South Africa’s unemployment figures have made for grim reading for a long time. The latest for the second quarter of 2021 were, by several measures, gloomier than usual. The official unemployment rate for the second quarter worsened to 34.4%. This is the highest the rate has been since the survey was started in 2008.
Worse is still to come: analysts have warned that the effects of the July 2021 violent unrest that swept through two provinces that are the biggest contributors to economic output are not yet reflected in employment figures.
We considered youth unemployment trends by using two sets of data – Statistics South Africa’s Quarterly Labour Force Survey and the long-running National Income Dynamics Survey. As has long been the case, young people bear a disproportionate share of the unemployment burden. Nearly two-thirds, or 64.4%, of people aged between 15 and 24 are unemployed. This is among the highest recorded in the world.
We examined why this is the case in a chapter, “South Africa’s high youth unemployment: structural features and current responses”, in the book Youth in South Africa: Agency, (In)visibility and National Development, edited by Ariane De Lannoy, Malose Langa and Heidi Brooks, due to be published in November.
Our analysis showed that youth unemployment is embedded in the long-standing structural dynamics of a labour market that has for several decades left far too many young people at the margins of the economy.
We developed a gap analysis, identifying what’s missing and what else needs to be done to address youth unemployment. The research found that most of the drivers of youth unemployment are addressed with current instruments. But the underlying causes of limited job growth, gender inequalities in employment and increasing discouragement among youth are not specifically addressed.
In addition, more needs to be done to ensure the coordination of policies to make the journey from learning to earning more seamless for a young person.
Finally, existing policy interventions can’t promote the levels of youth employment required in a context of low economic growth and low job growth.
Unpacking the data
Although the youth unemployment rate has been consistently high over the past two and a half decades, there was improvement between 2003 and 2007, a period when the country’s economic growth was high. Our analysis reveals that this decrease in youth unemployment was explained largely by increases in the labour market’s capacity to absorb labour.
However, economic growth has been depressed since 2008 and the youth unemployment rate has steadily increased. From 2008 to 2020, the youth (15-34 years) unemployment rate – using the expanded definition – rose by 15 percentage points, from 38% to 53%. The expanded definition includes both workers who are still actively searching for work and the discouraged workseekers. Comparatively, for those aged between 35 and 64 there was an increase of 10 percentage points, from 17% to 27%.
Racial and gender disparities in access to work are entrenched features of the South African labour market. African youth (15-34 years) have the worst unemployment rate compared to the other groups, at 57%. Young women (15-34 years) across the board experience a higher unemployment rate of 57%, while that of young men is 49%.
The statistics do reflect a positive relationship between economic growth and labour absorption among young people. This means that efforts to significantly reduce youth unemployment are made difficult by the sluggish economic growth rate.
Our analysis identified four key structural drivers of youth unemployment:
- low economic growth rates
- skills mismatches
- continued spatial inequalities
- labour market inefficiencies.
In response to these and other unemployment drivers, a number of Active Labour Market Programmes exist. These are macro-level interventions aimed at keeping people employed, ensuring that more people become employed, and improving the efficiency of the labour market.
The first set of interventions are about protecting jobs – that is to limit the number of jobs lost during economic downturns or company difficulties. For instance, the department of employment and labour sets aside a portion of the Unemployment Insurance Fund annually for initiatives that support turnaround strategies for companies in distress. The funds are also used for reskilling employees to minimise job losses.
Perhaps the largest set of interventions are labour absorbing. These are programmes that create work opportunities funded through public expenditure, including the Expanded Public Works Programmes, the Community Work Programme and the National Youth Service. They are intended to absorb large numbers of unemployed people, and youth in particular, into work or service opportunities.
The third set of interventions give employers incentives to hire more workers. One example is the Employment Tax Incentive. It is a tax-based intervention which encourages employers to hire young people in return for a tax rebate on the pay-as-you-earn tax that the company is liable to pay for each employee.
The fourth type of intervention is labour market intermediation – interventions intended to achieve better connection between employers and employees. Such interventions include workseeker support offered through the department of employment and labour’s Public Employment Support programmes, and private employment agencies such as Lulaway, Giraffe and JobJack.
Another example of intermediation efforts deals with spatial inequalities. In recent years, a transport subsidy has been tested to ascertain whether providing work seekers with a transport voucher would alleviate the transport costs barrier of work seeking. Evidence shows that the transport subsidy was ineffective in improving job placement chances.
Finally, a plethora of interventions occur on the supply-side of the labour market, seeking to address skills mismatches.
Filling the gaps
We developed our gap analysis by drawing on a synthesis of existing research on the drivers, mapped against existing interventions. For every driver we considered whether an active labour market programme existed to address it. This allowed us to draw conclusions about gaps in the current offerings.
Our analysis reveals that for most of the drivers, programmes exist to address them. However, these are severely hampered by low job growth.
Further, we found that there is little coordination between interventions. This leaves many young people struggling to understand what their next step is in their labour market journeys.
Increasing discouragement rates also point to the need for better curated and coordinated support that is easily accessible to young people as they seek to navigate labour market opportunities.
The issue of gender is an oversight in current strategies. While many programmes have targets for reaching women, they don’t address some of the barriers that women face in entering and remaining connected to the labour market – such as the higher burden of care that women face (which has increased since the COVID-19 pandemic began). This suggests that even in a higher job growth labour market, women may still be left behind.
Finally, economic growth that promotes job growth is the key factor in shifting the youth unemployment challenge. Strategies to promote job-intensive economic growth must be at the forefront of policymakers’ minds. If such growth is achieved, the existing suite of programmes, with some additions to address discouragement and gender inequalities, should ensure that young people are well placed to take up jobs.