Labour market policies
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 problematics of the situation in South Africa are clear: high unemployment, high inequality and low growth, combined with a lack of consensus on what to do. It might be more fruitful to think in ‘grand bargain’ terms: a package of policies that are intended to balance opposing perspectives whose differences cannot be resolved through technical debate – and to set short-term political-economic imperatives against the longer time horizon needed for policy interventions to address deep structural legacies
If the National Development Plan is to be effectively implemented, we need clarity about the mechanisms through which growth and redistribution can be jointly advanced. Priorities include social security reform and quality improvements in social services, urban development, housing and public-transport investment. Expanding employment opportunities is the most pressing challenge, requiring policies that might include: support for labour-intensive industry and agriculture, small enterprise and informal sector development, well-targeted skills programmes, and wage or employment subsidies. Recognising the complementarity between redistributive and growth-enhancing measures is essential.
What happens when a previously unregulated labour market is regulated? After the introduction of minimum wages and mandatory employment contracts for domestic workers, wages increased markedly while neither employment nor hours worked declined; some formalisation of working conditions also occurred. All these occurred despite a lack of monitoring and enforcement, suggesting that such actions (often costly) are not essential for regulation to have a significant impact on informal employment conditions, at least in the short run.
The Employment Incentive Tax Bill offers tax subsidies to firms to employ new young workers. An evaluation of the impact of a wage subsidy voucher indicates that employment incentives increase the likelihood of young job-seekers being employed; they also increase the time young people remain employed. There is no evidence of older or existing workers being replaced. Such incentives are a relatively cheap and effective way to create employment, but are unlikely to create large numbers of jobs for young people.
A job-search subsidy has been proposed as a measure to help people find employment. At least three criteria need to be met to create new jobs for those who receive the subsidy. First, it needs to be used only to search for jobs or to remove the financial constraints that prevent people from searching for jobs; second, firms need to recruit through the channels which subsidy holders actually use to seek employment; and third, the relative cost of labour needs to fall.
Any growth strategy for South Africa should include elements that address inequality explicitly. This article identifies reforms that are likely to support growth in the long term and proposes a policy framework to ensure a more equitable distribution of the dividends of economic growth. These relate to high-quality education for the poor, progressive taxation, a social safety net, anti-monopoly policies and labour market reforms to promote the employment of low-skilled people.
The South African government continues to pursue efforts to 'migrate' informal enterprises to the formal sector. This article examines the impact of regulations and law enforcement on the 'lived' economy of informal micro-entrepreneurs. Spatial analysis shows how the scope and distribution of informal economic activities are directly affected by regulation, land use planning and other controls. Such controls that effectively disallow informality are poor-unfriendly and harm livelihoods, self-employment and employment.
As part of perpetual policy experimentation and search for that elusive ‘silver bullet’ to deal with unemployment, the South African government recently introduced the Jobs Fund and continues to mull over the idea of youth wage subsidies – vehemently opposed by trade unions. The success of these programs is highly dependent on effective design and administration. This article evaluates program design features against a number of factors.