How job-assistance planning pays off
THE Covid-19 pandemic worsened the unemployment crisis in South Africa. In the second quarter of 2021, unemployment rates were the highest ever officially recorded. Many people who lost their only source of stable income fell into poverty as a result.
Social grants provide income that help people to survive the short-term economic hardship of unemployment. In the long term, new opportunities must be created to get people back to work. However, the national Treasury’s emphasis on fiscal restraint has led to debates about which of these policies to prioritise. This has been particularly evident in the debate around the extension of a grant introduced during the pandemic, known as the social relief of distress grant.
Treasury extended the grant for another year in November 2022, but warned that financing it would require additional revenue or reprioritising existing spending.
Much of the discussion on the merits of the grant treats it as a competitor to employment-creation schemes in the budgetary allocation. However, the evidence compiled in our review of the job search assistance literature suggests that with careful design, the relief grant can help to support the policy priority of getting young people into work.
Our research also suggests that the South African government should combine whatever replaces the grant with job search assistance programmes. Researchers have tested a number of job search programmes in South Africa and found promising evidence that they can increase employment. Further testing at a national scale could improve the design of these policies.
Research shows that cash grants can increase job-search. Simply receiving a cash grant encourages recipients of the grant, and other members of their household, to increase their search for jobs. This is in part because cash grants can be used to cover the costs of job search.
We argue the relief grant should be combined with enhanced job-search assistance programmes because they reduce unemployment by helping the labour market function better. Labour markets often don’t work optimally: job-seekers face barriers in looking for jobs and employers struggle to identify the right workers. Job-search assistance programmes can reduce these “search frictions”, potentially improving employment rates, employment quality and earnings for workers.
Job-search assistance covers a wide range of programmes that help people search for jobs, such as providing information about jobs, subsidies to cover search costs, job-search training or matching platforms like LinkedIn.
A number have been tested in South Africa. Formal certification of communication and numeracy skills was found to substantially increase job search, employment and earnings. The low-cost testing and certification of the results provided job-seekers with a new method to share information about their abilities with employers.
A scheme that encouraged young job-seekers to include a reference letter with their job applications and provided them with a simple template letter substantially increased employer call-backs, particularly for women.
Training job-seekers to join and use LinkedIn increased employment for at least 12 months because workers gained better information about employers and were better able to communicate their skills.
Our recommendation of combining cash grants and job-search assistance services is made on the basis of the best available evidence, but the policy has not been empirically tested at a national scale. We recommend that programmes be rigorously evaluated and phased in over time,.