The Effect of Human Capital Investment on Employment in Uganda

Unemployment in Uganda has always been a major issue especially for the youth with an education. Youth are especially struggling to find jobs in line with what they have studied and those who get jobs earn less than expected, those working in the informal economy find jobs faster, however, the benefits of being employed in the informal sector does not reflect the amount of work they are doing. In addition, private investments to further knowledge and health is not reflected from the returns made by the individual. Uganda, like other Sub-Saharan African countries, has a high percentage of the population employed in informal economy. To investigate, the relationship of the effect of human capital investment on Uganda’s employment, the study uses human capital indicators, education, health and their respective government expenditures. Since the study variables used are based on annual time series from 1991 to 2017, the study attempts to estimate a long run and short run causal relationship by applying cointegration and the error correction model. The stationarity tests were integrated at order one and the cointegration tests identified a long run relationship. The study suggested an increase in human capital investment to improve Uganda’s employment.