Policy to blame for poor jobs growth
Report suggests that although more people are employed compared with 1994, bad labour policy has hurt the poor
The number of South Africans who have jobs almost doubled from 7.9 million in 1994 to 15.6 million in 2015. This, however, is not nearly enough to make a dent in unemployment figures, as job creation has continued to lag behind, while the labour market absorption rate has fallen, according to the SA Institute of Race Relations.
Frans Cronje, the institute’s CEO, said the 96.4% growth in the number of people with jobs in the past 21 years was “a largely unacknowledged success and explains partly why the dependency on the employed ratio has come down”.
The study – titled There’s a Hole in the Job Market – also found that the number of unemployed South Africans who were dependent on people who had jobs had decreased from 380 for every 100 employed people in 1994 to 250 per 100 working people in 2015, a significant decrease of 34.2%.
The institute said the dependency figures offered a more comprehensive picture than the official dependency ratio, “which assesses the ratio of the young and old to the working-age population, regardless of whether they are actually working”.
The institute said the study was proof that investmentdriven economic growth was the most certain way to create employment, as figures from Stats SA and the Reserve Bank showed that despite higher gross domestic product growth between 2004 and 2007 – averaging 5% economic growth annually – unemployment also peaked during those years.
“This is why the institute has long maintained that investment-driven growth, and not gimmicks such as wage subsidies and public works schemes, is the only sustainable solution to South Africa’s unemployment issue,” said the institute.
Stats SA’s latest Labour Force Survey, which tracks the unemployment rate every three months, indicated that while the population stood at 54 956 900 people in the third quarter of 2015, with 35 955 000 people of working age, the study found only 20 887 000, or 58.1%, of them were economically active.
“Only 15 657 000, or fewer than half of working-age people, are employed. This is a higher proportion than of the official unemployment rate of 25% and of the expanded rate of 34.9%,” reads the Stats SA report.
For a more “accurate” view of South Africa’s unemployment crisis, the institute’s study suggests that other measures should be used when analysing the country’s jobs crisis. These are the labour market participation rate, of 58.1%, or the labour market absorption rate, of only 43.5%.
The former measures the proportion of the workingage population that is economically active, while the latter measures the proportion of the working-age population that is employed (including all people who do any work for pay, profit or family gain).
The study found that the number of people employed in the mining industry had contracted the most compared with six other industries. Mining employed 692 900 people in 1990, but only 489 515 in 2015, a 29.4% reduction in the number of jobs in that sector.
Mining’s losses were followed closely by those in the manufacturing sector, which shed 26.6% of its jobs between 1990 (1 537 511) and 2015 (1 134 416).
On the other hand, jobs in South Africa’s financial services sector, which is rated highly internationally, grew by 968% from 186 280 jobs in 1990 to a staggering 1 985 465 jobs in the sector in 2015.
The trade sector showed the second-highest growth in the 25 years, at 134.1%, with 78 100 jobs in 1990 compared with 1 844 849 in 2015. The transport sector is in third place, with 361 268 jobs in 1990 and 473 491 jobs now.
The utilities sector grew marginally, at 14.6% in the past 25 years, from 50 920 jobs in 1990 to 58 372 jobs in 2015.
The institute suggests government may be forced to slow and even scale down public service employment, as the civil service has experienced significant job growth, while primary and secondary industries have shed jobs.
“Since 1990, broader government employment has increased by 54.8%, from 1 310 484 to 2 028 825. Other than incubating the black middle class, the expanded civil service has been of little benefit to South Africa and is now the primary reason for the government’s fiscal crisis. Essentially, the public service has become a welfare scheme for the middle class,” reads the report.
The majority of those unemployed who are unskilled youth presents another crisis in the South African job market because the number of skilled jobs has increased, while unskilled labour has diminished, with the agricultural sector – an important export player – suffering a 54% reduction in the number of semiskilled jobs, from 215 000 in 2001 to 99 000 jobs in 2015.
“The data reveals that the number of skilled employees is increasing faster than the unskilled. This is a result of a labour regulatory environment that has driven poor people out of jobs and correlates with broader deindustrialisation trends. Again, it is apparent how misguided labour policies have been the architect of high unemployment levels among poor people.
“The labour market absorption rate for people with tertiary education is twice as high as for people who have only primary education. In this respect, the quality of South Africa’s schools can be identified as a central obstacle to the employment of young people,” reads the study.
The number of people who were unemployed increased from 1 988 000 in 1994 to 5 230 000 in 2015, or 163.1%, with black people bearing the brunt of unemployment.
“The number of unemployed [black] Africans has increased by 174.2% since 1994. The official unemployment rate of white people has increased faster, at 245.2%, but still represents a minority of the total workforce.” It placed the blame for this squarely on “misguided labour policies and a Cabinet that remains hostile to investment-driven economic growth”.