Employment and jobs
Labour productivity grew substantially in the first twenty years of democracy, but is this unequivocally good? Much of the increase has been driven by changes at the firm level. Smaller firms’ average labour productivity increased more than that of larger firms. This seems to reflect changes in the composition of firms and jobs – smaller firms and low-productivity jobs appear to be vanishing. This is worrying because these are the type of jobs we need to reduce unemployment.
While technology is making capital cheaper, policies like the national minimum wage will make labour more expensive. What does this mean for the choices firms make in terms of labour and capital inputs? This research shows that higher prices for labour will result in lower demand for labour, making job creation more difficult. Low-skilled and high-skilled labour are substitutes – higher wages for low-skilled workers will encourage firms to employ more high-skilled workers and become more skill intensive.
The challenge of youth unemployment is shaped by factors in both the labour market and the education system, alongside intricate community, household and individual-level issues. This complex mixture may make it a seemingly intractable problem. While long-term solutions need to be discussed and implemented, certain options warrant attention in the short to medium term. If these were efficiently addressed, we could begin to break down the barriers that prevent entry into the labour market for at least some young people.
The transition from higher education to employment is a challenge, considering persistent graduate un- and underemployment. Qualifications are not enough. Graduates (should) develop a ‘workplace identity’ that improves their chances of being employed. An empirical study shows that achieving employability frequently involves several labour-market states in which personal attributes are utilised but also developed. Most graduates are not prepared for this arduous journey, something both higher education institutions and graduates should attend to.
The informal sector is frequently viewed as comprising only street traders. However, micro-manufacturing of various types constitutes a small but significant component. A Cape Town case study of informal metalwork manufacturers, retailers, suppliers and customers shows that township metalworker enterprises and supply chains bring about important opportunities for promoting value adding, skills development and employment. Policy interventions that would help them grow include the provision of more suitable manufacturing and trading spaces as well as services such as electricity.
Over the past 15 years Government has promoted cooperatives at national and provincial levels with the aim of enabling small producers to tap into mainstream economic activities. Tens of thousands of cooperatives were formed in processes with officials’ performance appraisals based on the number of new cooperatives being formed. A 2014 study in the Free State indicates a very low survival rate of cooperatives and little evidence of job creation. This accords with earlier findings of an EU-funded study at the national level.
Foreign migrants often enter informal employment as day labourers. They compete with South Africans for jobs in this curb-side labour market. Three surveys of day labourers working in Tshwane between 2004 and 2015 reveal two important tendencies. First, the foreign-migrant component has increased from 12% to just over 55% in 11 years. Secondly, the wages and the level of poverty of both foreign and South African day labourers have worsened in the same period.
Informal urban settlements have a poor reputation as hotspots of social unrest, squalor and crime. Yet there is another side to them: as communities that are determined to lift themselves out of poverty via jobs in the city. In a society marked by severe social and spatial inequalities, these places may be useful vehicles for upward mobility. The ambivalence of government policy towards informal settlements needs to be replaced by a more positive approach.
In developing countries, agricultural growth is generally employment intensive and pro-poor but this sector in South Africa has been subject to a drastic decline in tariffs, pricing, infrastructure and other forms of support. This has not been compensated for by alternative measures such as expenditure aimed at facilitating small-scale agriculture and effective land reform. The result has been poor economic performance and rapidly declining employment in commercial agriculture with little sign of revival in the small-scale sector.
How suitable is a ‘developmental state’ to tackle unemployment, inequality and poverty in South Africa?
The National Development Plan envisions the achievement of a ‘capable and developmental state’. Developmental states are usually associated with high economic growth. Such states in East Asia often are seen as models for SA to emulate. However, given the structure of the SA economy, state and society, a developmental state is not suitable, nor attainable. The concept of a social investment state is a better alternative, but it will need key institutional and policy reforms to work.