The scars of joblessness

LONG-TERM UNEMPLOYMENT: DEVASTATING

prolonged unemployment, economic scars remain long after they find another job.

There’s a generation of young adult South Africans who have never been employed – and not because they do not want jobs. Some families have a second generation of young people who have never been formally employed.

Remember, South Africa’s structural unemployment did not miraculously appear after 1994. Rising long-term unemployment was a feature of the apartheid government in the ’70s and ’80s and continues to be so.

If unemployment was used as a “lead indicator” of an economy’s health, persistently high unemployment would have downgraded South Africa to a “poor economy” instead of an emerging one.

This is worrying, because research suggests that the effects of long-term unemployment extend beyond the labour market.

In South Africa, where a single income often supports multiple families, longterm unemployment has a direct impact on that worker and their family’s social capital; the stress of being out of work can also influence a person’s mental wellbeing and change family dynamics.

Additionally, the scarring effects of long-term unemployment on the worker can be directly linked to two important features of their role in the labour market: the loss of skills over time, and that upon finding work they may accept lower wages than previously earned. At the same time, as employers grow and expand, they adopt new technologies that in some cases replace workers and in others require skills they do not have.

For those who have suffered prolonged unemployment, the economic scars remain long after they find another job, because the chances of returning to the level of income enjoyed before job loss are eroded. Then there’s the long-lasting reduction of family income and the effects thereof on human and social capital.

Even with government’s unemployment insurance fund, unemployment forces a continued decline in consumption because the aid barely covers basic needs. This leads to reductions in education, health and food spending, among others.

The loss of income, poverty and resource scarcity stemming from long-term unemployment affects education, health and mobility outcomes.

The effects of widespread prolonged unemployment and job losses can fan out across the economy and choke real and potential output.

The youth’s persistent long-term unemployment especially exposes the fragility of the labour market.

There’s no scenario where long-term unemployment can simply be shrugged off as a societal glitch. As more people become unemployed, there’s greater risk of them becoming permanently detached from the labour market.

We saw evidence of this during the Great Recession and even as the US economy recovered, how much more so for an emerging economy? Long-term unemployment for young South African job seekers is devastating – unemployment trends today forecast future unemployment.

Unless long-term unemployment becomes a policy priority and is part of the public-private partnership programme, we will fail to reduce joblessness.

Molopyane is a mining and labour analyst