Does the drop in SA’s unemployment rate really mean much?

AS EXCITING as it is to see South Africa’s unemployment rate confound expectations by falling to 32.9% in the third quarter from 33.9% in the second quarter, does it give us reason to rejoice?

South Africans have been left puzzled by the latest figures from Stats SA’s quarterly labour survey despite the lived reality of many young people who are still struggling to make ends meet, waiting to be employed.

Unemployment, according to the expanded definition of unemployment, also decreased by 1.0 percentage points to 43.1%.

In South Africa, 15.8 million people had a job in the third quarter, up from 14.9 million in the first quarter.

The recent jobs data shows a steady recovery in employment, with over 800000 more jobs recorded this year. But 7.7 million active job seekers remain without work, while 3.5 million are classified as discouraged job seekers.

To place this into perspective, over a third of the country’s active work force is unemployed. Overall, economic growth has generally been slow and is noted as being lower than in other emerging markets.

Unemployment cannot simply be attributed to the economy’s inability to create jobs. The current labour force and demand are not aligned given the shift on the demand side for skilled labour, in a context of high unskilled or semi-skilled labour.

When South Africa’s economic recovery is compared to other countries post-Covid-19, recovery is noted as “sluggish”.

Without consistent growth, addressing unemployment in the country will remain a challenge.

Bear in mind that unemployment, particularly youth unemployment, has increased since 1990 and remains high and persistent despite an array of interventions devised to address the unemployment crisis.

This crisis can be attributed to structural challenges and the economy’s inability to create jobs.

The country’s current economic growth trajectory is not producing the volume and type of jobs required by the labour force, for example. There is a skills mismatch.

On the labour market demand side, firms are offering fewer lowskilled employment opportunities and increasingly seeking to employ skilled and highly skilled labour.

This is because of the shift to capital-intensive industries and the service sector rather than labour-intensive industries such as agriculture and manufacturing.

The requirement for these capitalintensive industries is a highly skilled labour force, whereas most job seekers in South Africa are on the semi-skilled and low-skilled end of the spectrum.

Secondly, the country’s unemployment crisis, particularly the prevalence of high youth unemployment, is exacerbated by an under-performing and unequal education system, particularly at the basic education level.

The critical challenge therefore for the post-school education (tertiary) and training sector is to help students overcome the poor schooling outcomes produced by the basic education system. On exiting the primary and tertiary schooling system, most youngsters lack the education and skills required to access highly skilled jobs within the formal economy.

South Africa’s economic, education and labour market phenomena are not unique in the world. Other developing and even developed economies experience a mismatch between labour market supply and demand because of a shift towards more capital-intensive production and the resultant reduced demand for unskilled or semi-skilled labour.

On the other hand, South African companies’ ability to hire is undermined by an education system that doesn’t provide adequate skills, and strict labour laws that make hiring and firing workers onerous. The apartheid-era strategy of placing townships, where many black citizens were compelled to live, on the periphery of cities also makes it difficult for residents to access the formal jobs market.