Sunday Times

Jobs crisis needs new ap­proach

As the jobs sum­mit nears, dire em­ploy­ment fig­ures un­der­line the ur­gent need to re­visit SA’s core poli­cies

- By ANN BERN­STEIN Poverty · Society · Steve Jobs · Iceland · Cyril Ramaphosa · Belarus · Belgium · Europe · European Union · United States of America · China · Centre for Development and Enterprise

● SA’s un­em­ploy­ment crisis is the deep­est in the world and the forth­com­ing jobs sum­mit needs to grap­ple with the scale and hor­ren­dous con­se­quences of mass un­em­ploy­ment. This is some­thing that Pres­i­dent Cyril Ramaphosa ac­knowl­edged ear­lier this year when he said that the sum­mit “will need to take ex­tra­or­di­nary mea­sures to cre­ate jobs on a scale that we have never be­fore seen in this coun­try”.

He’s right about the need for ex­tra­or­di­nary mea­sures be­cause the scale of the un­em­ploy­ment crisis is enor­mous. There are 37.8-mil­lion workingage adults in SA to­day. Of these, 11.9-mil­lion peo­ple (mostly stu­dents and school pupils) are not eco­nom­i­cally ac­tive. Of the re­main­ing 25.9-mil­lion, 9.6-mil­lion (37%) can­not find work. That’s al­most two adults in every five.

Put an­other way, only about 43% of SA’s adults work. In most coun­tries, the fig­ure is 60% or more.

And matters have grown worse over time: be­tween 2008 and 2018, the num­ber of work­ing-age adults in­creased by 6.3-mil­lion but of these only 1.9-mil­lion (30%) found work, while 3.2-mil­lion (over 50%) joined the un­em­ploy­ment queues. That’s an in­crease of al­most 900 unem­ployed peo­ple in the pop­u­la­tion every sin­gle day for more than 10 years.

Matters are even worse for young peo­ple, for whom the un­em­ploy­ment rate is 50%, and there are 400,000 fewer peo­ple in em­ploy­ment in 2018 than there were in 2008 de­spite the num­ber of young peo­ple hav­ing in­creased by 2-mil­lion in that pe­riod.

The 9.6-mil­lion unem­ployed mean that there are more peo­ple look­ing for work in SA than there are peo­ple liv­ing in seven out of nine prov­inces, and, if you wanted to re­duce the unem­ployed by half, you would need to cre­ate in­dus­tries that em­ploy 11 times more peo­ple than are cur­rently work­ing in the en­tire min­ing sec­tor.

The im­pli­ca­tions of all of this are dev­as­tat­ing. SA’s mass un­em­ploy­ment is the key cause of poverty and in­equal­ity, con­tribut­ing im­mea­sur­ably to so­cial dys­func­tion and po­lit­i­cal in­sta­bil­ity. Worst of all, un­em­ploy­ment is a ter­ri­ble waste of hu­man po­ten­tial and an as­sault on hu­man dig­nity.

And yet there is noth­ing in­evitable about SA’s scan­dalously high un­em­ploy­ment rate.

A key rea­son for the un­em­ploy­ment crisis is that pol­i­cy­mak­ers have been driven by a set of ideas about em­ploy­ment and the labour mar­ket that are un­suited to the chal­lenges we face.

In essence, the gov­ern­ment has cho­sen an ap­proach to em­ploy­ment that in­sists work­ers must re­ceive rel­a­tively high min­i­mum wages and con­sid­er­able le­gal pro­tec­tion from dis­missal. The pol­icy thrust and in­ten­tion is that jobs that do not meet these re­quire­ments are not the kinds of jobs em­ploy­ers should be al­lowed to of­fer.

Ef­fec­tively, gov­ern­ment pol­icy ar­gues that no wage is bet­ter than a low wage. SA’s labour mar­ket pol­icy has pre­vented the cre­ation of the kinds of jobs that are the first point of en­try for un­skilled work­ers into mod­ernising economies, whether in Europe and the US or the in­dus­tri­al­is­ing coun­tries of Asia.

The ide­o­log­i­cal aver­sion to these jobs is dis­as­trous. It is also in direct con­tra­ven­tion of the ad­vice of many in­ter­na­tional ex­perts, who, time and again, have said SA must cre­ate jobs for the many un­skilled work­ers we ac­tu­ally have and not the skilled work­force we wish we had.

Com­pared with the al­ter­na­tives most unem­ployed peo­ple have (ru­ral or ur­ban mis­ery and hope­less­ness, de­pen­dence long into adult­hood on par­ents and grand­par­ents, a life of strug­gle in the in­for­mal sec­tor, dom­i­nance of many women by fathers, brothers, hus­bands), work­ing in a fac­tory for low wages would be at­trac­tive to many hun­dreds of thou­sands of peo­ple. And these ba­sic jobs are not an end point, they can lead — as they have in al­most every other coun­try — to bet­ter jobs and other op­por­tu­ni­ties in time.

For those who have one, there are big ad­van­tages in hav­ing a high-pay­ing, well-pro­tected job. But the cost of set­ting high min­i­mum wages and stan­dards that all em­ploy­ers must meet is that too few jobs are cre­ated.

One im­pli­ca­tion of recog­nis­ing these chal­lenges is that it shows up the in­ad­e­quacy of job-cre­ation projects that ad­dress only a small num­ber of ben­e­fi­cia­ries. Far too much en­ergy by the gov­ern­ment, busi­ness and civil so­ci­ety goes into projects that help move some peo­ple into the em­ploy­ment queue, and not enough into pol­icy re­forms that have to take place.

We all need to recog­nise that com­mer­cially vi­able firms are by far the most ef­fec­tive, sus­tain­able and eco­nom­i­cally ef­fi­cient job-cre­ation projects, and we should do ev­ery­thing in our power to help re­move con­straints on firms. The most crit­i­cal of these are the rules that raise the costs of em­ploy­ment and those that make em­ploy­ers re­luc­tant to em­ploy more un­skilled and in­ex­pe­ri­enced young peo­ple.

Too many of SA’s in­dus­trial sec­tors are marked by high lev­els of con­cen­tra­tion, with a small num­ber of dom­i­nant com­pa­nies. How­ever, this is less the re­sult of an­ti­com­pet­i­tive prac­tices by busi­nesses (though, of course, this does hap­pen), and more the con­se­quence of poli­cies that raise the cost of do­ing busi­ness to the point where only cap­i­tal-in­ten­sive firms can thrive.

Real re­form would in­clude ex­empt­ing small and newly cre­ated firms from many ex­ist­ing reg­u­la­tions, and mak­ing SA a com­pet­i­tive place for light man­u­fac­tur­ing to at­tract the many jobs leav­ing China.

Cre­at­ing an en­vi­ron­ment in which com­pa­nies are able and en­cour­aged to cre­ate large num­bers of lowskill jobs is the sin­gle most im­por­tant step SA could take to make its growth path more in­clu­sive.

Un­less core poli­cies are re­vis­ited and soon, yet an­other gen­er­a­tion will grow up in a world of mass un­em­ploy­ment and hope­less­ness.

Bern­stein is the ex­ec­u­tive di­rec­tor of the Cen­tre for De­vel­op­ment and En­ter­prise

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