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SA is creating jobs that lock out workers forever

Date Released: Mon, 8 June 2015 11:12 +0200

Unemployment in SA rose to 26.4% in the first quarter of this year, according to recent statistics. This means that 5.5-million South Africans were looking for jobs without success.

If we add to this the 2.4-million "discouraged" workers who have given up looking for jobs that don't exist, unemployment rises to 37.8%. This means that 7.9-million South Africans are unemployed and that for every two South Africans working, there is one without a job.

The rise in unemployment in SA is unsurprising given the feeble pace of economic growth. Economies grow either because more people are employed, or because existing workers are more productive.

Growth in gross domestic product in the first quarter was just 1.3%. Growth at such a pace inevitably means no increase in employment.

But every year there are hundreds of thousands more South Africans looking for jobs. Most of these are doomed to join the ranks of the unemployed.

Success in finding a job is closely related to educational attainment. Eighty percent of South African men and 72% of women with tertiary education are employed, but only 40% of men and just 28% of women with less than a matric have jobs.

Because of the racial skewing of educational attainment in SA, a far larger proportion of whites and Indians have matric or tertiary qualifications, so unemployment is much higher among coloured and black South Africans.

If we want to reduce our frighteningly high levels of unemployment, we must accomplish three things.

First, the economy must grow much faster. Second, education needs to improve dramatically to enable a much larger proportion of especially black South Africans to enter the labour market with qualifications that substantially improve their chances of finding a job.

Finally, we need to create jobs for the millions of unemployed people and the hundreds of thousands of new entrants into the labour market who do not have a matric. These workers can acquire new skills only by finding work and acquiring on-the-job training.

Without this ingredient, they have no chance of improving their employability and their earnings.

Tragically, SA's policies actively oppose the creation of low-skilled jobs for such workers. An example is the clothing industry where, according to University of Cape Town Professor Nicoli Nattrass, rising minimum wages forced many low-wage, labour-intensive producers out of business.

Government subsidies on capital investment enabled top-end producers employing more skilled workers to stay in business.

"Decent work for the few," Nattrass argues, "was achieved through rising capital-intensity and job destruction."

Nattrass suggests that "labour-intensive firms are stigmatised as 'sweatshops' and actively destroyed".

Policy makers, she argues, hope instead to "somehow catapult us on to a high-wage, high-productivity growth path that will be sufficiently rapid as to be labour-demanding, despite its capital-intensive nature".

This is the official dream, but it is closer to a nightmare for two basic reasons.

The first is that education fails hopelessly to provide most new workers with the skills to become part of such a future.

Having failed them at school, we seek to create only the types of jobs that exclude them from work forever.

Second, the equipment required by capital-intensive high-wage firms is largely imported.

This has to be financed through volatile, unreliable foreign inflows, rendering such a growth path unaffordable.

It is time for a drastic change in official thinking. Current policies promote "decent work" for the few at the expense of the millions of people who are unemployed.

To change this, Nattrass suggests that "it makes much more sense to use our limited capital resources to create as many jobs as possible — to promote labour-intensive firms and sectors, not instead of but alongside the existing capital-intensive firms and sectors".

It is to be hoped that, over time, the highwage firms will expand sufficiently to employ most workers. Low-skilled workers in labour-intensive firms in SA will obtain the on-the-job skills that make them employable in the high paying firms.

The alternative is condemning millions of South Africans to a lifetime of permanent unemployment and misery.

Keeton is with the economics department at Rhodes University. 

By: Gavin Keeton
Source: Business Day - p. 11. 8 June 2015

Source:Business Day