal sector – 11 per cent.

143

Thus, 88 per cent of the trainees are potential

entrepreneurs in the informal sector. Using the above

tripartite classification, Table 6.5 shows how these

apprentices are distributed by sector of employment.

TABLE 6.5: PERCENTAGE DISTRIBUTION OF APPRENTICES BY FUTUREASPIRATIONS

ESTABLISHIMMEDIATELY

ESTABLISHLATER

FORMALWAGE JOB

NOTSTATED

MANUFACTURING Wood

Leather

Cloth Metal Block Printing

TECHNICAL SERVICES Auto-

Repairs Electrical Others

83.875.080.094.685.080.0100.0

73.470.863.279.0

8.115.76.70.05.010.00.0

9.610.410.515.8

7.26.36.75.410.010.00.0

16.018.826.35.3

0.93.16.70.00.00.00.0

0.00.00.00.0

ALL ENTERPRISES 79.0 8.8 11.2 1.0Source: Author’s field survey.

Apprentices in MS show a greater tendency towards

establishing own enterprises immediately relative to those

in TS. Surprisingly, all trainees in printing works

expressed the intention of establishing immediately while

95 per cent of those in cloth-working express similar

intention. Of those intending to establish later, TS

enterprises have greater percentage (9.6) compared to those

in MS (8.1). Sixteen per cent of trainees in TS are looking

144

forward to formal wage employment as compared to 7 per cent

in MS.

Using some of the information presented above, and

others obtained from our survey, a simple calculation of

the rate of annual addition to the stock of entrepreneurs

can be made using the relationship derived in equation (3).

However, some rather simplifying assumptions are made and

they are as follows:

(i) The distribution of apprentices by future aspiration

(Table 6.5) is stable over time and that such

distribution reflect exactly what apprentices will do,

ceteris paribus, after training;

(ii) The net labour-market movement of entrepreneurs is

zero over time. In other words, the number of informal

sector entrepreneurs withdrawing from the sector

exactly equals those entering and re-entering the

sector in enterprise-owner category;

(iii) The rate of flow of apprentices to a given

enterprise is constant.

Substituting our survey data into equation (3) gives

the result shown in Table 6.6. Our data shows that average

waiting period for those delaying entering into

entrepreneurship is 5.06 years. This compares with 5.7

years obtained by Farouq, et al (1976)98 for apprentices in

the defunct Western State of Nigeria.

145

The annual rate of generating new entrepreneurs per

enterprises is especially high in cloth, block and

electrical enterprises, while it is relatively very low in

leather-making enterprises. For all enterprises the average

is 0.93. the implication of this rate of generation is that

given the number of MATS enterprises in Ibadan to be N, it

means that annual addition to the total stock of

entrepreneurs will be 0.93N.

One important point raised is whether the urban

economy is able to absorb such annual increase of

entrepreneurs productively without increasing the level of

underemployment. As argued earlier, the question of open

unemployment does not arise but that of extent of

utilization.

TABLE 6.6: ANNUAL RATE OF GENERATION OF NEW ENTREPRENEURS BY TYPE OF ENTERPRISESENTERPRISES Ai Bi Ni Ti ti NEW ENTREPRENEUR

TOTAL PER ENTERPRISEMANUFACTURING

WoodworksLeatherClothMetalBlockPrinting

TECHNICAL SERVICEAuto-RepairsElectricalOthers

0.840.750.800.950.850.801.00

0.080.160.070.000.050.100.00

1,039287633522335648

1,080687265129

3.43.73.12.94.13.34.3

3.53.63.32.9

5.023.95.56.14.44.85.4

5.134.85.15.5

2626117115491411

2311395236

0.910.810.411.320.801.170.93

0.900.861.030.86

146

0.730.710.630.79

0.100.100.110.16

ALL ENTERPRISES 0.79

0.09

2,119

3.4 5.06 503 0.93

Source: Author’s field survey.

Note: Ai = Proportion of Apprentices wanting

to establish own enterprises

immediately after training.

Bi = Proportion of Apprenticeswishing to delay establishing ownenterprises.

Ni = Total number of apprentices currentlybeing trained.

Ti = Average number of years those

delaying establishment will spend

before starting own enterprises.

As there are little restraints (apart from initial capital)

to establishing enterprises. Such under-utilization will be

reflected in reduced demand for their services and reduced

average weekly earnings.

However, there is a limit to which one can push this

argument if one considers the extent of innovation of

workers as well as the relative ease of adaption to

changing circumstances by these informal entrepreneurs. In

most cases, the Say’s law which argues that ‘supply creates

its own demand’ can be said to be true for these workers.

147

Since average size of establishment is small, and decisions

can thus be quickly taken, then adaption to changing

circumstances can be quick and easy.

This is so since their major aim is to create jobs

for themselves. Thus, for example, vulcanizers used to

engage in reconditioning punctured tyre tubes. But now,

most of them go further to recondition smooth or blown-out

tyres. The economic situation in Nigeria led to

astronomical increase in price of tyres and this makes the

‘new’ business of reconditioning old tyres a highly paying

job relative to only tube reconditioning. Metal workers now

specialize in small-scale manufacture of nuts and bolts,

stoves, pails, lock-keys and so on, using old discarded

steel rods and sheets. These products compete with the

imported ones that are hardly affordable by most urban

dwellers. To give one example, battery reconditioners not

only service old batteries; but they ‘manufacture’ car

batteries using old and discarded materials in conjunction

with electrolyte. Such adaptations and innovations will end

up creating jobs for these increasing entrepreneurs and

this will likely prevent the state of underemployment to be

worsening with time.

However, in spite of the above, and given the rate

of generation of new entrepreneurs, it will be of interest

to know the level of skill utilization of current

entrepreneurs as this will help to throw light on the level

of underemployment prevailing in the economy; and by

148

extension the absorptive capacity of the economy with

respect to new entrepreneurs.

Measured in terms of number of hours actually

employed per week relative to the standard 40 – hour

working week (equation 4) or in terms of income realized in

the survey week relative to previous peak income (equation

6), every enterprise showed some measure of

underemployment (Table 6.7). The income measurement gave a

higher level of underemployment as compared to the hours

engaged measure. Relative to TS, underemployment is greater

in MS and for all enterprises it is 36 per cent for income

measure and 21 per cent for hours engaged measure.

TABLE 6.7: PERCENTAGE UTILIZATION OF EFFORT BY TYPE OFENTERPRISEENTERPRISES INCOME MEASURE HOURS ENGAGED MEASUREMANUFACTURING 60 80Woodworks 65 80Leather 65 79Cloth 57 83Metal 56 75Block 56 86Printing 76 95TECHNICAL SERVICE 68 78Auto-Repairs 63 78Electrical 78 82Others 75 70Source: Author’s field survey.

Computed using equations 4 (Hours Engaged

measure) and 6 (Income measure) respectively.

6.3 EMPLOYMENT FUNCTION

149

As discussed in chapter four (under the model

formulation section), it is hypothesized that several

factors affect the level of employment. For analytical

purpose, therefore, we have defined the level of employment

per enterprise in several ways. These are discussed in

section 4.2.4 above.

The ordinary least squares estimating technique was

applied to our basic model specified in equations (8) and

(10) using each of EMPT 4 as dependent variable. The linear

form (equation 8) gave a better fit and the result obtained

is as shown in Table 6.8.

Figures in parentheses beneath the coefficient

estimates are the standard errors of regression for the

variables concerned. In all, except the second regression

result, all variables have positive impacts on the level of

employment. It is also observed that there exists a

relative stability among coefficient estimates of

regressions 1, 2 and 3.

The coefficients of multiple determination lie between

22 per cent (regressions 1 and 3) and 37 per cent

(Regression 4). Regression 4 seems to have given the best

result in terms of both economic and statistical criteria.

As such our discussion will be based more on it.

The explanatory variables of our regression

equation are made up of both quantitative (dummy)

variables. Dummy variables in our regression shows the

150

change in the level (intercept) between equation of the

reference or the excluded category and each of the other

categories.

TABLE 6.8: EMPLOYMENT FUNCTION FOR THE URBAN INFORMAL

ENTERPRISES IN MANUFACTURING AND TECHNICAL SERVICES

EMPT 1

(1)

EMPT 2

(2)

EMPT 3

(3)

EMPT 4

(4)INTERCEPT 6.08 -44.65 5.99 4.86

VAR 2: SKILL 0.19+ 8.76+ 0.20+ 0.23+

Utilization (0.02) (1.18) (0.02) (0.02)

VAR 8: Average Wage 0.12+

(0.03)

10.78+

(1.65)

0.13+

(0.03)

0.18+

(0.02)X4: Age of Business 0.17+

(0.06)

17.16+

(3.52)

0.16+

(0.06)

0.011

(0.05)X27: Present Capital 0.03

(0.027

)

-0.77

(1.54)

0.03

(0.027

)

0.03+

(0.001

)XIIA: Amount of Education of

Owner

0.07+

(0.02)

3.15+

(1.30)

0.06+

(0.02)

0.04

(0.02)

X142: (1, if Owner is

Trained in FS

(0, Otherwise

0.69+

(0.29)

54.73+

(16.34

)

0.62+

(0.029

)

0.62+

(0.23)

X202: (1, if TS) 0.19 25.79+ 0.24 0.19

151

(0, Otherwise) (0.19) (0.72) (0.19) (0.15)

R2

F

N

0.22

21

544

0.24

24

544

0.22

22

544

0.37

45

544

Note: + = Significant at 5% level.

The intercept for the excluded category is represented by

the constant term; while the coefficient of any dummy

variable indicated the amount of vertical shift in

intercept. For example, the difference between the

intercepts or changes in the level between those trained in

the formal sector and those trained other methods (e.g.

apprenticeship system) (variable X142) is 0.62 as shown in

regression 4 of Table 6.8. this interpretation is as a

result of the fact that we have not constrained the

constant term to be equal to zero. For the quantitative

variables, the regression estimates measure the slopes of

the variables concerned.

All the explanatory variables except age of business

(X4) and type of enterprise dummy (X202) are significantly

different from zero at the indicated levels, on their

impacts on the level of employment. The non-significance of

X202 and X4 respectively show that industrial difference as

between TS and MS; as well as age of establishment do not

affect the level of employment in the urban informal sector

. For X202, the result is not surprising as both industries

require a given level of skill before being engaged to work

152

either as employee or journeyman. However, for X4, one

expects greater labour market experience to increase

employment level of a firm. A possible explanation for this

phenomenon is that recently established firms are likely to

be more modern in terms of the type of productive

activities engaged in and the level of education as well as

the quality of training of owners. This might explain

variations in the level of employment, among enterprises.

The fact that relative modernity of enterprises and

educational attainment of entrepreneurs are statistically

significant variables (rather than age of enterprise which

was also tried in the regression) affecting employment

growth gives credence to this explanation.

Variable X142 is a dummy whose differential

coefficient measures employment differentials among

enterprises owner by entrepreneurs trained in the formal

sector relative to those trained by the age-old

apprenticeship system. Our result shows that training

through the formal sector contributes more to employment

relative to those trained in informal apprenticeship

system. This may be due to the fact that those exposed to

formal training are relatively more skilled and are thus

able to attract more customers and apprentices which in

turn will expand the demand of such enterprises for more

workers.

The level of skill utilization also affects employment

positively. Our result shows that an increase in the level

153

of skill utilization by 10 per cent will expand employment

by 2.3 per cent.

The impact of capital level on employment level is

significant at 10 per cent level. However, the observed

magnitude of its coefficient is rather small. In fact it is

the second smallest coefficient. What might probably be

responsible for this is that in most of the enterprises,

capital level is low and it is not uncommon for

entrepreneurs to depend on themselves for inter-firm tools

and machinery borrowing. Thus, what increase in the level

of capital does, most often, is first, to reduce such

inter-firm dependence before it before it begins to, after

a point, significantly influence the level of employment

through increased customer patronage arising from

increasingly improved quality of work.

Average wage and level of employment are found to be

positively related. This seems to be a departure from the

traditional theoretical postulation that posits negative

relationship between the level of wages and employment

demand. But as demonstrated in section 4.1.4, employment

situation in the informal economy is rather peculiar and

does not as such, fall in line with the traditional macro-

models. For instance, employment situation in the formal

sector is both a combination of employment supply (by the

owners themselves) and demand (for employees when owners’

efforts cannot cope with the volume of work at hand). This

is so because entrepreneurs establish their business

154

primarily to create jobs for themselves and if the volume

of work increases, they may employ extra hands to cope with

the job. It is no wonder therefore that paid employment is

an exception rather than the rule.

Also, for those skilled workers in the manufacturing

and technical services, the concept of unemployment is not

relevant. They may however, be underemployed in current

employment. Therefore, an entrepreneurial demand for labour

services might have to be accompanied by increasing wages

to attract workers from current employment. Thus, the

preponderance of enterprise owners supplying their own

effort at increasing wages, and the demand by owners for

employees at higher wages to attract them, explain why

average wage and level of employment are positively

related.

The amount of education (measured by the number of

years spent in the formal schooling system) acquired by

entrepreneur positively affects the level of employment.

This conforms to our a priori expectation as the educated

are expected to be more innovative and adaptive. Moreover,

they are better able to manage their firms, relative to the

uneducated, thereby promoting efficiency and hence the

level of employment.

In summary, all the explanatory variables included in

the model have positive impacts on the level of employment.

However, five of these variables have their coefficient

estimates significantly different from zero at 95 per cent

155

level of confidence; while the rest are not statistically

significant.

6.3.1 Level of Commitment and job Satisfaction Among

Urban Labour Force

In spite of the factors identified as influencing the

level of employment as well as the contribution of

enterprises to skill formation, the study goes further to

examine the level of commitment of workers to their sector

of employment.

Of those currently employed in the informal sector, 64

per cent are totally committed and are satisfied with their

jobs. They are, therefore, not considering formal-sector

alternative. Only 5 per cent are thinking of moving to the

formal sector. Another 22 per cent are engaged in either

wage and/or casual employment in the informal sector in

order to obtain initial capital to set up own enterprises

as soon as possible. The rest did not respond to the

question. Thus, among the informal sector operators

(excluding apprentices and unpaid helpers) 86 per cent are

not prepared to leave the sector since they are satisfied

with current employment.

Among the formal sector workers interviewed, about 5

per cent are satisfied with their current jobs and are not

thinking of leaving until they retire. In contrast, 94 per

cent have a strong desire to quit in order to establish

their own enterprises in line with their current employment

156

in the formal sector. Seventy-two per cent of the latter

are prepared to withdraw from formal sector employment

within a year from the time of the survey to establish own

enterprises, 23 per cent in the next 5 years and the rest

in the next 10 years. Even at present, 85 per cent of these

formal sector workers are engaged in moon – lighting in the

informal sector in order to supplement earnings from

regular employment and to prepare for their eventual set-up

on a full time basis.

The above is in consonance with the view of most

workers (81 per cent) in MATS (formal and informal) that

self-employment is far more rewarding than paid employment.

However, 5 per cent believe otherwise, 9 per cent think

that there is no difference while the rest (5 per cent) did

not respond to the question.

These results suggest that for the skilled workers in

MATS subsector of informal sector, informal employment is

perceived more as a life-long occupation rather than a

casual pre-occupation until formal employment is found. In

fact most of them are not even seeking formal employment.

Also, a significant proportion of those employed in the

formal sector have expressed strong desire to own

enterprises in the formal sector. And in fact, 8 per cent

of entrepreneurs in the informal sector were formerly

employed in the formal sector.

157

Therefore, for our sample workers, the probabilistic

migration hypothesis which maintains that the informal

sector is a staging post for urban workers until a former

sector alternative is found is not upheld.

6.4: INFORMAL EMPLOYMENT PROBABILITY FUNCTIONS

Given our findings in the foregoing section, it will

be of interest to explore those personal characteristics

that allow one to predict the probability of either leaving

one sector for the other; or remaining in the current

sector of employment. To this end, probability functions

were estimated one each for formal (Regression 1) and

informal (Regression 2) sector workers. The result is as

shown in Table 6.9.

Ten basic variables were used in the estimation of the

2 regression equations – but these have been expanded to

thirty-four by the use of dummy variables. Regression 1

relates to the formal sector workers and the estimates are

to be read as the probability, relative to the excluded

group, that a person with given characteristic will prefer

to move to the informal sector rather than remain in the

formal sector. On the other hand, regression 2 relates to

the informal workers and gives the probability, relative to

the excluded group, that a person with a given

characteristics will remain in the informal sector rather

than move to the formal sector.

All variables entered into the regression equation are

dummy (that is: 0, 1 variables) and one category of such

158

basic variable has been excluded in order to prevent dummy

– variable trap. At the same time, the excluded category is

to serve as the control for those in the regression

equation.

TABLE 6.9: INFORMAL SECTOR EMPLOYMENT PROBABILITY FUNCTION

REGRESSION 1** REGRESSION 2*+

VARIABLES/INTERCEPTINTERCEPT

-0.08 0.86

1. HOUSEHOLD POSITION (X5)X501: Head of Household b 0.06+

(0.04)X502: Other Members a a

2. REASONS FOR BEING IN FS/NFS (X05)X051: Head of Household a aX052: Parent’s Influence 0.17+

(0.07)-0.85+

(0.02)X053: Needed a Job to Survive -0.07

(0.05)b

X054: Could not Obtain Other Job. 0.59 (0.52)

-0.21+

(0.09)X055: Parent Cannot Afford Higher

Education-0.81(0.15)

-0.08(0.05)

X056: Retrenched Previous Job b 0.08

159

(0.10)X057: Withdrew from FS Job b bX058: Post-retirement Exercise B 0.11

(0.07)3. MONTHLY INCOME: (XI)

X11: Up to N100 a aX12: N100 – N200 0.44

(0.28)0.03 (0.06)

X13: N201 – N500 0.47+

(0.22)0.08 (0.05)

X14: N501 – and above 0.51+

(0.23)0.12+

(0.06)4. SEX (X38)

X381: Male a aX382: Female -0.18

(0.20)-0.13(0.07)

5. MARITAL STATUS (X39)X391: Single a aX392: Married b bX393: Divorced/Separated 0.42

(0.51)-0.13(0.35)

6. PREVIOUS OCCUPATION (X12)X121: Informal Self Employment a aX122: Wage Job/Schooling 0.05

(0.10)b

X123: Domestic/Casual -0.58+

(0.37)0.15+

(0.09)7. FATHER’S EDUCATION (X52)

X521: No Schooling a aX522: Primary -0.18

(0.11)-0.10(0.10)

X523: Secondary bX524: Post Secondary b

8. MIGRATION STATUS (X43) a aX431: Native -0.08

(0.09)b

X432: Migrants9. TYPE OF ENTERPRISE (X20)

X201: Manufacturing a aX202: Technical Services b -0.01

(0.03)10.

RESPONDENT’S EDUCATION (X42)

X421: No Schooling a aX422: Primary 0.12

(0.10)b

X423: Secondary 0.23 -0.12+

160

(0.17) (0.04)X424: Post-Secondary 0.17

(0.16)-0.07(0.07)

R2 0.27 0.12F 2.0 2.6N 111 350

Note: a = Excluded Variables b = Variables not taken into the model by the

stepwise regression procedure used.+ = Significant at 5% level

** = Regression showing the probability of a formal sectorworker moving into the informal employment.

*+ = Regression showing the probability of an informalsector worker remaining in informal sector employmentrather than move to the formal sector.

The coefficient estimates obtained are the differential

coefficients from the excluded categories. This is because

the constant term was not constrained to be equal to zero.

The effects of the excluded variables have absorbed by the

constant term.

Out of the 24 explanatory variables entered into

regression 1, the stepwise procedure adopted in estimation

dropped eight variables due to low F-level. The remaining

16 variables explained 27 per cent of the variations in the

dependent variable. At 5 per cent level, a significant

association exists between the dependent and the

independent variables using F-statistic’s criterion.

In terms of reasons for entering the formal sector

employment, two dummies (X052 and X053) are significant at

5 per cent and 10 per cent levels respectively. Those

influenced by parents have the highest probability of

leaving the formal sector while those who obtained the job

161

to survive have the least chance of leaving; compared to

those that are personally interested and decided to enter

the sector (X051). The former group might have perceived

the informal employment potential but were probably

forbidden by parents to set up in the informal sector,

whereas the latter group, upon getting the job are prepared

to keep it until retirements.

With respect to variable x1 (monthly income) our

results shows that the probability of leaving the formal

sector varies directly with income; that is, those with

high income having high probability of leaving and vice

versa. The reason for this observation is not far-fetched.

The high income group is likely to be the more educated and

therefore, the more enterprising group. These are then

able, due to their superior training, to perceive and be

prepared to take advantage of the income opportunity in the

informal economy. As reported earlier, most of these

workers have been moo-lighting in the informal sector and

are thus cognizant of their possible enhance earnings, as

well as freedom from control associated with informal self

employment. In contra-distinction to the high income group,

the lower income groups are likely to be less educated and

therefore less enterprising. As such, they might prefer to

be insulated from risk-taking which they abhor, and

therefore want to remain in formal sector employment. Apart

from the factor of education, ability to save from income

in order to generate necessary capital might be another

factor for this observation. While those in high income162

bracket can save towards informal capital formation and

entrepreneurship, this might be difficult (if not

impossible) for low income workers. Thus, they (the low-

income workers) might have lost the hope of ever being able

to generate necessary capital for NFS employment. The only

option open to them under such circumstance is to put up

with formal employment throughout their working life.

It is not unlikely that most of those in low-

education category have moved from informal employment to

formal one and as such they are prepared to remain in the

sector. This position is strengthened by ‘previous

occupation ‘variable. Those previous in domestic/casual

work (but now in FS employment in MATS category) have the

least statistically significant probability of leaving the

formal sector. Thus, the pride of having moved from

casual/domestic job to a blue-collar work in the formal

sector might be all they need to achieve.

The facts discussed above are further reinforced by

the coefficient estimates of variable X42 (Education)

dummies. Only X423 is significant, and given the

preponderance of those with secondary education, those with

post-secondary education are thus negligible. Thus the

significance of X423 suggests that those with secondary

education have the highest probability of leaving the

formal sector relative to others; due to the reasons

proffered above. In considering the social origin of formal

sector workers in relation to their probability of leaving

163

the sector for informal employment, those whose fathers

have primary education relative to those with no schooling

have the least probability of taking up informal sector

employment.

However, it is to be noted that opposition in the

household, sex, marital status, migration status as well as

sector of employment exert no significant influence on the

dependent variable.

In regression 2, 34 variables were entered but only

17 were used in the stepwise procedure while the rest were

dropped. Of the 17 used, 8 were statistically significant

at the levels indicated; and the coefficient of multiple

determinations is 12 per cent. Using F-

statistic criterion at 5 per cent level, there is a

significant association between the dependent and

independent variables.

Relative to other members of the household,

household heads are more disposed, upon entering the

informal sector, to remain there rather than move to the

formal sector.

In terms of the reasons for entering the sector

(variable X05), those who settled for informal

entrepreneurship because they could not obtain the formal

alternative have the least probability of remaining in the

sector. This seems reasonable considering the fact that

entering the informal sector for this group of people was a

164

second best option. It is therefore not unlikely that this

group of people will still be thinking of moving to the

desired jobs in the formal sector. Following this group are

those whose parents cannot afford to sponsor them to the

desired educational level that can guarantee their

obtaining formal sector job, with a differential

coefficient of -0.08. Those whose parents influenced them

in taking entrepreneurial employment in the formal sector

also have a differential coefficient of -0.05 relative to

the control group (X051). In other words these groups have

a lower probability of remaining in informal employment

relative to those that are primarily interested in taking

up informal entrepreneurship.

Unlike the case of the formal sector workers, the

probability of remaining in the informal sector employment

rather than move to the formal is highest for those in the

highest income bracket (X14), while it is lowest for those

in income group N101 – N200, that is dummy variable X12

whose differential coefficient is not statistically

different from zero. This result suggests that higher

earning of informal sector entrepreneurs in MATS subsector

is an incentive towards remaining in the sector on a

permanent basis. The pride of owing an enterprise, freedom

from controls associated with formal wage job as well as

fairly high earning potentials are important factors

towards staying in the informal sector employment.

165

Previous employment also positively influence the

probability of remaining in the NFS as those in the

casual/domestic work before taking up entrepreneurship in

MATs have higher chance of being in the sector perpetually

relative to the control group i.e. those previously in

informal self-employment. Social mobility from domestic

service to self-employed entrepreneur is enough achievement

for these groups of people and when such point is reached,

they remain satisfied and formal sector-ward movement is

thus highly unlikely. It should be noted that these group

of people in the formal sector (Regression 1) also have

relatively low probability of leaving formal employment.

This suggests that whatever sector these groups of people

find themselves after leaving the casual/domestic work,

they tend to remain there perpetually.

Relative to those without formal education, those

with secondary education exhibit lower tendency towards

remaining in the sector. This is expected because, until an

average educated youth has committed himself to informal

employment either through frustration arising from

fruitless formal sector job search or through personal

intention to exploit the informal income-opportunities,

among others, the tendency to leave the sector is still

fairly high.

166

CHAPTER SEVEN

EARNINGS AND STATUS MOBILITY OF INFORMAL SECTORLABOUR FORCE

7.1: EARNINGS

As postulated earlier, one of the motivating

factors for entering the urban informal sector employment

is the possibility of maximizing life-time income stream.

Such informal employment could be through personal167

primary self motivation or as a second best option if

desired formal sector wage is not found. Table 7.1

shows the reported earnings of these workers. The self-

employed as expected99, earn more than the employees

within the urban informal sector. However, both in the

formal and informal sectors, workers in TS earn more than

those in MS. The mean level of earning in TS is N510.00

per month while it is N426.00 in MS. For the self-

employed, the highest monthly earnings is reported by

those in ‘other Technical Services’ with a mean monthly

earnings of N558.00 per month while the lowest earnings

is found among leather workers (N389.00). For all

enterprises, the self-employed earn an average of

N5,532.00 per annum which is about twice the national

minimum wage of N2, 820.00 per annum.

TABLE 7.1: MEAN MONTHLY EARNINGS IN IBADAN URBAN LABOUR MARKET

Sector ofEmployment

Informal Formal All EmployeesSelf

EmployedN

EmployeesN

AllInformal

N

EmployeesN

Formal andInformal N

MANUFACTURING 445 262 426 519 426Printing 455 287 422 431 425Leather 389 360 388 - 388Cloth 401 256 372 - 372Metal 501 228 445 447 445Block 390 305 339 - 339Woodworks 507 282 389 524 485TECHNICALSERVICE 478 391 493 628 510Auto-Repairs 448 354 426 412 422Electrical 472 317 450 805 570Others 558 496 551 778 599ALL ENTERPRISES 461 316 430 583 468AVERAGE ANNUALINCOME (N)

5, 532 3, 792 5, 160 6,996 5,616

168

AVERAGE ANNUAL MINIMUM WAGE

1.96 1.34 1.83

Source: Author’s Field Survey

This is made of:

(a) Basic salaryN

1, 500(b) Transport

Allocation

960

(c) House

Allocation

360

Total 2, 820

The informal sector employees earn considerably less

than the self employed (by about 32 per cent) but the

distribution of earnings is similar to that of the self-

employed. Informal employees in the TS earn more than their

MS counterparts, while workers in the ‘Other Technical

Services’ record the highest mean monthly earning of N496

per month. The cloth workers have the lowest monthly income

of N228 per month. However, the mean aggregate earnings of

the employees is about 1.3 times the national minimum wage.

Our findings regarding the earnings of the informal

urban labour force in Ibadan, therefore, does not support

the view in economic literature that urban informal workers

are the urban poor trying to eke out a meagre existence. In

fact, evidences of significant saving and investment have

169

been provided elsewhere for these class of workers in urban

labour markets (Oladeji and Ogunrinola, 1990; Amin, 1981).

In comparison with informal workers, employees in the

sampled formal enterprises earn more than their

counterparts in the informal sector. Like the earnings

distribution of informal workers, employees in TS earn more

than those in MS. The highest monthly earning is recorded

by electrical workers while wood workers have the lowest

monthly earnings.

Differences in the level of human capital endowment

whether institutional or personal, among others factors

account for the observed differences in formal-informal

earnings. Thus, differences in educational attainment, and

labour market experience, quality of training, as well as

accessibility to superior factors and techniques of

production are possible factors accounting for the observed

earning differential. For example, while the average number

of years spent in school by informal workers is 8 years, it

is 9.5 years for formal workers. While average labour

market experience for formal workers is over 12 years, it

is 9 years for the informal workers. Moreover, most of the

formal sector workers engage in moonlighting in the

informal sector either to supplement their wage income

or/and to prepare for their eventual return to the informal

economy. The resultant effect of all these is a relatively

higher monthly earnings for urban formal workers relative

to informal workers.

170

Table 7.2 gives the percentage distribution of workers

by income group and sector of employment. In spite of the

impressive income level recorded by the urban labour force,

this table shows that some workers are earning very low

level of income.

TABLE 7.2: PERCENTAGE DISTRIBUTION OF URBAN LABOUR FORCE BYMONTHLY INCOME AND BY SECTOR OF EMPLOYMENT.

MANUFACTURING TECHNICAL ALL ENTERPRISESLESS THAN OR EQUALTO N100.00Informal SectorSelf EmployedEmployees Formal Sector

15.315.115.94.3

17.317.24.617.9

16.24.516.716.1

N101 – N200Informal SectorSelf EmployedEmployees Formal Sector

22.420.129.56.5

23.522.428.67.7

22.921.229.27.7

N201 – N500Informal SectorSelf EmployedEmployees Formal Sector

38.837.443.269.6

33.333.632.149.2

36.236.038.457.7

N501 AND OVERInformal SectorSelf employedEmployees Formal Sector

23.527.311.419.6

25.926.921.938.5

24.624.915.130.6

AVERAGE MONTHLY INCOMEInformal SectorSelf EmployedEmployees Formal Sector

426445262519

493528391478

430461583316

Source: Author’s Field Survey.

If we categorize those earning up to N100 as very low

income earners, N101 – N200 as low income earners, N201 –

N500 as medium income group and N501 and above as high

171

income group, we have the following picture. Within the

informal sector, 16 per cent of the workers earn less than

or equal to N100 per month. The incidence of very low

income is greatest among the informal sector employees (17

per cent) while it is 16 per cent for the self employed.

In terms of type of occupation, the informal employees

in TS are worse off as 18 per cent of them are in very low

income group while corresponding figure for MS is 16 per

cent. However, for the formal sector employees, the very

low income group constitute 4.5 per cent with 4.3 per cent

and 4.6 percent in MS and TS respectively.

In essence, a lower proportion of workers in the

formal sector relative to the informal, are within the very

low income bracket. These group of very low income earners

can be said to be the marginal group as the upper level of

their income is just 43 per cent of the minimum wage. It

may thus be difficult for them to maintain minimum level of

living. In other words, they are poor in the absolute sense

since they are below the poverty line as defined by the

national minimum wage.

About 23 per cent of the NFS labour force are in the

low income group. Like the marginal workers, the employees

are dominant in this class with 29 per cent, while the

self-employed are 21 per cent. Twenty-three per cent of

those in TS and 22 per cent of those in MS belong to this

income group. As expected, just about 8 per cent of formal

sector employees are in the low income category with the

172

majority (7.7 per cent) from the Technical Services

enterprises as compared with manufacturing (6.5 per cent).

The medium income group constitute 36 per cent of

informal sector workers with 39 per cent in MS and 33 per

cent in TS enterprises. Like the other two groups discussed

above, it is the employees that predominate (36 per cent).

It is interesting to note that majority of the formal

sector employees belong to this income class (58 per cent)

with the MS enterprises accounting for 70 per cent and TS,

49 per cent. This income class is the modal class for both

the NFS and FS operators. This suggests that the majority

of urban labour force within the skilled categories in our

sample, earn N200 – N500 per month.

Twenty-five percent of those in the high income group

are found in the informal sector while the corresponding

figure for the formal sector is 31 per cent. Within the

informal sector, the self-employed predominate in this

income class. Moreover, this income class is a typical in

the sense that it is the only class where the self-employed

are more dominant as compared to the employees. This

suggests that the self-employed are earning considerably

more than the employees. This assertion is supported by the

higher average monthly earnings of the self employed (N461)

relative to those of the employees (N316). However, the

formal sector employees enjoy higher average monthly income

(N583) relative to those in the informal economy (N430).

173

Table 7.3 presents the regression result of the

earnings distribution function fitted for the urban labour

force in ibadan. Its purpose is to shed light on those

factors affecting the distribution of earnings among

participants. Apart from the structural vaiable (sector of

employment) introduced to test the market segmentation

hypothesis; human capital variables (labour market

experience, education, quality of training and migration

status) as well as other socio-demographic variables were

included. This is to help us determine the impacts of such

variables on distribution of earnings.

Ten basic variables are used in the model but these

have been expanded to 29 by the use of dummy variables. In

all, 20 of these entered into the model while the rest

served as the control-variables. All the variables entered

into the equation are used in the stepwise regression

procedure adopted and 13 of the variables are significantly

different from zero at the levels indicatd. The regressors

explained 43 per cent of the variations in dependent

variable as shown by the magnitude of R2. By the use of F-

statistic, it is observed that there is an association

between the dependent and independent variables.

174

TABLE 7.3: EARNING DISTRIBUTION FUNCTIONS FOR THE URBAN LABOUR FORCE IN IBADAN

DEPENDENT VARIABLE: LOG OF WEEKLY EARNINGS COEFFICIENTS REGRESSION ERROR STANDARD

INDEPENDENT VARIABLES: 3.69 -1.HOUSEHOLD POSITION (X5)

X501: HeadX502: Others

-0.0796(a)

0.209

2.FORM OF EMPLOYMENT (X03)X031: Private SectorX034: Informal EmployeesX033: Self EmploymentX032: Public Sector

(a)0.481+

-0.211-0.974+

0.2850.3590.229

3.SEX: (X38)X381: MaleX382: Female

(a)0.257 0.276

4.MARITAL STATUS (X39)X393: Divorced/SeparatedX392: MarriedX391: Single

(a)-0.1670.129

1.000.210

5.MIGRATION STATUS (X43)X431: Non-MigrantX432: Migrant

(a)0.113+ 0.045

6.FATHER’S EDUCATION (X5)X521: No SchoolingX522: PrimaryX523: SecondaryX524: Post Secondary

(a)0.2390.0520.345

0.1580.4180.355

7.RESPONDENT’S EDUCATION (X42)X421: No SchoolingX424: Post Secondary X423: SecondaryX422: Primary

(a)0.082+

0.193+

0.0752+

0.0440.040.018

175

8.QUALITY OF TRAINING (X14)X141: Informal ApprenticeshipX142: Private Sector TrainedX144: Technical/ VocationalX143: Civil-Service Trained

(a)0.135+

0.121+

0.095+

0.060.040.01

9.LABOUR MARKET EXPERIENCEX54: Actual (Years)X55: Actual; Squared

0.075+

-0.0015+0.0220.0005

10. TYPE OF ENTERPRISE (X20)X201: ManufacturingX202: Technical ServiceR2

FN

(a)0.094+

0.432.50

397

0.017

Notes: + = Significant at 5 percent level a = Excluded category

Because of its semi-logarithm form, the regression is

to be interpreted to mean that a unit increase in an

independent variable results in a percentage change in the

dependent variable. Also, the regression coefficients

associated with the dummy variables should be interpreted

as giving the percentage difference in the earnings of an

individual belonging to a particular category relative to

the excluded category, after holding all that other

variables constant. This is as a result of the fact that

the constant term was not constrained to be equal to zero.

For example, the coefficient estimate of 0.481 for X032

means that employees in public sector earns more than those

in the private sector by 48 per cent; while 0.082 for X422

shows that those with primary education earn 8 per cent

more than those without formal education.

176

Both the experience (X54) and the square of experience

(X55) variables are significant at 1 per cent level and

have the expected signs. Given the functional form of the

model, the variables are expected to capture any

nonlinearities in the experience – earning profile. Thus,

holding all other variables constant, the experience –

earnings profile peaks at 25 years.100

The regression result supports our earlier findings

with respect to formal – informal earning distribution

pattern. On the average, formal sector workers earn more

than the informal sector workers. This supports the market

segmentation hypothesis that institutional factors (e.g.

location in the urban labour market) affects distribution

of earnings, ceteris paribus. Within the formal sector, the

self-employed are earning considerably more than the

employees. It is therefore not surprising that 95 per cent

of employees in the informal sector are looking forward to

establishing their own enterprises soon.

Our analysis shows that public sector workers earn

more than those in private sector of the formal economy.

The commitment of the government towards enforcing her own

minimum wage laws while some private sector organization

might not, explains this situation.

Respondents’ education dummies are all statistically

significant and have the expected positive impacts on

earnings distribution. These suggest that earning is an

increasing function of education. Successive level of

education makes increasing contribution to earnings. For

177

example, while primary education increases earning by 8 per

cent, secondary and post-secondary education increases

earnings by 11 per cent and 56 per cent respectively.

The coefficient estimate of type of informal

enterprise variable (X202) shows that being employed in TS

rather than in MS increases earnings by 9 per cent. This

supports our

earlier finding reported in Tables 7.1 and 7.2 above. This

is not surprising considering the higher effort utilization

rate in TS as compared to MS enterprises (Table 6.6).

For the migrants, the result obtained conforms to a

priori expectation. It shows that migrants earn more than

the natives. This is expected as migration is a self-

selection process towards the direction of greater economic

opportunities relative to areas of origin.

The statistical significance of X523 dummy shows that

social origin in terms of fathers’ educational attainment

influences earnings distribution. Thus, workers whose

fathers are educated up to primary school level have an

earning differential of about 24 per cent relative to off-

springs of fathers without formal education. One is however

surprised regarding the non-significance of the other two

education dummies: X523 and X524 i.e. fathers with

secondary education and those with post-secondary education

respectively.

With respect to the quality of training received and

earnings distribution, it is observed that quality of

178

training exerts fairly high and positive influence on

earnings distribution. Relative to those trained by the

age-old apprenticeship system, those trained on-the-job in

the formal private sector earn considerably more.

Similarly, other modes of training contribute more to

earning than the apprenticeship system; but the formal-

sector training (private or public), positively affects

earnings most. This is not surprising as formal sector

trainees and workers have access to more advance capital

equipment and other better training facilities as compared

to those in the formal sector. Such superior training

cannot but enhance productivity potentials and hence,

earnings.

Other socio-demographic variables included in the

model do not have statistically significant impact on

earnings distribution. Nevertheless, the model has been

able to explain 42 per cent of variations in earnings

distribution of urban labour force in Ibadan. It is,

however, interesting to note that for these group of

workers, human capital variables (experience, education,

quality of training, migration status) as well as

institutional variables (sector of employment) are

important determinants of earnings distribution.

7.2: OCCUPATIONAL AND STATUS MOBILITY OF URBAN INFORMALLABOUR FORCE

179

The employment history as well as earning analysis of

our respondents, are used to examine the potentials of

informal employment in providing social and occupational

mobility. Such mobility is inherent in formal sector

employment through seniority and promotion possibilities;

as well as inter-occupational movements by workers.

For our entire sample (462 respondents), 56 per cent

in their first employment while the rest had done at least

one other job before. For the subsample of informal sector

workers (351), 54 per cent are on their first job, while

the rest had done at least one other job before current

employment. Disaggregated by status in current employment ,

44 percent of the self-employed and 47 per cent of the

employees had held at least one job prior to current

employment.

Apart from the number of jobs ever held prior to the

time of our survey, status mobility is another interesting

phenomenon that this study seeks to examine. Change in

status from, say, journeyman to self employed or from

casual work to either employee or self-employed is

beneficial to the worker as this implies enhanced status

and earnings. However, those that moved down the ladder

from, say, self-employed to say casual job are likely to be

reported by our data. This situation is not unlikely to

exist in the informal sector. It is assumed that our

inability to capture such cases will not invalidate our

result.

180

Of the informal labour force that have done at least

one other job before embarking on current employment, 79

per cent are currently self employed while the rest are

employees. As shown in Table 7.4, majority of the workers

are on their second job (100 out of 156 or 64 per cent) and

this is more pronounced among the employees

TABLE 7.4: PERCENTAGE DISTRIBUTION OF INFORMAL SECTOR LABOUR

FORCE ACCORDING TO JOB HISTORY

SN. NUMBER OF JOB HISTORIESCURRENT STATUS OF RESPONDENT

(PERCENTAGE)SELF EMPLOYED EMPLOYEE NUMBER

1. One Previous Job 63 67 1002. Two Previous Jobs 27 27 423. Three Previous Jobs 7 6 104. Four and above 3 0 4TOTAL (%)Actual Number (N)

79123

2933

-156

Source: Author’s Field Survey.

(67 per cent) as compared to the self employed (63 per

cent). For the employees, none had held up to five jobs

altogether and for the self employed only 3 per cent are in

this group.

Our analysis is thus made up of (a) 4 people who had

four or more previous job experiences and these are the

self-employed; (b) 10 persons who had three; (c) 42 person

who had two; and (d) 100 persons who had one such

experience before getting employed in present job. For the

rest 195 of our NFS sample, current employment is their

first job. This to some extent, is an indication of

181

occupational mobility in the urban informal manufacturing

and technical services in Ibadan.

In terms of status mobility, Table 7.5 shows that 58

per cent of the current self-employed were employees in

their preceding job; 20 per cent were in casual, and 6 per

cent each in domestic category of jobs respectively. This

result suggests an indication of self – improvement and

upward social mobility since change of employment status

from employee to self-employed implies higher current

income and better future prospects in the informal economy

(see tables 7.1 and 7.2).

It should be remarked, however, that 10 per cent of

those currently self-employed did not change their status

and these are predominant in TS (75 per cent) relative to

MS (25 per cent) enterprises.

182

TABLE 7.5: PERCENTAGE DISTRIBUTION OF INFORMAL LABOUR FORCEACCORDING TO THEIR PRESENT STATUS, EMPLOYMENT STATUS INPRECEDING JOB AND TYPE OF ENTERPRISES IN CURRENT EMPLOYMENTPRESENTSTATUS

EMPLOYMENT STATUS INPRECEDING JOB

MANUFACTURING(MS)

TECHNICALSERVICES(TS)

N (PERCENT)TOTAL

Self-Employed

Self-EmployedEmployeesCasualDomesticOthers

2550507567

7550503325

12718824

10582066

ALL SELF EMPLOYED 49.6 50.4 123

100

Employees

Self-EmployedEmployeesCasualDomesticOthers

80638310025

203717-75

516624

154918612

ALL EMPLOYEES 67 33 33 100 ALL NFS LABOURFORCE

53 47 156

-

Source: Author’s Field Survey.

In contrast, those in casual and domestic services making

26 per cent of the sub-sample made a rather rapid status

mobility from their previous positions to enterprise –

owners. It is not impossible that these group of workers

had earlier been trained before going into casual/domestic

occupation probably to acquire starting capital. This is in

consonance with our findings reported in Table 5.3 where 41

per cent of our sampled entrepreneurs had to engage in

casual job before being able to obtain starting capital.

In general, of the one hundred and eleven currently

self-employed reporting status mobility, a greater

183

proportion (52 per cent) are from the manufacturing while

the rest (48 per cent) are from the Technical Services.

Of those that are currently employed in the MATS

subsector of urban informal sector of Ibadan, 24 per cent

reported an enhancement of status from casual and domestic

jobs to informal sector employee status. All the previous

domestic workers are in the manufacturing enterprises,

while 83 per cent of casual workers in preceding job are in

the same industry. For these workers, manufacturing, rather

than Technical Service industry offer a better scope for

upward status mobility.

It is, however, surprising that while 49 per cent of

those in employee category reported no change of status, 15

per cent actually suffered status retrogression from self-

employed to employee status. Of the latter, about four-

fifths are in the manufacturing while the rest are in the

Technical Services enterprises. Also, those reporting no

change in status are predominant in manufacturing (63 per

cent); while the sector is also responsible for the

majority of those reporting status enhancements.

As stated earlier, for those fully commitment to the

informal sector employment, status mobility from employee

to self-employed is the focus. This view gains additional

impetus when years of labour market experience is cross-

tabulated with employment status. This is shown in Table

7.6. it provides an indirect measurement of upward social

mobility over time.

184

Evidences from the table suggest that the chance of

moving from employee to self-employed status increases with

experience in the NFS of urban labour market. For those in

the one to six years in the MATS of Ibadan, 63 per cent are

self employed while the rest are employees. Those in the

self-employed category increased to 87 per cent and 94 per

cent as labour market experience increases from 7 – 15

years to 16 years and over, respectively.

TABLE 7.6: PERCENTAGE DISTRIBUTION OF INFORMAL LABOUR FORCEBY CURRENT EMPLOYMENT STATUS, AND LABOUR MARKET EXPERIENCE YEAR OF EXPERIENCE TOTAL SELF-EMPLOYED EMPLOYEES TOTAL1 – 67 – 1516 and Above

100100100

638794

37136

404020

Total Sample (N=156)

79 21 100

Source: Author’s Field Survey

Such enhanced status as experience increases becomes

reasonable when it is realized that after training, there

is little or no barrier to self-employment status. The

single most important requisite for entry is the starting

capital and probably, some experience on-the-job. Thus, as

post-apprentice experience increases, the required capital

and experience are acquired towards establishing own

enterprises. As noted earlier, the tendency towards self-

employment is likely to be high since self-employment

guarantees both freedom (associated with owning an

enterprise) and enhanced earnings.

Table 7.7 provides chronological average monthly

earnings in preceding and present jobs for those currently

185

in self-employment. The table shows that money income in

preceding job is lower than present one. This suggests that

status improvement and upward social mobility are directly

related.

Earnings increased by as high as a factor of about 6.6

for casual workers who are now self-employed; to 2.3 for

those previously in ‘others’ category before being

currently self-employed even for those that were self-

employed in previous employment, earnings increase by a

factor of 5. This shows that apart from change in status,

experience is another factor affecting the level of

earnings as shown previously.

TABLE 7.7: INCOME PROFILE (FROM JOB HISTORY) OF THE SELF-EMPLOYED LABOUR FORCE IN THE INFORMAL SECTORSTATUS IN RECEDING JOB MEAN MONTHLY INCOME (N)

PRECEDING JOB PRESENT JOB 2 ÷ 11 2 3

Self EmployedEmployeeCasualDomesticOthers

1431619363160

759541618259367

5.33.46.64.12.3

Source: Author’s Field Survey

Evidences from Ibadan informal sector for those employed in

MATS subsector, therefore, suggest a significant job and

status mobility between and within occupations

respectively. It is also shown that such mobility results

in enhanced economic welfare.

186

CHAPTER EIGHT

SUMMARY OF FINDINGS AND POLICY RECOMMENDATIONS

8.1 : SUMMARY OF FINDINGS8.1.1: Employment Generation, Skill Development andUtilization in the Urban

Informal Sector

The findings in this study confirm our first two

hypotheses in section 1.3.1 that the informal sector

contributes significantly to employment generation and

skill development. The observed smallness in size 101 of

these enterprises notwithstanding, they have been found to

be important sources of employment and skill formation.

The 544 enterprises sampled engaged a total number of

3, 213 workers. 102 This represents an average of about 6187

workers per enterprise. Twenty percent of these workers are

owners, 11 per cent are employees, 66 per cent are

apprentices while the rest are unpaid family workers. It is

observed that paid employment is not very popular with this

kind of enterprises. This is because enterprise-owners are

primarily motivated towards creating jobs for themselves.

Apart from the owners and employees, our study reveals

a significant preponderance of apprentices among those

engaged in informal manufacturing and technical services

enterprises. These apprentices, more often than not, are

those young school leavers that have revised their previous

unrealistically sanguine labour market expectations after

having failed to secure the desired labour market jobs.

These apprentices have decided to acquire skills and later

set up own enterprises thereby availing themselves of the

perceived employment and income potentials of the urban

informal sector. It is therefore not surprising that 88 per

cent of them have decided to set up own enterprises after

training. Moreover, the fact that the government through

the National Directorate of Employment is involved in

apprentice training programme points to the perceived

potentials of the informal sector regarding its role in

employment generation and skill development for the

burgeoning urban labour force.

188

With respect to skill development, the informal sector

is playing a prominent role. The apprenticeship mode of

training is the most important. About 90 percent of the

entrepreneurs were thus trained in the informal sector

while these masters have themselves trained a total of

2,200 workers since they established their enterprises.

This represents about 4 trained labour force per

enterprise. Like their masters, these trained labour had a

sole desire of creating jobs for themselves after training.

It is not surprising therefore that 61 per cent of them had

establish own enterprises in line with their training and

11 per cent, are working as journeymen with their masters.

The rest are either on formal wage employment, in casual

job to mobilize starting capital, or their current where

about is not known to masters.

Apart from those that had been earlier trained, the

544 enterprises sampled have a total of 2, 119 apprentices

that are currently undergoing training in various aspects

of manufacturing and technical services. Not only do they

take up train apprentices by themselves, many of the

masters are training apprentices for the NDE. This

underscores the importance of these enterprises towards

skill development. However, in terms of skill utilization,

not a very encouraging result was obtained. The mean level

of skill utilization is 64 and 79 per cent using the

income, and hours engaged measures respectively. This

indicates that the level of underemployment lies between 21

and 36 per cent in the sector.189

8.1.2: The Urban Informal Sector: Marginal or Dynamic?

This study confirms our fourth hypothesis that the

sector is dynamic rather than being marginal. It also

points to several factors responsible for dynamism within

the urban informal enterprises. Evidences of dynamism are

summarized below using several key variables relating

either to the enterprises or the operators.

Earning of Urban Informal Sector Labour Force

In terms of earnings, informal sector operators

compare favourably with their formal sectors counterparts.

This is because majority of the informal workers earn more

than the government minimum wage.

About 61 per cent of the sampled informal sector

workers earn more than N200.00 per month; while comparative

figure for our sampled formal sector workers is 88

per cent. For all categories of workers (formal or

informal), the modal income group is N201 to N500 per

month. However, for the informal sector workers, the means

monthly income is N430.00 while it is N583.00 for the

formal sector workers. Among the informal labour force, it

is observed that the self-employed earn more than the

employees. Each of the two groups earn N461 and N316

respectively on the average per month (Table 7.2).

Evidences presented in Table 7.2 show that 61 per cent

of the informal sector workers enjoy a relatively modest

190

level of the income (above N200 per month) while 16 per

cent can be said to be the marginal group. Those in the

N101 to N200 per month (23%) constitute the intermediate

group.

Earnings analysis using multiple regression approach

shows that the sector of employment (whether formal or

informal), migration status, social origin of respondents

proxied by fathers’ educational attainment, educational

level of respondents, quality of training as well as labour

market experience significantly contribute to earnings

distribution in the urban labour market (Table 7.3).

The Enterprises

Apart from individual earnings of workers, some

striking characteristics of the enterprises also give

indications of dynamism some of which are summarized below.

First, it is observed that most of the enterprises in

our study area are characterized by increasing survival

rate as compared to those in studies carried out in

previous years. For instance while the modal age group of

enterprises in this study is 10 – 15 years, comparative

figure for informal sector enterprise in Lagos is 2 – 5

years.18 For Ibadan in the 1960’s it was 6 – 10 years.7

Second, though the starting capital levels of

enterprises are generally very low, yet enterprises are

able to generate surplus for reinvestment into the

business. This explains why mean capital stock increased to

over N8, 000 per enterprise from the low initial level of

191

about N1, 000 within a period of 11 years which is the mean

age of enterprises. It is therefore not surprising that a

modest capital growth rate of about 11 per cent per annum

on the average is recorded by these informal enterprises.

Third, the number of people engaged in these

enterprises is showing a remarkable increase over time.

While many of these enterprises started as a one-person

business concerns, phenomenal growth has taken place over

time. For all enterprise, the mean annual rate of growth of

people engaged is 8 per cent.

The Entrepreneur

The personal characteristics of the entrepreneur

coupled with his role within the enterprise are major

determining factors of whether the enterprise will be

dynamic or marginal. For instance, his level of education

and commitment to his duties affects the survival as well

as the growth of the enterprise.

For our sampled entrepreneurs, it is observed that the

educational level of operators are moderately increasing as

compared to those in other previous studies in Nigeria. In

Callaway’s study of Ibadan, majority of the entrepreneurs

were in the ‘no schooling’ category. In this study,

however, only 10 per cent of the entrepreneurs had never

attended school, 50 per cent had primary education, 34 per

cent had secondary education and 5 per cent had technical

education.

192

The trend recorded above is also observed among

current apprentices who are the future enterprise owners in

the informal sector. Among them, only 1 per cent had never

attended school, 30 per cent had primary education while

the remaining 69 per cent had at least secondary education.

This trend towards improved formal educational attainment

of informal sector participants is a potent force towards

managerial improvement, hence increased efficiency,

modernization and dynamism of such enterprises over time.

In terms of commitment and job satisfaction of

entrepreneurs and other informal workers, our study shows

that the majority of the workers are strongly committed to

their enterprises. Eight-six per cent of the workforce

(entrepreneurs and other workers) are totally committed to

their jobs and are not considering formal-sector

alternatives. Given such level of commitment, it is thus

not difficult for these workers (especially the

entrepreneurs) to make necessary sacrifice towards the

growth of their businesses. One of such sacrifices is in

term of working long hours, thereby engaging in what Amin

(1981) describes as ‘self-exploitation’ in order to sustain

the enterprise and generate surplus for reinvestment. This

becomes imperative since formal sector credit is, in most

cases, not available for most of the urban informal

enterprises.

Given the above, it is therefore not surprising that a

considerable upward mobility and the resultant enhanced

earnings over time are observed among the workers in the

193

sector. Among the self-employed that have held at least one

other job prior to current employment , 88 per cent

experienced status mobility from employee, casual workers,

domestic servants and other kinds of jobs to self-

employment status. Similar impressive result was obtained

from the employees. Moreover, it was observed that the

scope for upward social mobility increases with the number

of years of labour market experience. These evidences

suggest dynamism of enterprises and operators in the

informal sector of Ibadan.

8.1.3: The Urban Informal Sector: In Transition?

The probabilistic migration model posits that informal

employment is a temporary phenomenon for urban migrants on

their way to formal sector employment. In other words, the

urban informal sector, rather than being a permanent

feature, is considered a temporary staging post to which no

worker is seriously committed since finding the desired

formal sector employment is the goal. By implication, the

informal sector will then cease to exist when the formal

sector is able to generate enough jobs to meet the needs of

urban labour force. Our third hypothesis in section 1.31 is

put forward to test the probabilistic migration thesis. The

result emanating from our study does not uphold the

hypothesis.

Among the informal labour force interviewed for this

study, 86 per cent of operators (workers and owners) and 85

per cent of apprentices view their commitment to informal

194

sector employment as permanent without considering the

formal sector alternative. And surprisingly, as much as 94

per cent of the formal sector employees interviewed in MATS

occupations expressed strong desire of quitting formal

sector jobs to establish own enterprises in the informal

sector. This is premised on the view expressed by majority

(81%) of workers interviewed that informal sector

employment is much more rewarding because, among other

reasons, it guarantees freedom from being controlled by

others as well as pride of owning an enterprise.

Factors that are found to be influencing commitment of

informal sector workers on one hand, and those responsible

for inducing formal sector workers to informal sector

include: level of education attained, social origin of

operators proxied by fathers’ educational attainment,

respondents’ position in the household, level of earnings

per month, previous occupation and reason for entering a

particular sector of employment. The magnitude and

direction of each of these variables are as shown in Table

6.8.

Moreover, as reported in section 8.1.2 above, the

inherent dynamism of the informal sector enterprises in

terms of impressive growth rate of employment and capital,

increasing survival rate, moderately increasing educational

level of operators, technological diffusion as a result of

formal – informal migration of workers, among others, are

factors that will continue to influence the modernization,

195

the scale as well as increasing labour absorption of the

sector. Furthermore, the increasing educational attainment

of operators has the tendency of improving the

organizational techniques, productivity, income and the

capital base (assuming surplus generated are reinvested as

is being done now) of the enterprises. Thus, the transition

possibilities of these informal microenterprises to small-

scale industrial enterprises that are motivated, not only

by self-employment objective, but by investment and

employment objectives will be enhanced. This will increase

the importance of wage employment in the sector.

8.2 : POLICY RECOMMENDATIONS

Our findings suggest that the urban informal workers

are not a disappearing marginal group but a major and

growing element in the urban labour market. It is therefore

relevant to address the implications of these findings for

policy formulation. Policies or support measures are

necessary if the performances of the informal sector

enterprises and their operators are to be improved and

sustained over time.

Employment level in the informal sector varies

directly with income. In this regard, policies aimed at

strengthening formal – informal linkage through subcontract

arrangement as well as direct purchase of goods and

services by government institutions and parastatals from

informal sector enterprises, will increase the level of

196

patronage of these micro-enterprises. This in turn will

increase the level of skill utilization, income and level

of employment. It is also opined that such increased

patronage, has a tendency to increase the standard of goods

produced as the new patrons (government and its agencies)

will be more interested in specifying and enforcing

standards in the sector.

The level of education and quality of on-the-job

training received have positive relationship with the level

of employment and income. As shown in our employment and

earning models, training through the formal sector

contributes more to employment and earnings than informal

apprenticeship form of training. This suggests that for

enhanced personal income as well as greater employment

promotion within enterprises, more formal on-the-job

training should be promoted among current and would-be

informal MATS workers. This has the tendency of enhancing

technological diffusion, better adaptability to change and

improved performance of the informal work force.

In this regard, the efforts of the National

Directorate of Employment (NDE) towards training of

apprentices using the formal and informal sectors is in the

right direction. If encouraged to settle in the formal

sector after training, those trained in the formal

organizations will help diffuse formal technical know-how

through training own apprentices. This diffusion process is

197

expected to be promoted through the multiplier process

within the informal economy.

For masters currently employed in informal MATS

enterprises, as well as those apprentices currently

undergoing informal apprenticeship, their level of skill

and technical know-how could be upgraded through extension

workers’ visit to these enterprises from time to time to

demonstrate to informal operators better methods of doing

their jobs. Moreover, in achieving skill improvement and

technical diffusion, the ‘Mature People’s Scheme’103 of the

NDE could be expanded to include those in paid employment

wanting to opt out (before retirement) of formal employment

to informal jobs but lack the necessary capital. This will

be of particular benefit to many skilled workers in the

MATS category. Our field work shows that 94 per cent of

those interviewed in the formal sector wanted to set-up

informal enterprises but lack the necessary capital.

Encouraging such formal-informal mobility of workers, apart

from promoting skill improvement and technological

diffusion in the formal sector, will create vacancies in

the formal organizations they are leaving. Also those

leaving formal sector employment will create employment for

themselves immediately and later for others.

Another factor that positively influences the level of

employment is the level of present capital. As shown in our

analysis, majority (88%) of the entrepreneurs in the urban

informal sector obtained their initial capital from

informal sources. This is because the formal

198

sources of credit consider them a credit risk as these

entrepreneurs possess no required collaterals. It is not

surprising, therefore, that capital level for these

enterprises are generally very low, especially if compared

with formal sector enterprises.

Therefore, policy measures aimed at allocating greater

credit resource to these enterprises will boost employment

and earnings: in this regard, the newly established

Government Poeples’ Bank can be charged with the

responsibility of mobilizing from, and dispersing credit

among, the organizations of informal sector workers; among

other patrons of the bank. As argued by Oladeji and

Ogunrinola (1990), such arrangement of mobilizing savings

and granting credit through the existing organizations of

craftmen rather than the current practice of using peer

group, will enhance wholesale distribution of credit and

guarantee loan repayment. Such access to loan will widen

capital base and enhance the level of employment, skill

utilization and earnings.

Widening the capital base of informal sector

enterprises has an implication on technology to be adopted

in these organizations. Thus, research institutions should

be encouraged to develop simple, efficient but labour-

intensive technology. Such machines should be affordable,

easy to learn and able to improve product quality. The

resultant effects of increasing product quality and

productivity will lower product prices, widen the market

199

and increase employment opportunities as well as income of

informal sector participants. Moreover, there is a need for

a systematic data-

collation exercise on the urban informal activities. This

will be possible if these enterprises are encouraged to be

registered thus allowing more information necessary for

planning purposes, to be obtained from them.

Having discussed the policy recommendation that will

promote employment and earnings of the urban informal

economy, it will be of relevance to discuss the

implications of promoting the urban informal sector on the

urban environment.

Promotion of employment and earning of urban informal

enterprises has the potential of exacerbating rural-urban

migration. Thus, to avert this outcome, regional

development policies should be geared to the promotion of

economic and social development in the rural areas. Such

areas, if developed, will favour the springing up of non-

farm formal and informal manufacturing and technical

service enterprises. This will reduce the rural-urban

imbalance in economic opportunities and therefore temper

the rate of urban-ward migration and its attendant slum and

squatter settlements in the urban areas.

8.3: PROBLEMS AND LIMITATIONS OF THE STUDY

One single most important problem encountered in the

conduct of this study has to do with data collection. Given

200

the literacy level of our target population, most of them

were suspicious of surveys of this type. They usually

connect it with the government’s attempt at obtaining

information for taxation purpose. However, we succeeded in

allaying such fears entertained by some of the operators

and as such a good number of them cooperated.

Related to the above is the issue of record-keeping by

enterprise-owners from which data could be easily supplied.

Most of our target population either do not bother, or are

not literate enough to keep any systematic record of their

business transactions. As such, they have to rely on their

memory to supply information required. Moreover, given the

secrecy with which income is held among Nigerians, most of

the entrepreneurs that gave information are therefore

likely to have under-reported income level and/or

exaggerated costs.

However, the design of our questionnaire as well as

the training of our enumerators took these problems into

consideration. As such, errors likely to creep into data

collected as a result of these problems were reduced to the

barest minimum.

With respect to limitations of the study, the study

relied on cross-section data. Such data collected at a

point in time did not enable us to know anything about

enterprises that did not succeed and had thus folded up

prior to our survey. This is a limitation to our study as

factors affecting failures of such enterprises could not be

examined. A probable solution to this would have been to

201

embark on a longitudinal survey of selected enterprises

over a given period. However, given the time and fund

available for this study, such approach was not possible.

8.4 AREAS FOR FURTHER RESEARCH

The urban informal sector is vast but suffers

considerable neglect in terms of research. For example, our

study covers two out of about five industrial groups within

the sector. Thus,

enterprises in Trade, Building and Construction, and

Transport were not covered in this study and these also

need adequate study. Further research efforts into factors

determining the direction of growth – vertical or

horizontal – as well as the technological and employment

implications of such growth are of crucial importance.

Also, the policy environment in which the informal sector

participants operate, and their adjustments to these

policies require research attentions. Moreover, the role of

women in the sector needs be studied to examine their

contributions to development within the urban labour

market, given their numerical importance especially in the

trading subsector of the urban informal economy.

202

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APPENDIX A

OBAFEMI AWOLOWO UNIVERSITY, ILE-IFE

DEPARTMENT OF ECONOMICS

SURVEY OF INFORMAL SECTOR ENTERPRISES IN IBADAN

Dear Respondent,

This research questionnaire aims at obtaining

information regarding your enterprises for the purpose of219

private academic research in the Department of Economics of

Obafemi Awolowo University, Ile-Ife.

We appreciate the contributions of businesses like

yours to the Nigerian economy and as such we intend to

research into these firms with the aim of coming up with

policy measures that will enhance the survival and growth

of such firms especially in an austere time like this.

We want to assure you that the work has nothing to do

with the government and/or taxation and as such we will

treat all information obtained with the strictest

confidence.

We sincerely appreciate your cooperation. Thank you.

‘Ranti Ogunrinola,Research Co-ordinator

1. Nature of business (e.g. Carpentry, Barbing, Clerical,

Teaching) ……………………

2. Location/Address: .……………………………………………………………………

3. Status of Respondent:

(i) Owner ………………………………………………………………………

(ii) Worker (Paid Employees)…………………………………………………..

(iii) Apprentice ………………………………………………………………….

(iv) Journeyman …………………………………………………………………

(v) Unpaid Family Worker ……………………………………………………..

220

4. Type of Workshop:

(i) Open sky ……………………………………………………………………

(ii) Open shed ……………………………………………………………………

(iii) Rented shop …………………………………………………………………

(iv) Part of Owner’s rented apartment

………………………………………….

(v) Owner’s premises …………………………………………………………..

(vi) Uncompleted building by the roadside

…………………………………….

(vii) Others ………………………………………………………………………

5. What year was this business established? …………State

number of years …

6. What is the form of business organization?

(i) Sole Proprietorship ………………………………………

(ii) Partnership ………………………………………………

(iii) Family-Owned …………………………………………

(iv) Registered private company……………………………

(v) Others ………………………………………

7. Does this workshop have Yes

No

(i) Electricity/Electric Machine ........

………..

(ii) Water supply ………..

…………

(iv) Telephone ……….. …………

8. Kindly state number of personnel in this enterprise.

Number Number whenNow Established

221

(i) Owners ………………………. ………………………..

(ii) Employees ………………………. ………………………..

(iii) Journeymen ………………………. …………………………

(iv) Apprentices ………………………. ………………………..

(v) Unpaid family workers……………………… ………………………..

9. Kindly state the number of personnel having the

following education:

Owners Paid Journeymen Apprentices Unpaid Family

Employees Workers

a. No. schooling

b. Below full Primary

c. Full Primary

d. Below full secondary

e. Full secondary

f. Technical/Vocational

g. First Degree/HND

h. Others (Specify)

10. Number of hours enterprise opens for work per day

…………………………………

11. On the average, how many hours is the business fully

engaged per day?

(i) Last week ………………………………………………………………………

(ii) In time of high demand ………………………………………………………

(iii) In time of low demand …………………………………………………………222

12. When having low demand, what does the workers do?

…………………………………………………………………………

13. If workers do other jobs, how much per week is

realized? ………………………………………………..

14. Please state mode of vocational training of workers.

NUMBER OF Owners Paid

Journeymen Employees

a. Trained by informal sector masters

Sector masters

b. Trained by the N.D.E.

Trained by private firms e.g. U.T.C.

c. Public Service trained

d. Trained in the Technical School

e. Others (Specify)

15. Please state number of workers in the following age-group:

Owners Paid Journeymen Apprentices

Family

a.

Less than 15 years

b.

15 – 19 years

c.

20 – 24 years

d.

25 – 29 years

e.

30 – 34 years

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f.

35 – 44 years

g.

45 – 49 years

h.

50 years and above

16. Since established, how many apprentices had this establishment trained? …

17. How many of these were trained for NDE? ……………………………And how many are still being trained for NDE? ………………………………

18. Please, state placement of ex-apprenticesNumber

(i) Started own business…………..

(ii) With master as employee/Journeymen…………..

(iii) Looking for job…………..

(iv) With other masters as employee/journeyman…………..

(v) In formal sector employment e.g. government,Private firms, etc.

…………..(vi) Places unknown

…………..19. (a) With how much capital was this business

established? .................(b) Express initial capital in current prices?

20. Please state how such initial capital was obtained?(i) Gift from friends/relatives …………………………………………..(ii) Own Savings …………… State savings mode ……………………….(iii) Loan from friends/relatives …………………………………………….(iv) Loan from Bank …………………………………..

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(v) Did casual job until capital was obtained ………………………….(vi) Others (Specify) …………………………………………………….

21. What is the present capital of this business? ………………………………

22. (a) Please state approximate not income realizedLast week N …………………………………………………………

(b) What is average weekly income?(i) This year N …………………………………………………..(ii) Last year N ………………………………………………….

(c) State previous peak income from apprentices N ………………….

23. Please state average annual income from apprentices N………………….

24. Assuming you are fully engaged, how much income can you realize per week?(a) This year N .…………………………………………………………….(b) Last year N ……………………………………………………………..

25. Please state This Last When

Year Year Establisheda. Average value of

Production per week ……….. ………… …………

b. Average value of Raw Materials for one weeks production

............... … ……… ..………..

c. Average value of sales per week ………… ………… ………..

d. Average value of raw materials for one week’s production

......… ………… …………

26. How much per week do you pay as?

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a. Wages to employees …………………… …………b. Wages to Journeymen …………. ………… …………c. Rent to premises ………… ………… …………d. Cost of raw materials ………… ………… …………e. Cost of fuel …………. …………. …………f. Electricity Charges ………… …………. …………g. Rate/Due to local government ………… ………… ………h. Other production expenses ………… ………… …………

27. How much per week can you attribute to wear and tear of machines and tools N …

28. Assuming you hire your equipment, how much per week will you be paying N ……………

29. Kindly state the main source of your major raw materials(s)a. From formal private company ………………………………b. Informal sector enterprises …………………………………c. Government establishment …………………………………d. Others ……………………………………………………

30. State main products of this firm ……………………………………(b) State Number of firms making similar products in this town ……

31. What kind of people/firms buys your products?(Please rank) a. Private individuals ……………………………………………b. Other Informal sector enterprises……………………………c. Private firms …………………………………………………..d. Government and Parastatals …………………………………e. Others …………………………………………………….

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32. Has this business ever received subcontract fromYes No

a. Government and/or its Agencies ……… ………

b. Private formal sector firms ……… ………

c. Other informal sector firms ……… ………

d. Other s (Specify) ……… ………

33. If yes, has such subcontract helped your business growth?

a. Yes ……………………………………………………………b. No ………………………………………………………………

34. If No, explain …………………………………………………………………………35. Please state how often you receive any of these

assistances from the government or any of its agencies.

Never Occasionally Always

a. Loanb. Extension servicec. Training/Seminar/Workshop

36. If you have ever received loan, has loan helped the growth of your enterprise?

a. Yes ………………………………………………b. No ……………………………………………….

37. If No, explain ……………………………………………………………38. Which of these assistances will like most to receive

from the government?(Please rank)a. Loan …………………………………………………………………b. Extension service ……………………………………………………

c. Training ……………………………………………………………...d. Subcontract …………………………………………………………e. Favourable legislation ……………………………………………….

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f. Others (Specify) ……………………………………………………..39. Will you like to organize into cooperative society to

achieve the above?a. Yes ……………………………………………………b. No …………………………………………………….

40. Is your Union doing anything to achieve any of the assistances in No.? (35) Above?

a. Yes ……………………………………………………………b. No …………………………………………………………….

41. Do you consider this business to be growing?a. Yes ……………………………………………………………b. No …………………………………………………………….

42. If No, what are the possible reasons?a. No access to credit ……………………………………………b. Low patronage ……………………………………………….c. Lack of skilled labour………………………………………………………d. Others (Specify) ……………………………………………………………

43. Given the high cost/non availability of spare parts and essential raw materials has this business ever adopted any new method in production in the last three years?a. Yes …………………………………………………………b. No …………………………………………………………………….

44. If Yes, briefly describe such new method …………………………………………………………………………………………………………………………

45. What advice do you have for the government towards improving the conditions of enterprises like this? ……………………………………

Thank you.

FOR OFFICIAL USE ONLY

Name of Interviewer …………………………………………………..…

Zone No. and Area: ………………………………………………………

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Duration of Interview ………………………………………………………

Signature and Date: ………………………………………………….…

NOTES:

(a) Responses to Open-ended questions should be

marked ‘X’

(b) Answers that are more than one should be ranked.

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APPENDIX B

OBAFEMI AWOLOWO UNIVERSITY, ILE-IFEDEPARTMENT OF ECONOMICS

SURVEY OF INFORMAL SECTOR ENTERPRISES IN IBADAN

Dear Respondent,

This research questionnaire aims at obtaining

information regarding Employment and earnings for the

purpose of Academic Research in the Department of Economics

of Obafemi Awolowo University.

Your responses will be treated with utmost confidence

and you are being assure that this work has no connection

whatsoever with government and/or taxation purposes.

Your cooperation will be highly appreciated. Please

note that your name and address need not appear on the

questionnaire.

‘Ranti Ogunrinola,Research Co-ordinator

SECTION A: (GENERAL)1. Business Location/Address: …………………………………………………………….2. Field of business (e.g. Carpentry, Barbing, Clerical,

Teaching) ……………………….3. Status of Respondent:

1. Employee in Private formal sector ……………………………………………

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2. Employee in Public Service ………………………………………………….3. Self Employed Entrepreneur………………………………………………….4. Informal Sector Employee ……………………………………………………5. Journeyman ……………………………………………………………………6. Apprentice ……………………………………………………………………7. Unpaid family Worker ……………………………………………………….8. Others (Specify) ………………………………………………………………

4. What is your impression/attitude towards this job?1. Satisfied …………………………………………………………2. Desired Self Employment ………………………………………………3. Looking for regular wage job …………………………………………………4. Planning to move to other town/business ……………………………………1. The job does not use my full potential

………………………………………6. Limited opportunity for

promotion…………………………………………7. Others (Specify) ………………………………………………………………

5. Why, in the first instance, did you desire to learn/ get engaged in this job?

1. Personally interested ……………………………………………2. Influence by parents …………………………………………………3. Needed a job to survive …………………………………………4. Couldn’t obtain wage job ……………………………………………5. Parents cannot afford higher education

………………………………6. Retrenched …………………………………………………………7. Withdrew from formal job ……………………………………………8. Post retirement exercise ………………………………………………

5 Others (Specify) …………………………………………………………6. Assuming the economic situation were buoyant, will you

still maintain the answer given in (4) above?1. Yes ……………………………… 2. No ……………………

7. If No, please state what your attitude to present job would have been ………

8. In case you prefer wage employment in (4) above

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(a) How much per month would you like to earn? N……………………

(b) Have you been searching for the job?1. Yes …………………………………….2. No ……………………………………

(c) If Yes, by what method?1. Writing application ……………………………. 2. Visiting possible employers ………………………….3. Through friends and

relatives…………………………….4. Registered in Labour office ……………………….5. Others (Specify) ………………………………………

9. If Craftsman/Apprentice, who decide that you should learn this work? ………

10. What relationship do you have with the master?1. Blood related ………………………………… 2. From the same town/village …………………………3. Not related …………………………………………

11. Please state previous occupation before engaging in learning this job:

1. Farming …………………………………………………………2. Schooling ………………………………………………………3. Trading ………………………………………………………4. Wage job ………………………………………………………..5. Self Employment …………………………………………………6. Domestic Service …………………………………………7. Casual job ……………………………………………8. Others (Specify)…………………………………………

SECTION B: (APPRENTICES SHOULD GO DIRECTLY TO QUESTIONS 27 AND 28)

12. How many years of experience have you had on 1. Present job ………………………………………2. Other jobs relevant to this ………………………………3. Other Jobs ………………………………………………

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13. (a) If a Craftsman, state number of years you spent in learning this job …………………………………………………………………

(b) Do not belong to your trade association?1. Yes ………………………………2. No ……………………………………

(c) If Yes, about how many members are there? ……………………………………

14. How many jobs have you held in the past before this one? ……………………………………

15. Please, state type of previous jobs, salary/earning, status and reasons for leaving:-

From To Year Average Status* Type of Reason for

Spent Monthly Job Leaving

Earnings

Last Job 2nd Last Job

3rd Last Job4th Last Job

* Please state whether: self employed, employee, casual workers, etc.16. For how many hours are you available for this work per

day? 17. Are you always fully engaged throughout this period?

1. Yes ………………………………….…2. No ……………………………………

18. (a) If No, what do you when not engaged? …………………………………………(b) If you work when not engaged about how much per week do you realize?

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……………………………………………………………………………………19. Given the current economic situation, do you think it

is necessary to have other job outside one’s regular job?1. Yes ……………………………………2. No ……………………………………

20. What job do you combine with your job? …………………………………………..

21. About how much per week do you realize from such job?1. This year N …………………………………………………………2. Last year N …………………………………………………………

22. Please state your future aspiration with regard to this job.

1. Continue until retirement/old age ………………2. Establish own enterprise soon …………………3. Get wage employment …………………………4. Go back to School ……………………………5. Return to home town/village ……………………6. Others (Specify):………………………………

23. If self employed, how much did you realize from this job?

1. Last week this year …………………………………2. Average earnings per week this

year………………3. Average earnings per week last year .....……………

24. If a regular wage worker:(a) How much per month do you earn in term of

This LastYear Year

a. Basic salaryb. House Allowance

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c. Transport Allowanced. Other Allowance

(b) State whether you enjoy/have YesNo

a. Paid annual leave ……… ………

b. Employers’ contribution towards social ……… ………Security (e.g. NPF, Gratuity, Pension) ……… ………

c. Paid maternity leave, if applicable ……… ………

d. Employment contract) ……… ………

e. Workers’ union that bargain for Improved working conditions

……… ………

(c) Is your company/government owned or registered bygovernment?

1. Yes …………………………………….2. No ……………………………………

(d) If not a technical worker, state whether you havelearnt any technical skill

1. Yes …………………………………….2. No ……………………………………

(e) If Yes, state the nature of the skill ………………………………………(f) Apart from your official job, do you engaged in

part-time self employment to utilize the skill.1. Yes ……………………………………2. No ……………………………………

(g) If yes, how much did you realize from such part-time work last week?

N …………………

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(h) When do you hope to be utilizing that skill on full-time self employment? …………………………………………………………………………………

(i) If you answer No, to question (24. d) above, do you intend to learn a job and latter become self employed?1. Yes ………………………………2. No ……………………………………

25. In relation to regular wage work, how do you rank selfemployment (S. E.)1. S. E. is better ……………………………………2. S. E. is worse ……………………………………3. No difference ……………………………………4. Cannot compare ………………………………

26. What advice do you have for government towards improving the lot of the self-employed? ………………………………………………………………

SECTION C: (FOR ALL RESPONDENTS)27. Can you please state?

(i) Your age ……………………………………..(ii) Sex: (1) Male ………………… (2) Female ………………(iii) Marital Status:

1. Single ……………………………………..2. Married ……………………………………3. Divorce/Separated …………………………………………4. Others (Specify) ……………………………………………

(iv) Religion:1. Christian ………………………………………………………..2. Muslim …………………………………………………………3. Traditional Religion ……………………………………………4. Others (Specify) ………………………………………………..

(v) State of origin/country for non-Nigeria …………………………….

(vi) Highest level of education attained:1. No. schooling …………………………………………………..

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2. Below full Primary ……………………………………………. 3. Full Primary ……………………………………………………

4. Below full secondary …………………………………………..

5. Full secondary ………………………………………………….

6. Technical/Vocational …………………………………………..

2. First Degree/HND ………………………………………………3. Others (Specify) …………………………………………………

(vii) Place of birth ………………………………………………………….(viii) If not born in this town, please state:

1. When you came to this town ……………………………………………… 2. Distance of home town from here

………………………………………… 3. Last occupation before coming to this

town ……………………………… 4. How much per month earned from

such jobs …………………………… 5. What did you plan to do on

reaching this town? ………………………… 6. First occupation in this town

Salary per month N ………………………(IX) Position in the household?

1. Head ………………………………2. Wife ……………………………………

(x) Father’s occupation …………………………………………………(xi) Father’s education …………………………………………………(xii) Average monthly/Annual income of

father N ………………………………

SECTION D: APPRENTICES ONLY 28. (a) For how many years will you learn this job? ……………………… years. (b) How many of these have you spent? …………………………………

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(c) Do you consider your mode of training to be satisfactory?

1. Yes …………………………………… 2. No ……………………………………

(d) If No, how do you think this training mode can be improved?

……………………………………………………………………………..

(e) How would you compare your training mode with?

My training mode is No Difference Cannot BetterInferior Compare

1. Similar training

With other master craftsmen 2. Training in Technical College3. Training through the N.D.E.

(f) 1. Are you one of NDE trainees? 1. Yes ……………………………… 2. No …………………………………… 2. If Yes, state advantages of this

training mode over the informal apprenticeship type: ………………………………………………………………

(g) State your future aspiration with regard to settlement after training?1. Get regular wage employment

……………………………………… 2. Move to other town to establish

……………………………………. 3. Establish own business in this

town ………………………………...

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4. Stay with master as employee/journeyman ………………………….

5. Engage in casual job until enough capital is demand ………………..

6. Others (Specify) ……………………………………………………...

(h) How much in total will you pay for this training?N …………………………

(i) Who will be responsible for paying the above?…….…………………………

(j) How much initial capital do you think you need N……………………………

(k) Who will provide initial capital for establishment? ……………………………

(l) How much income per week do you think you will berealized after training? N ………………………………………………

Thank you.

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