Higher education, labour market and economic growth in Uganda (1985-2017)

Abstract

Transitioning to an amalgamation of a knowledge-based economy and the fourth industrial revolution labour market; places a tremendous amount of responsibility on the higher-education sector. The economic growth fluctuations, labour market competition, preferred funding has left a query about the relevance of some or even all higher-education graduates. Therefore, this study provides a statistical version of the interrelation between economic growth, labour productivity, and Unemployment with higher education graduates, characterised by gender, academic discipline, and award level. These interactions are neither foreseeable from the available trend statistics, nor in the inconsistent and contradictory evidences in the existing literature. The study employed a unique blend of the Vector Auto Regression (VAR), the Vector Error Correction (VEC), and the Autoregressive Distributed Lag (ARDL) models; and the Cobb-Douglas production function. Alongside these new proxies of higher education and labour productivity were used to establish the interrelationship between the variables under study. These secondary data were obtained for the period between 1985 and 2017. Estimations showed that there exists a significant positive impact of higher education on: growth only in the long run; on labour productivity in both short and long run; and Unemployment in the short run. These results confirm that higher education, which is a tool of investment in human capital, having a statistically significant effect on the Ugandan economy and labour market. Evidences of reverse impacts were also found among the aforementioned relationships. In otherwords, this study indicates that economic growth, labour productivity, and Unemployment do affect the number of higher education graduates. Statistical evidences of effects of females, Arts, and Postgraduates were found on economic growth, labour productivity, and Unemployment. Male, Science, and Undergraduates were found to statistically have a higher impact on the same variables, than their counterparts the females, Arts, and Postgraduates. This study recommends that research, innovations, inventions, and practices should be introduced at higher education; while secondary education only emphasises subject-specific theory. This would facilitate good short run effect. The study also justifies the need for continued support for females, arts, and sciences, since their vital role in Uganda's economic growth and the labour market was evidenced.