Unemployment, inequality, and Africans’ expectations about future economic prospects

This study examines the relationship between unemployment, income inequality, and Africans’ expectations about future economic prospects, highlighting how structural exclusion and labour market inefficiencies shape perceived opportunities, optimism, and confidence. Using Afrobarometer individual-level survey data combined with country-level macroeconomic indicators, ordinary least squares estimates reveal that Africans’ expectations regarding their countries’ future economic prospects are more strongly and negatively associated with unemployment than with the level of income inequality prevailing in their countries. Specifically, a one-percentage-point increase in unemployment is associated with a 0.026-point decrease in respondents’ optimism expectations regarding economic outlook. In addition, there is limited evidence that inequality substantially moderates the relationship between unemployment and expectations. Robustness checks using ordered logit models, a leave-one-country-out exercise, and logit models, confirm the consistency of the findings. However, robustness checks based on aggregating individuals’ perceptions at country-year level data suggest that the relationship between unemployment, inequality, and economic expectations is primarily driven by individual-level variation, underscoring the importance of micro-level heterogeneity in studying perceptions of future economic conditions. The findings suggest that African policymakers should prioritize addressing unemployment challenges to restore optimism, even where inequality remains unresolved.