Welcome to The World of Work

How encouraging it is to see the improvement in the pass rates of the matrics and the wonderful results many of the students managed to achieve. The challenge now facing those who have graduated from school learner to work seeker is to find a job. A job that is satisfying and rewarding. Looking back at the labour situation over the last ten years, we can only hope the future holds the changes that are needed.

In 2004, according to Statistics South Africa (Stats SA), the official unemployment rate was 27.8 per cent. Officially, approximately 4.6 million people were unemployed. The ANC, in its 2004 election manifesto, set itself the task to halve unemployment through “new jobs, skills development, assistance to small businesses, opportunities for self-employment and sustainable community livelihoods” over the following ten years. Six years down the line, it is clear that this ambitious goal cannot be achieved.

The current Stats SA official unemployment rate is 25.3 per cent (4.396 million people unemployed). We would be ignoring reality if we failed to add to this figure discouraged work seekers (those who would like to work but have given up searching because they simply believe that there is no work available). This swells the number of the unemployed by a further 2 million people. And then what about the 1 million souls who lack the means to actively search for employment? When added together, it seems that currently a more accurate estimate is that there are 7.396 million people unemployed and that the expanded rate of unemployment is 36.6 per cent.

Recently the government announced a new ten-year plan. In its “economic growth strategy” it aims to “cut unemployment to 15% by creating 5 million new jobs by 2020”. So what does this latest scheme to reduce the rate of unemployment over the next ten years entail? Economic Development Minister Ebrahim Patel announced that, “Infrastructure will play a very special role as the trigger to unlocking many of the opportunities and in overcoming the bottlenecks to create greater growth and employment.”

But does government spending on infrastructure necessarily reduce long-run unemployment? Maybe, but maybe not! More importantly, does infrastructure spending address the root cause of the unemployment problem in SA? People believe that fiscal stimulus is good because when people are put to work on government projects everything is clearly visible. But government itself is not a producer of any real wealth. To get its hands on any funding for infrastructure or any government programme, the government first has to divert it from wealth-generating activities. This undermines the real wealth generators and weakens the whole wealth-generation process.

On top of the 4.396 million people unemployed, we now have several thousand job-seeking matriculants to find work for so the most important issue facing government today is to improve conditions for greater labour absorption. The eminent professor of economics, Joseph Stiglitz, recently commented “In South Africa, markets have failed to function as they should and for a long time: unemployment has remained persistently high, at a level that should be unacceptable” (author’s emphasis added). But SA’s persistently high levels of unemployment are unacceptable and it is because markets have not been allowed to function.

During the apartheid years, black people were largely denied the opportunity to work. In post-apartheid SA, labour laws meant to protect those who are already employed, effectively prevent the unemployed from entering the labour market. People are inclined to believe that legislation can solve all economic problems. If employees are not earning a ‘living wage’, why not pass a law forcing employers to pay more? Because the consequence of such legislation is that some people who have jobs will lose them, and others will never get the opportunity to get jobs.

In SA, we need economic growth and a fundamental change in the labour laws. As Prof Stiglitz says, “Markets are still the most powerful engines of growth”. In order for the SA economy to grow, government must leave businesses alone and focus on its core activities, which includes the creation of an enabling environment for businesses to operate.

Professor Stiglitz also suggests that, “When a strategy has been tried that fails and fails repeatedly it is time to try another”. Indeed. The best plan for the ANC to adopt over the next ten years is to give the market a chance and let our people decide for themselves what constitutes ‘decent work’. We urge the government to review its policies and allow our graduates and matriculants the opportunity to find gainful employment and not be out on the streets.

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/4 January 2011