The key to SA’s chronic and persistently high rates of unemployment

The ANC’s recently released election manifesto charts the course for its top priority areas over the next five years. It places the “Creation of decent work and sustainable livelihoods” as its number one priority and states, “We underscore that the creation of decent work is at the centre of all our economic policies” and furthermore, that its “priorities will specifically target the needs of the youth, women and people with disabilities”.

In the 2004 election manifesto, the ANC set itself the ambitious target of halving unemployment by 2014 through “new jobs, skills development, assistance to small businesses, opportunities for self-employment and sustainable community livelihoods”. Although the manifesto did not explicitly state the number it planned to halve, rendering the statement meaningless, we can assume it was referring to the official prevailing rate of unemployment. According to the March 2004 Labour Force Survey (LFS) there were approximately 4.6 million people unemployed resulting in an official unemployment rate of 27.8 per cent. Five years down the line it is clear that the grandiose goal of halving this rate by 2014 will not be achieved if the ANC continues with its existing policies and strategies.

According to the revised estimates for the September 2007 LFS publication, approximately 3.9 million working age adults were officially unemployed. This equates to an official unemployment rate of 22.7 per cent. However, a further 3.4 million did not actively search for work in the month prior to the survey but indicated they would work if there were jobs available. If we include these discouraged work seekers, the total number of unemployed increases to 7.3 million and the unemployment rate shoots up to the more realistic rate of 35.6 per cent. Given these chronic and unacceptably high levels of unemployment, the ruling party correctly places this issue at the centre of its campaign.

If we disaggregate the data, we see that approximately three-quarters of the unemployed are younger than 34 years old. A particularly revealing statistic is that the majority of discouraged work-seekers are in the younger age groups, one-fifth in the 20-24 year age group and more than one-third younger than 24 years old. In September 2007 the unemployment rate amongst black South Africans was 26.8 per cent and roughly two-thirds of all unemployed individuals were young (between 15-34 years) black South Africans.

The 2009 manifesto has avoided any quantitative targets preferring the more watered-down approach of “the creation of decent work”. But who gets to decide what is “decent work”? Despite all statistics, if it is you who is unemployed, as far as you are concerned, the rate of unemployment is 100 per cent, so surely you would want to have the right to decide for yourself what constitutes “decent work”.

In post-apartheid SA, labour unions continue to play an integral role in the political make-up of the ruling party and it will be interesting to see what kind of political influence they will continue to exert in the build-up to the general elections and the future of the SA economy. With labour unions forming such an important part of our society, one can easily lose sight of their primary role – to raise the wages and improve the working conditions of their members relative to equally productive workers in an identical, competitive, non-unionised sector. To do this, trade unions have to block potential competition – usually from low-skilled individuals who are willing to accept lower wages rather than face the bleak option of being unemployed with the consequence of starvation for themselves and their dependants. For workers within the unionised sector, wages are secure but inequality in the general population increases because some individuals are earning money whilst others are effectively prevented from entering the market at the lower end.

In order to achieve the ruling party’s stated objective of radically reducing unemployment, we must carefully weigh how labour market policies affect unemployment and hence SA’s prospects for growth and reducing poverty. In this regard, it is important that we do not focus just on the good intentions behind these policies but, perhaps even more importantly, rigorously investigate any unintended consequences. Considering the role of labour unions (partly to bargain collectively and partly to block the entry of potential competition), it should be clear that they have a vested interest in ensuring that their members are protected, whatever the implications of that protection may be. They are primarily concerned with the interests of their members and the rights of ordinary South Africans come second. They ensure decent work for workers fortunate enough to be members of a union, but what about those unfortunates who they effectively prevent from gaining employment?

Government, current and post-election, must start to think honestly and sincerely about ordinary, poor South Africans – regardless of colour. It has to weigh up the risks of taking on vested interests against those of increasing unrest and disquiet among the unemployed poor.

Author: Jasson Urbach is an economist with the Free Market Foundation. This article may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the author’s and are not necessarily shared by the members of the Foundation.

FMF Feature Article / 20 January 2009 - Policy Bulletin / 29 September 2009