IMPACT OF INFLATION ON LIVING STANDARD OF PUBLIC PRIMARY SCHOOL TEACHERS IN
GAGARAWA LOCAL GOVERNMENT AREA, JIGAWA STATE –NIGERIA
Abdullahi Maigari Gagarawa
1, Dr. Monika Mehrotra
21,2Department of Economics, Nims University, Jaipur (India)
ABSTRACT
Inflation is the general rise in the prices of goods and services thus leading to a fall in the value or purchasing power of a country’s currency. This paper is set to investigate the effects of inflation on living standard of public primary school teachers in Gagarawa Local Government Area of Jigawa State–Nigeria in terms of their monthly income, expenditures and their comparative standard of living over the period (2014-2016). Research hypothesis was formulated based on the research problem and objective. Survey design was used to collect data by the use of a structured questionnaire. Samples of 155 teachers were selected from the population of the study.
The data collected were analyzed using frequency distribution and percentages. Chi-square was used to test hypothesis, the result from hypothesis testing made the null hypothesis to be rejected while the alternative was accepted. Major findings and conclusion are that since inflation erodes teachers income, increased their expenditures subjecting them to receiving loans with high interest, forcing the teachers to take an extra income generating works in an attempt to maintain their normal life, these consequently undermine their living standard. The study recommends that wage-rate should be increased in such a way that it would match the expected increase in inflation rate, this will help to maintain a good standard of living for the whole classes of public primary school teachers. There is the need on the part of the government to have quick and direct intervention on prices of goods and services particularly on food items, this would facilitate and create a safe- guard to both the middle and lower classes of the teachers under study.
Keywords; Inflation, Living Standard, Nigeria, Teachers
I. BACKGROUND OF THE STUDY
One of the most crucial challenges of the present times is the problem of rising prices that is inflation. When prices of essential goods and services rises, it become harder for the poor-with limited resources- to be able to afford those goods and services. Its effects can be felt by each and every person to at least some degrees, whether he is a doctor, engineer, teacher, lawyer etc or anybody. Inflation is in partial in selecting its innocent victims. Inflation in general, is seen as the rise in the general levels of prices maintained over a given period in an economy. In other words, it refers to the general rise in the prices of goods and services thus leading to a fall
in the purchasing power of a country‟s currency Lipsey R. G. & Chrystal K. A. (1995). According to Tucker (2007), he viewed inflation as an increase in the general price level of goods and services in the economy. It also takes place when prices of goods and services expand more in proportion than the increase in the proportion of output Shahid, (2010). Furthermore, inflation refers to a rise in the general price levels of goods and services over time and not prices of some specific set of goods or services, as in commodity inflation or core inflation, which is measured as the percentage rate of change of a price index. Haq, (2008). However, Sloman and Kevin (2007), explain that inflation may either be Demand-Pull inflation or Cost-Push inflation. Demand-Pull inflation is a type of inflation caused by persistent increase in aggregate demand over aggregate supply, thus the firms respond by raising prices and increasing their output. While Cost-Push inflation on the other hand, is related to persistent increase in costs experienced by firms in the production of goods and rendering of services.
However, inflation is classified into various degrees which includes; hyper inflation which is of (3 digit % point)rate, extremely high inflation of (50% to 100%) inflation rate, chronic inflation with inflation rate of (15%
to 30%), high inflation of (30% to 50%) inflation rate, moderate inflation of (5% to 25%-30%) inflation rate, low inflation with inflation rate of (1% to 2%-5%), Umaru A. & Zubairu A.A.,(2012).
In terms of measurement, it is observed that there are various methods to be used in measuring the rate of inflation in an economy, this is because there are so many price indices relating to different sectors of the economy, Tucker,(2007). However, the most commonly known indices for which inflation rate are measured in many countries are the consumer price index CPI, which measure prices relating to consumer, and the Gross Domestic Product Deflator GDP Deflator, which measures prices relating to goods and services produced locally.
Inflation is one of the most crucial factors leading to social and economic instability and disorders in an economy. It is one of the frequent and largely observed and tested variable both theoretically and empirically, Zou, et. Al. (2011). According to Rizvi and Naqvi, (2010), the cause-and- effect of inflation on other economic variables, and it s cost effect to the entire economy are clearly spelt out. Carlos , (2009) in his study indicated that inflation is a global issue of concern because larger proportion of the population have been affected , while the marginalized sectors are comparatively more affected where a larger portion of their income is destined towards purchasing food items. During periods of inflation a substantial increase in miseries may be expected of those who are already living below the poverty line and can be expected to drive others into poverty (ADB Report, 2008).
Globally, the excessive adverse effects of inflation may be observed. In times of commodity or core inflation when the prices of food items rises, families with lower incomes feel the pinch more adversely since their expenditures on food items constitutes a larger portion of their total expenditures in a given period of time. The effects of inflation are felt by everybody but mostly hits the poor consequently increased their hunger and poverty, because of foodlessness or poor nutrition and a deteriorating standard of living; they became less likely to be productive and earn a living, they also became more vulnerable to diseases, which are an undeniable fact (CSOR, 2008). Inflation has already been reducing the purchasing power of consumers, (IPC, 2008). According to International Monetary Fund (IMF Report, 2008), states that inflationary pressures around the globe have intensified the purchasing power in commodity –importing economies that has been eroded, and some low and
middle income countries face difficulties in ensuring adequate food supplies for their poorest citizens who are in danger of losing the advantages in macroeconomic stability achieved in recent years.
In Nigeria, the history of inflation can be traced back to the cheap money policy which began in 1960.
Government at that point in time wants to encourage development in the key sectors of the economy after independence and therefore introduced the cheap money policy as a technique for the realization of the stated objectives. This policy was characterized by reductions in interest rates which were targeted toward certain sectors of the Nigerian economy. It was implemented to help in the execution of first national development plan and later the civil war. This however bring about an increase in the Nigerian budget in 1960 and consequently led to increased monetary expansion during that period.(Rosemary, 2015 ). Due to the increase in government expenditures budget deficit become acceptable, hence inflation stated to set at that period. As a result of the above mentioned condition, inflation rate rose from 6.4% in 1961 to 12.1% in 1969, Bayo, (2005). Moreover, in 1970, there was a boom in oil revenue, this led to a rise in government expenditures and this automatically propelled the aggregate demand to excessive levels. The excess aggregate demand was not accompanied by an increase in the output levels of goods and services produced domestically, thus leading to an increase in the quantity of money in circulation and led to the reduction in the purchasing power of money.
In addition to the above statements, the Udoji salary award of 1974, took the inflation rate from 13.8% that year to about 34% in 1975 due to increase in salaries and wages of workers. Salary and wage increase led to an expansion in aggregate demand creating an excess of the demand over supply, and this situation pushed the inflation figure to 35.9% within the same year. This period brought about the issue of imported inflation as goods and services has to be imported from foreign countries in order to neutralize the excess aggregate demand, Olubusoye O. E. & Rasheed O., (2008). The Keynesian theory of inflation was propounded by John Maynard Keynes (1883-1946) in his book titled „The General Theory of Employment, Interest and money‟‟.
Keynes and his followers emphasized the increase in aggregate demand as the source of demand pull inflation.
There may be more than one sources of demand .Consumers want more goods and services for consumption purposes. Businessmen want more inputs for investment. Government demands more goods and services to meet civil and military requirements of the country. Thus the aggregate demand comprises of consumption, investment and government expenditures. When the aggregate demand exceeds the value of aggregate supply at the full employment level, the inflationary gap arises. It can therefore be said, the excesses in aggregate demand over aggregate supply in the Nigerian economy to some extent has relationship with our inflation rate. The quantum of excess aggregate demand in the system will be the “cause” and the “effect” will be inflation.
Inflation influences the living standard of a country. When inflation rate increases, the price of all commodities also increases, this led to a fall in the real value of money as too much money will be purchasing only few goods, reduction in the purchasing power of consumers and therefore, complicating the standard of living. The impact of inflation on household has made it very difficult for many of them to have access to their basic necessities as they have gone beyond their purchasing power. Due to the fact that their purchasing power has fall drastically, they were therefore compelled by the situation to take loans in order to meet up their expenditures which further over burden their economy as they must repay the loan with interest which are usually high. For households to maintain their standard of living or met up their expenditures which always increases during
inflation, many households has to resort to extra income generating activities which is a sign of dip down in their leisure time, productivity, better social as well as their physical health. As such, inflation reduce the level of living standard through reducing the real income of households, thereby compelling them to take on extra income generating works and subjecting them toward receiving loans with high interest rates.
High inflation has so many effects; it can lead to a breakdown of the whole economy as money loses its value, inflation lead to high wage demand as workers want to cover up the high cost of living, Economics, (2010).
Inflation also creates uncertainties; people do not know what the money they earn today will buy tomorrow?
This discouraged saving, productive activities and investment. Many of these challenges have crippled, and still are being faced by Nigerian economy. This study therefore, focuses on finding the impact of inflation on standard of living of public primary school teachers in Gagarawa Local Government Area, Jigawa State-Nigeria.
II. PURPOSE OF THE STUDY
Several studies have been carried out on the issue of inflation, but the researcher selected this unique topic based on the fact that it draws a relationship between inflation and standard of living. Rising levels of inflation deteriorates standard of living. In Nigeria, this is the flaring issue and also determines the rank of Nigeria in Human Development Index (HDI).
Therefore, the increase in the prices of goods has left so many adverse effects on individuals‟ life in Nigeria.
Such kinds of price increase create various difficulties and complications in standard of living of the Nigerian populace.
In view of the above situations, the researcher is seriously disturbed by this ugly condition especially in relation with living standards of public primary school teachers in the study area. As a result of this disturbing situation, the researcher examined the actual happenings in the study area to either agree with the claims of some teachers or disprove their assertions. However, the whole essence is to remedy the condition if it exists. Therefore, the main objective of this paper is to explore the impact of inflation on living standard of public primary school teachers in terms of their income, expenditures and comparative living standard.
Hypothesis of the Study
The study formulated one hypothesis as follow:
HOI: There is no significant relationship between inflation and the level of living standard of difference classes of public primary school teachers in the study area.
H1: There is a significant relationship between inflation and the level of living standard of difference classes of public primary school teachers in the study area.
III. METHODOLOGY
This research is set to critically examine the impact of inflation on living standard of public primary school teachers in Gagarawa Local Government, Jigawa State-Nigeria over a three years period (2014-2016). This was carried out to investigate the effects of inflation on teacher‟s monthly incomes, expenditures and their general living standard during the period under study.
3.1 Sampling Procedure and size
This study employed the convenience random sampling in which the primary (public) schools teachers under the study area were divided into ten (10) inspectorate areas. Random probability sampling was used to select the sample size where every teacher of the population under study has equal chance of being selected as a sample for the study. For the study fifteen (15) teachers from each of the ten inspectorate areas were selected forming a sample size of one hundred and fifty (150) respondents. Therefore, 150 questionnaires were administered to collect the required information from the respondents. These questionnaires were properly filled as all the respondents of the study were teachers; therefore, all the administered questionnaires were correctly filled, returned and used for analysis.
3.1.1 Population of the Study
The target population of the study was all public primary school teachers in Gagarawa Local Government Area, Jigawa State-Nigeria. A total population of 150 male and female teachers served the population of the study.
3.2 Sources of Data
For the purpose of this research, both primary and secondary data were employed. The main sources of primary data for this research work are the 150 randomly selected primary school teachers, who were the respondents of the study. While the secondary data for the study comes from sources such as reports of government agencies, Central Bank of Nigeria, National Bureau of Statistics, Journals both published and unpublished, Textbooks, Newspapers and access to internet.
3.3 Instrument of Data Collection
The instrument used in the collection of data for this research work from the respondents was a self developed questionnaire titled „Questionnaire on the impact of inflation on living standard of public primary school teachers in Gagarawa Local Government, Jigawa State-Nigeria, with an acronym (QIILPPSTGLGAJSN).‟Every step has been designed carefully, for the final result to be genuine and academically sound.
3.4 Validity of the instrument
The face, content and construct validities were ascertained through expert review. Simple straight forward questions were based on the research problem, objective and research question were used.
IV. DATA PRESENTATION, ANALYSIS AND RESULT.
Age and Sex play a vital role in conducting a research involves households because male are mostly responsible for household expenditures as usually lead the family. Any researcher cannot downgrade the significance of sex distribution if any meaningful data can be elicited and collected for analysis. The result from the collected data shows that majority of the respondents fell within the age group of 20 – 41 years of age which represents 97.4%
of the respondents, 2.6% of the respondents were found to be within the age group of 42 – 60years. This shows that majority of the respondents were within the age of active labor force. Similar findings have been reported by Olarewaju, (2016). It is also revealed by the study that 80.7% were males, while only 19.3% were females.
This shows that there were more male than female teachers in the study area. Based on the world classification of classes, the researcher divided the respondents into different social classes based on their salary income. By this, those teachers of salary grade levels 3-6 were classified as lower class, 7-10 as middle class and 12-17 as upper class respectively. Further, the result revealed that 19.3% of the respondents a salary grade level 3 – 6,
while 54% are within 7 – 10 salary grade level, and 26.7% are on grade level 11 – 17 respectively. In terms of working experience, the result shows that 38.7% of the teachers had teaching experience of between 1 - 10years, while 32% had 11 – 20years, 21.3% had 21 – 30years and 8% for 31 – above of teaching experience. Further the result revealed that 20% of the respondents had an average household size of 1 – 5, 38% 6 – 10 number of families, 34.7% 11 – 15, and 7.3% 16 – 20 respectively. With respect to educational level of the respondents the result shows that 16% were secondary school leavers, while 32% had passed Nigeria Certificate of Education (NCE) and Diploma. 48% are degree holders, while 4% are Master degree holders. Generally, education broadens our horizon. Thompson (1951), asserted that, if a teacher has high level of education, all other things being equal he/she is expected to be higher in productivity and income. This shows how important education is in today‟s economy.
4.1 Hypothesis Testing
The hypothesis test is conducted at 95% confidence interval that findings shall be the true result on the ground.
The premises for the data analysis are;
HO1: There is no significant relationship between inflation and the level of living standard of difference classes of public primary school teachers in the study area.
H1: There is a significant relationship between inflation and the level of living standard of difference classes of public primary school teachers in the study area.
4.2 The Study Chi-square Model
Chi-square (X2) is used in testing the three hypotheses of the study. According to E.C. Osuala (1982), Greek letter X2 is frequently used in testing a hypothesis concerning the difference between set of observed frequencies of a sample and a corresponding set of expected or theoretical frequencies, chi-square is computed as follows.
Where, o = observed frequency E= expected frequency
Hypothesis One: There is no significant relationship between inflation and standard of living of public primary school teachers in the study area.
Comparison of Respondents standard of living
Hypothesis = There is no significant relationship between inflation and the standard of living of public primary School Teachers.
Calculation of expected value X= CT X RT
GT
X= 59 X 55 = 21.62
Response Upper Class Middle Class Lower Class Total
Good 33 18 08 59
Fair 17 21 12 50
Poor 5 10 26 41
Total 55 49 46 150
150
X= 59 X 49 = 19.27 150
X= 59 X 46= 18.09 150
X= 50 X 55= 18.33 150
X= 50 X 49 = 16.33 150
X= 50 X 46= 15.33 150
X= 41 X 55= 15.03 150
X= 41 X 49 = 13.39 150
X= 41 X 46= 12.57 150
= 150 DF = (C - 1) (R - 1) DF = (3 - 1) (3 - 1)
DF = (2 X 2) = 4 Tabulated value X2 = (0 - E)2
E
X2 = (33 – 21.62)2 = (33 – 21.62) X 2 / 21.62 = 1.05 21.62
X2 = (18 –19.27)2 = (18 –19.27) X 2 / 19.27 = 0.13 19.27
X2 = (8 – 18.09)2 = (8 – 18.09) X 2 / 18.09 = 1.12 18.09
X2 = (17 – 18.33)2 = (17 – 18.33) X 2 / 18.33 = - 0.15 18.33
X2 = (21 – 16.33)2 = (21 – 16.33) X 2 / 16.33 = 0.57 16.33
X2 = (12 – 15.33)2 = (12 – 15.33) X 2 / 15.33 = 0.43 15.33
X2 = (5 – 15.03)2 = (5 – 15.03) X 2 / 15.03 = 1.33 15.03
X2 = (10 – 13.39)2 = (10 – 13.39) X 2 / 13.39 = - 0.51 13.39
X2 = (26 – 12.57)2 = (26 – 12.57) X 2 / 12.57 = 2.14 12.57
Tabulated value is = 4 Calculated value is = 6.11
4.3 Decision
The above table shows the chi-square computation of the value of X2 for inflation and living standard. This table shows that the calculated X2 is 6.11, while the critical or table value is 4 under 1 degree of freedom at 0.05 significance level, hence we reject the null hypothesis that there is no significant relationship between inflation and living standard of public primary school teachers in Gagarawa Local Government Area, Jigawa State- Nigeria and accept the alternate hypothesis that there is a significant relationship between inflation and living standard of public primary school teachers in the study area.
V. CONCLUSION
The Nigerian economy has been shaken in recent times making the life of average household difficult, rising prices and the depreciation in the value of the country‟s currency were viewed to be the core problems. Inflation in Nigeria still remains high in absolute terms compares with many other countries in the sub-Saharan region and the world in general.
From the analysis of empirical data it is concluded that the lower and middle class teachers got adverse effects from inflation in 2016 compared to 2014 and 2015 respectively. This can be seen in form of increased household expenditure. With their fixed income, the middle class teachers in their effort to regulate themselves during inflationary period ultimately led them to take on extra income generating works and also obtain loans with high interest rate; these however increased the economic burden on the income of this category of teachers.
High inflation rate deplete households‟ income, increase household expenditure and therefore undermine the living standard of lower and middle class teachers.
However, the upper class teachers with salary grade levels of 14-17 are not affected much by inflation because of possession of excessive income which is enough to cater for their monthly expenditures and were even able to make some savings. While the lower class teachers on the other hand try to adjust themselves to inflation situations by engaging in extra income generating activities and also are subjected to receiving loans in order to met up their expenditures, these consequently affects their social and physical health, it also led to additional expenses on health instead of being a solution to income deficiency, overwork became cause of more expenses to the lower class teachers.
Consequently governments have to do something urgent to ameliorate the situation as the situation at hand is not a child‟s play. And whether the above apocalyptic event will come to pass, it is clear that rampant inflation has already had a strong impact on the lives of many Nigerians. In other words, families in all ways of life have been touched by this economic condition and the pressure is so great that their survival would be threatened.
Therefore, the core thrust of this paper is that inflation has caused and will continue to cause considerable hardship for many Nigerian families and poses a serious threat to the mental health of a substantial proportion of the population particularly the public primary school teachers who were the main subject of this study.
VI. RECOMMENDATION
Based on the above conclusions, the study recommends as follows:
The wage-rate should be increased in such a way that it would match the expected increase in inflation rate, this will help to maintain a good standard of living for the whole classes of public primary school teachers.
It is also recommended that government should modify the tax system to be of progressive type. This will make the upper class of teachers with higher salaries to pay more with the P.A.Y.E system of tax, and the middle and lower class teachers pay less. By this system, the disposable income of the last two classes of teachers will automatically increase
.
There is the need from the part of the government for quick and direct intervention on prices of goods and services particularly food items, this would facilitate to create a safe-guard to both the middle and lower classes of the teachers under study.The role of the media is marginally significant in illumination of the problems and for arousing the attention of the concern authorities towards the issue of inflation. Therefore, media should be properly and neutrally utilized to unveil the culprits who are intentionally involved in raising prices, conspirators and hoarders to the government for execution.
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