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The struggle of unemployment: A South African perspective

South Africa achieved independence in 1994, but years later, there has been little improvement in the general populace’s poverty levels. While the country remains one of Africa’s strongest economies, statistics indicate that close to 50% of the population lives in poverty. (Based on south African government poverty measure where the upper bound poverty line is approximately $70 per month.)

The covid-19 pandemics have exacerbated the issues of poverty in the country. South Africa has one of the highest infection rates in Africa and more recently has been dealing with a mutated version of the virus that has since been christened the South African variant. Lockdowns and covid 19 restrictions have pushed many out of employment, and businesses have been forced to shut down. Estimates indicate that close to 1million people may fall below the poverty line.

According to a World Bank Report , the inequality of apartheid lives on. The report indicates that inequality of opportunity is extremely high in the country. 

To compound issues, unemployment among youth stands at more than 50% , substantially higher than comparable countries.

South Africa’s economic issues run deeper. The economy is not growing enough to absorb its youth and reduce the trends in employment. Compounded by the lack of equal access to education and other services, the youth are not adequately set up for employment.  Part of the challenges stems from the inadequate capacity generated in the manufacturing industry. 

The manufacturing industry has grown no more than 1% from 2010 to 2018. Manufacturing jobs are usually low skills mass jobs that absorb a large portion of employable young people. As such, the lack of traction in the manufacturing sector has added to the employment woes that the country faces. 

While the manufacturing sector has not shown significant growth, the financial sector has shown considerable improvement. However, this sector is primarily a high-skill industry and cannot cater to meaningful employment.

This is given the fact that the bulk of this unemployed group consists of medium to low skilled employees. 

The employment statistics released by the countries statistics agency remained bleak. 

Statistics South Africa reported that the unemployment rate was at 32.5% in the last quarter of 2020. This means that up to 7.2 million people were out of employment. This figure was higher than the 30.8% reported in the second quarter of last year.

What are the leading causes of unemployment in South Africa? 

The country’s background and apartheid-induced inequality have created a legacy system of inequality. To date, black people in the country face an unemployment rate quadruple that of their white counterparts.

This can in part be attributed to the country’s legacy of apartheid that created a system of inequality that excluded black people from the education system. This gave rise to a perpetual vicious cycle in which this class of people has not been adequately reintegrated into the quality education segment. 

The inequality can also be in part a direct result of a failure to address the systemic issues of inequality plaguing the country. Some of the structural challenges include the high university fees, for example. The fee structure excludes a sizeable chunk of the population from receiving higher education. 

As the levels of education decrease, the unemployment levels rise significantly. 

Like the rest of Africa, South Africa also has a very young population. As such, more and more people flock into the labor market, which has no capacity to absorb large numbers. Coupled with the low education levels, this creates a large unskilled labor pool. 

Another factor contributing to unemployment is trade unionism. South Africa has an active trade union culture. Lobbying for higher wages, especially in an economy facing slow growth levels, may reduce new employment levels. 

It is important to note that reports have indicated some waves of xenophobic attacks on foreign nationals working within South Africa’s borders. It has been reported that some of these attacks have been linked to the dire unemployment situation, which has seen locals blame foreign nationals for taking their jobs. However, this situation wanes investor confidence even further, indirectly contributing to increased unemployment. 

How can stakeholders improve employment levels? 

An attempt to solve the urgent problem of unemployment involves addressing the education system. An adequately funded education system accessible to all regardless of background will help improve the young disadvantaged children’s skills.

Roping in private education institutions that provide high-quality, low-cost education, as is the case with institutions like Bridge International Schools in East Africa, can improve quality education. 

Further opening up the economy to encourage entrepreneurship through access to funding, government support, and promoting entrepreneurship within the education system may help open up the economy to allow for economic growth sufficient to cater to the ballooning population levels. 

An all stakeholder approach to addressing chronic inequality will help focus further towards improving equality as defined by socio-economic status to help open up access to opportunities. 

The fragile state of the economy

Going forward, there is a need to adapt to the new normal while seeking solutions to address the fragile state of the economy. According to the Bureau of Economic Research, the economy remains weak, as evidenced by a drop in business confidence. As businesses battle with the effects of covid 19, including dwindling demand, operational challenges, they continue to struggle to operate viably. 

As if to pour paraffin on an already burning situation, the looming threat of the coronavirus remains on the horizon. There has been a slow rollout of the vaccines, which has led to fear that gatherings and movement over the Easter season may become super-spreaders of the virus. The result would be a rise in the infection rate that may force the government’s hand to tighten lockdown restrictions once again. 

The start and stop cycle that businesses find themselves stuck in is of significant concern. The lack of certainty not only plummets investor confidence but also contributes to the unemployment issues. As long as businesses cannot find their footing, they remain hardpressed and can not create the employment level necessary to absorb the growing numbers of unemployed South Africans. 

In conclusion, the South African unemployment rate remains high. In the midst of the covid-19 pandemic, South Africa remains one of the continent’s highest affected countries and continues to grapple with finding solutions. 

The economy remains volatile. In unprecedented times like these, the unemployment issues in South Africa remain highly problematic. 

Read also: Unemployed and underprivileged hit hardest by S.Africa’s declining GDP

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7 Unemployment in South Africa

James Heintz is the Andrew Glyn Professor of Economics at the University of Massachusetts, Amherst. He has worked on collaborative projects with numerous national and international institutions, including the Office of the High Commissioner for Human Rights, the International Labour Organization, the United Nations Economic Commission for Africa, the United Nations Development Programme, the Human Development Report Office, the South African Human Rights Commission, the International Development Research Center (Canada), and UN-Women. His policy work has included work in developing countries, primarily in sub-Saharan Africa, including Ghana, Kenya, Liberia, the Gambia, Madagascar, and South Africa.

Karmen Naidoo is a doctoral candidate in economics at the University of Massachusetts, Amherst. She is also a senior research associate at the DST/NRF South African research chair in industrial development (SARChI), University of Johannesburg. She holds master’s degrees in economics from the University of Cape Town and SOAS, University of London. Her research interests are in the areas of development economics, labour economics, and structural change. In particular, she is interested in the impacts of trade and technology on the labour market.

• Published: 08 December 2021
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South Africa has exhibited sustained high rates of open unemployment since the end of apartheid, when reliable statistical measurements became available. The lack of decent employment opportunities contributes to ongoing social and economic inequalities. This chapter examines the reasons behind the country’s high unemployment rates. After a brief analysis of unemployment trends and patterns, it discusses alternative explanations of South Africa’s employment problems, with a focus on structural causes arising from historical and institutional factors. The chapter also examines how policy choices post-apartheid have affected employment outcomes, including macroeconomic policies, trade policies, and labour market policies.

7.1 Introduction

A remarkable feature of South Africa’s labour market is the persistently high level of unemployment. Since the end of apartheid, when reliable statistical measurements became available, the country has exhibited rates of open unemployment that are extreme by any comparative standard. Wage employment is the single most important source of income for most South Africans. Therefore, the lack of access to decent employment opportunities contributes to ongoing and deep-seated economic inequalities ( Leibbrandt et al. 2010 ). These disparities in employment outcomes reflect broader vulnerabilities across multiple dimensions: race, gender, age, educational attainment, and location. The extreme problem of joblessness also has shaped debates over the desirability of post-apartheid labour market and social protection policies, such as the national minimum wage, which came into effect on 1 January 2019 and which aims to increase the wage floor for workers not covered by other wage regulations and for those under sectoral wage determinations deemed too low ( Elsley 2019 ). 1 Understanding the nature and causes of unemployment in South Africa is therefore essential when considering the country’s future trajectory.

This chapter examines the reasons behind South Africa’s high unemployment rates. After an analysis of unemployment trends and patterns, it discusses alternative explanations of the country’s employment problems, with a focus on structural causes arising from historical and institutional factors. It also looks at microeconomic explanations of open unemployment based on the functioning of the labour market. The chapter further examines how policy choices post-apartheid have affected employment outcomes, including macroeconomic policies, trade policies, and labour market policies and concludes with a summary of the most important take-away messages from this review.

7.2 Unemployment Trends and Patterns

Unemployment rates are calculated as the number of unemployed persons expressed as a percentage of the total labour force. In South Africa, two unemployment rates are commonly used: a narrow, or strict, definition of unemployment and a broad, or expanded, definition. Under the strict definition of unemployment, an individual is only included in the ranks of the unemployed and as part of the labour force if they have actively been seeking employment over the seven days prior to being surveyed. Under the expanded definition, unemployed individuals who are no longer actively seeking employment, but who are willing and able to work if a paid job became available, are included in unemployment and labour force numbers. The inclusion of discouraged work-seekers and other non-searching unemployed individuals means that the broad unemployment rate is significantly higher than the narrow unemployment rate.

Reliable labour market statistics do not exist for the apartheid era in South Africa. Therefore, we only examine trends for the post-apartheid period (from 1994 onward). At the end of apartheid, unemployment rates were high—around 30 per cent of the labour force using the expanded definition. 2 Since then, the number of unemployed has grown significantly, even by the narrow definition. For instance, the number of unemployed individuals, using the narrow definition, has increased from about 2.4 million in 1994 to 6.7 million in 2019—an almost three fold increase. When discouraged work-seekers are included, the number of unemployed doubles from 4.6 million in 1994 to 9.5 million in 2019. Depending on the definition of unemployment used, aggregate unemployment rates ranged between 25 and 40 per cent of the labour force for most of the post-apartheid period (Figure 7.1 ).

A portion of the initial increase in unemployment in the late 1990s has been attributed to a rapid rise in labour force participation, particularly among African women ( Casale and Posel 2002 ). The removal of influx controls that prohibited the permanent urban settlement of Africans during apartheid was associated with increased mobility in the immediate post-apartheid period, particularly for African women ( Posel and Casale 2003 ). In this period, employment creation did not keep up with the growth in the size of the labour force. Since 2000, labour force participation rates have remained fairly stable and aggregate unemployment showed signs of improvement over the 2000s.

Labour force participation and unemployment rates, 1993–2019

Notes : The narrow unemployment rate is calculated as the number of unemployed divided by the size of the active labour force (LF), excluding non-searching unemployed. The broad unemployment rate includes non-searching unemployed. WAP stands for working age population, defined as individuals aged 15–64. The narrow labour force participation rate excludes non-searching unemployed from the size of the labour force.

However, the 2008/09 global financial crisis and subsequent recession had a significant impact on the South African labour market. As a result, some 800,000 net jobs were lost over the 2009–10 period and since then, unemployment has increased. An important effect of the recession was an increase in the number of discouraged workers ( Verick 2012 ). Searching and non-searching unemployment increased more during the recession for African men with low levels of education relative to women with similar characteristics ( Verick 2012 ).

Patterns of unemployment in South Africa reflect broader economic inequalities, including along the lines of gender, race, age, and location. Table 7.1 presents unemployment rates, using the expanded definition, by social and demographic characteristics. Unemployment rates among women have remained substantially higher than for men over the twenty-five years since the end of apartheid. There has been a narrowing of the gender unemployment gap during the post-apartheid period, which can be attributed to the relatively more rapid rise in unemployment rates among men. As a legacy of apartheid, unemployment rates continue to be structured along racial lines: non-white groups continue to face systematically higher rates of unemployment in South Africa. In particular, unemployment among Africans has remained the highest at 36 per cent in 1995, rising to 41 per cent in 2019. Coloureds experience the second highest rates of unemployment, at 22 per cent in 1995 rising to 27 per cent by 2019.

Notes : Broad unemployment rates include discouraged work-seekers.

Excessively high rates of youth unemployment have persisted over time—in 2019 almost half of those aged 15–34 who are willing and able to work could not find paid employment. A closer examination of youth unemployment is provided in Chapter 32 of this volume. Educational attainment also influences the risk of joblessness. Among individuals with high school completion or less, the unemployment rate has increased from 37 per cent in 2000, to 41 per cent in 2019. Comparatively, among individuals with a post-schooling diploma or degree, unemployment has increased from 13 per cent to 19 per cent over the same period.

7.3 Structural Causes of Unemployment

What might explain these extremely high and persistent rates of unemployment in South Africa? The economist Edmond Malinvaud produced a framework for thinking about the various factors contributing to unemployment that can be usefully applied to South Africa ( Malinvaud 1978 ). In his typology, unemployment that can be attributed to a lack of aggregate demand for goods and services is referred to as Keynesian unemployment. Under Keynesian unemployment, the supply of goods and services is rationed due to inadequate levels of demand and this leads to a shortfall in employment opportunities. In contrast, unemployment that can be attributed to insufficient accumulation of fixed capital is labelled classical unemployment (or alternatively Marxian unemployment). In this scenario, a lack of investment, or overly capital-intensive investment, limits employment opportunities. Even when the productive capacity of the economy is fully utilized, there is excess supply of labour, since the economy fails to generate an adequate number of paid jobs.

In Malinvaud’s framework, involuntary unemployment, either ‘Keynesian’ or ‘classical’, has multiple causes and is structural in the sense that market prices do not seamlessly adjust to eliminate joblessness (Malinvaud 1977 , 1978 ). We expand on this foundational approach to disaggregate the factors that determine the total number of paid employment opportunities. When these jobs are not sufficient to absorb the entire labour supply, unemployment results. Within this framework, we can disaggregate the determinants of total employment into four factors (see 7.6   Appendix for a more formal presentation):

The productive fixed capital stock

The output–capital ratio (an indicator of capital intensity)

Labour productivity (the amount of output produced with a given amount of labour)

Capacity utilization (a measure of aggregate demand—actual output expressed as a fraction of potential, or full-employment, output).

Structural unemployment can be explained by a combination of these factors: insufficient accumulation of fixed capital, adoption of capital-intensive production technologies (i.e. a falling output–capital ratio), growth in labour productivity, or insufficient aggregate demand. We look at each of these potential sources of unemployment in the context of the South Africa economy.

The idea that insufficient capital accumulation can yield an excess supply of labour and involuntary unemployment is not new. It is central to Lewis’s classic theory of labour surplus economies ( Lewis 1954 ). Low rates of investment mean that, even if productive capacity is fully utilized, there will not be enough paid jobs to absorb the labour supply. Researchers have argued that low rates of capital accumulation during the final two decades of apartheid contributed to high rates of involuntary unemployment in the post-apartheid era ( Heintz 2009 ). Moreover, others have noted that the systematic underdevelopment of the apartheid-era homelands and restrictions that prevented investments in informal businesses also limited opportunities for paid work ( Kingdon and Knight 2004 ). The relatively small size of the informal sector in the post-apartheid period is further seen to contribute to the sustained high levels of unemployment over time ( Heintz and Posel 2008 ; Kingdon and Knight 2004 ). 3

Growth rate, fixed capital stock, South Africa 1950–2019

Figure 7.2 shows the growth rate of the aggregate fixed capital stock in South Africa from 1950 to 2019. The growth rate of fixed capital reflects net investment or capital accumulation in the country. Rates of capital accumulation were high during the 1950s, 1960s, and part of the 1970s. However, beginning in the mid-1970s, the growth rate of fixed capital began to decline sharply. For approximately twenty years, from the mid-1980s to the mid-2000s, rates of fixed capital accumulation have been very low by historical standards. Since 2006, there has been a recovery in the growth rate of the capital stock. Nevertheless, the long period of low rates of investment would have impacted the economy’s ability to generate paid jobs.

Others have stressed the type of investments made, not simply the overall rate of accumulation. Specifically, overly capital-intensive production technologies limit the number of jobs created by an additional unit of capital investment ( Nattrass and Seekings 2012 ). Despite high rates of unemployment, production in South Africa remains highly capital-intensive. Counter-intuitively, market production economizes on the country’s abundant factor of production, that is, its labour force. There are numerous reasons given for this paradox. During the apartheid years, priority was given to the goal of generating sufficient decent jobs for the minority white population while maintaining a surplus of labour elsewhere in the economy. This outcome could be achieved by supporting capital-intensive investments through policies that effectively lowered the cost of capital. With the growing strength of organized labour, beginning in the 1970s, firms had an incentive to adopt capital-intensive production techniques to avoid the ‘hassle’ of employing a labour force whose bargaining power was growing. Others have stressed the role of labour market institutions, such as bargaining councils, in creating a capital-intensive bias ( Nattrass and Seekings 2012 ).

A critical form of investment, omitted from the Malinvaud-inspired framework laid out here, is the development of the productive capacities of human beings. Not only was there underinvestment in physical capital during the later years of apartheid, South Africa also underinvested in the country’s human resources for decades. Vast historical inequalities with regard to access to education and training continue to persist within the labour market. The unequal investments in human capital represent another structural explanation of unemployment. South Africa exhibits both high rates of open unemployment and a skills shortage ( Davies and van Seventer 2020 ). As shown previously, unemployment rates are inversely related to educational attainment and joblessness is significantly more prevalent among the less educated. Research has shown that young South Africans who complete secondary education are much more likely to be able to transition from school into paid employment ( Lam, Leibbrandt, and Mlatsheni 2010 ).

Along with physical and human investments, changes in labour productivity affect employment levels. Higher labour productivity means that less labour is required to produce a given amount of output. If output is fixed and labour productivity is growing, employment will necessarily fall. More generally, if output grows at a slower rate than labour productivity, jobs will be lost. The impact of growing labour productivity on paid jobs in South Africa has been documented with respect to patterns of deindustrialization (Tregenna 2009 , 2011 ; Rankin 2012 ). Within South Africa, manufacturing employment as a share of total employment has fallen much more rapidly when compared to manufacturing output as a share of total output. This suggests that efforts to increase sectoral output may not result in an equivalent increase in paid jobs. The explanation for these patterns lies in the dynamics of labour productivity—with productivity growth outstripping the growth in output.

Increases in labour productivity are reflected in the elasticity of employment with respect to output—that is, the percentage increase in employment associated with a given percentage change in output. If labour productivity does not change, a doubling of output should yield a doubling of employment (the elasticity would be equal to 1, all things equal). With increases in labour productivity, less labour is needed to produce a given amount of output and a doubling of output would be associated with less than a doubling of employment (the elasticity would fall below 1). Table 7.2 presents estimates of the elasticity of employment with respect to output during the post-apartheid period. 4 The elasticities are particularly low in mining and manufacturing, suggesting that increases in productivity have limited the numbers of jobs created for a particular increase in output.

Notes : These estimates represent regression-based elasticities. Constant and standard errors are not shown. Sector fixed effects are used for the total GDP-employment elasticity.

Finally, inadequate demand contributes to open unemployment in the standard Keynesian fashion. Specifically, actual output will fall below potential output when producers are limited with regard to how much they can sell. In this case, rationing of sales in the final markets for goods and services leads to a rationing of employment opportunities. Policy changes, such as trade liberalization, that increase competitive pressures and displace domestic production, can also contribute to a decline in aggregate demand. The relationship between such policies and unemployment in South Africa is discussed later in this chapter. In addition, vast income inequalities, such as those evident in South Africa, limit market development and domestic demand ( Stiglitz 2012 ).

These aggregate changes are only part of the story of a shifting structure of employment. Changes in the composition of employment are also apparent at the sectoral level (Table 7.3 ). During the post-apartheid period, the share of employment in primary and secondary industries, including agriculture, mining, and manufacturing, declined. Employment shifted into construction and certain service sectors, including retail and wholesale trade and the financial sector. These changes in the structure of employment represent a shift away from what was once the traditional base of the South African economy into new types of employment.

Notes : Community, social, and personal services relate primarily to public-sector employment.

While the framework presented here helps clarify the structural sources of unemployment in South Africa, it is important to recognize that these factors interact with one another. For instance, increases in labour productivity are employment-displacing, but only if they do not affect investment or aggregate demand. Productivity increases have the potential to raise profitability and returns to investments in ways that could support the overall rate of capital accumulation. Higher productivity can also lower unit labour costs, enhancing trade competitiveness and the demand for domestically produced output. Sustainable long-run wage increases are also associated with improvements in productivity over time. As labour income grows, so does the potential aggregate demand. These interconnections need to be considered when analysing South Africa’s unemployment challenge.

This overview provides a number of insights into the structural sources of unemployment in South Africa. To sum up: uneven and slow rates of capital accumulation limited the development of productive capacity in the country. Many of the productive investments made had a capital-intensive bias to provide a relatively small number of quality jobs to a privileged minority. Underinvestment in the country’s human potential further compounded the effect on paid job opportunities. At the same time, labour productivity has been increasing faster than the demand for output, particularly in industrial sectors, leading to labour displacement. Such increases in labour productivity could be driven, in part, by growing competitive pressures due to import penetration as South Africa reintegrated into the global economy ( Rankin 2012 ). Export competitiveness, import penetration, and constraints on the development of domestic markets also exacerbate unemployment by curtailing aggregate demand. Taken together, these structural factors contribute to South Africa’s high and persistent levels of unemployment.

A historic perspective further clarifies the origins of these structural sources of unemployment. The apartheid labour market system created a large, inexpensive, and relatively well-disciplined low-skilled labour force. Outside of the white population, job opportunities were limited and rationed through various mechanisms, such as the ‘colour bars’, that reserved the best jobs for the white labour force, the pass laws (i.e. influx controls), that regulated residency rights in urban areas where workers could find industrial wage employment, and unequal access to education and training. Many regions in the country, such as the homelands, were systematically excluded from the apartheid development model, leading to gross under investment. The capital-intensive bias, partly due to an artificially low cost of capital, further limited opportunities for paid work.

Large labour surpluses and repression of organized labour, particularly in the first two and a half decades of apartheid, kept wages low. The laws limiting access to job opportunities, the underdevelopment of areas not dominated by whites, and unequal investments in the population’s productive potential raised the cost of job loss to Black workers. If workers lost their jobs, the apartheid labour market system made it difficult to find equivalent work elsewhere. The threat of job loss thereby served as a disciplinary device, helping to secure the productivity of this segment of the labour force and the profitability of the apartheid economy, particularly in the 1950s and 1960s ( Heintz 2009 ; Wintrobe 1998 ). However, the system was predicated on maintaining insufficient numbers of decent jobs for the majority of the population.

While it seems obvious that high rates of unemployment would emerge from the apartheid economic system, it is less clear why unemployment continues to persist at such elevated levels in the post-apartheid period. One explanation is that the apartheid system, through a range of interventionist policies, created an economic structure that is slow to change and is not self-correcting. Simply removing the apartheid-era laws and distortions is not sufficient to transform these economic structures. The discussion of structural causes suggests that the key to South Africa’s unemployment challenge lays beyond the labour market and involves policies to support investments, appropriate technologies, skills gaps, and market development. This is not to say that labour market policies are irrelevant. Clearly, they affect employment levels and trends. But solving South Africa’s unemployment problem would involve far more than relying on wage and price adjustments. Nevertheless, the dynamics of the South African labour market cannot be dismissed when examining the country’s serious unemployment problem. For this reason, we look at these microeconomic dynamics, focusing on labour market rigidities, next.

7.4 Microeconomic Perspectives

The structural causes of unemployment in South Africa represent one set of factors contributing to the persistence of high rates of joblessness. However, alternative explanations have been advanced that are strongly rooted in neoclassical economic theory. These alternatives focus on the possibility that microeconomic dynamics are behind South African unemployment. On the demand side, these approaches argue that labour market rigidities keep labour costs artificially high, lower labour demand, and hinder job creation. There are also supply-side microeconomic theories based on individual preferences and characteristics—for example, high reservation wages due to unrealistic earnings expectations and a system of social grants lead to a situation in which individuals remain unemployed rather than accepting a job that falls short of these expectations. We review these demand-side and supply-side microeconomic theories in turn.

The labour market rigidities explanation of unemployment in South Africa points to various factors that prevent labour costs in general, and wages specifically, from adjusting in the face of high rates of unemployment: collective bargaining agreements, bargaining council agreements, regulation of working conditions (such as those contained in the Basic Conditions of Employment Act of 1997), and sectoral minimum wages. There is a fairly sizeable body of research that suggests that these sources of labour market rigidity reduce the overall level of employment by dampening labour demand (e.g. Flowerday, Rankin, and Schöer 2017 ; Bhorat, Kanbur, and Stanwix 2014 ; Magruder 2012 ; Nattrass and Seekings 2012 ; Fedderke 2012 ; Moll 1996 ). Labour demand is reduced when market interventions and collective agreements raise the cost of employing labour.

Labour market regulations and bargaining agreements are not the only source of rigidities in labour markets. Asymmetric information and imperfect markets can also generate wage premiums ( Shapiro and Stiglitz 1984 ; Bowles 1985 ). This occurs when wages influence productivity, often referred to as efficiency wages ( Solow 1979 ). Workers are likely to put in more effort when they fear losing a good job. Employers typically contract for a given volume of work (e.g. hours of work), but, in many cases, may not be able to contract for a particular level of effort. By paying a wage premium, employers can elicit more effort from their workforce, since workers face a higher cost of losing a well-paying job if the employer discovers that they are not putting in sufficient effort and dismisses them. These dynamics produce wage rigidities even in the absence of collective bargaining or legislation.

If labour market rigidities stifle labour demand, then lowering wages should increase employment and lower the measured rate of unemployment. This raises the question: how responsive is labour demand to changes in wages? Estimates of wage elasticities provide a partial answer to this question. Wage elasticities measure the responsiveness of employment to wages, when all other factors are held constant. The wage elasticity shows the expected percentage change in employment of a 1 per cent change in real (i.e. inflation-adjusted) wages.

Estimates of wage elasticities for South Africa suggest that labour demand is relatively inelastic—changes in wages, even sizeable ones, would not be expected to result in large changes in employment. For instance, von Fintel (2017) produces elasticity estimates of around –0.1 to –0.2, suggesting that a 10 per cent reduction in wages may only increase employment by 2 per cent. Other estimates for South Africa suggest that employment may be more responsive, for example, an average elasticity of –0.7, but there appears to be a wide variation by sector ( Fedderke 2012 ).

Given this evidence on the relationship between wages and employment, can high wages fully explain the high rates of involuntary unemployment in South Africa? The elasticity estimates suggest that paid employment is relatively unresponsive to wages. Because of this, wages would have to fall drastically in order for labour demand to increase to a point where it absorbs the unemployed labour force. 5 In other words, wage premiums would have to be extremely large in order to fully explain the persistently high rates of unemployment. Furthermore, wages are not the relevant variables—labour costs are. Rising wages may not translate into increasing labour costs if productivity rises sufficiently with wages. Along similar lines, slashing wages may not lower labour costs if productivity suffers, as efficiency wage arguments would lead us to believe. A sizeable cut to wages, when employment is inelastic, would also reduce incomes with negative consequences for aggregate demand. Elasticity estimates assume nothing other than wages and employment change, but if productivity and domestic demand are linked to wages, the impact on employment becomes more complex.

The institutions that push up wages, such as bargaining councils, minimum wages, and labour laws, have been shown to have uneven coverage and enforcement ( Flowerday, Rankin, and Schöer 2017 ; Bhorat, Kanbur, and Mayet 2012 ). If these restrictions are not binding in all cases, their impact on employment would be muted. Despite these caveats, it is important to recognize that elasticity studies for South Africa have consistently shown a negative relationship between wages and employment. Therefore, wage premiums and upward pressure on wages, in themselves, will likely do little to mitigate the current high rates of unemployment. Studies of the impact of bargaining council agreements and minimum wages have suggested that these institutions have had some negative impact on employment, although the estimated size of this effect is fairly modest (e.g. Bhorat, Naidoo, and Yu 2014 ; Dinkelman and Ranchhod 2012 ). Research has revealed evidence of significant dis-employment effects of the introduction of sectoral minimum wage laws in certain contexts, for example, agriculture ( Bhorat, Kanbur, and Stanwix 2014 ), but such legislation cannot explain the persistence of high rates of unemployment prior to the introduction of these policies. Given this evidence, wage rigidities, by themselves, cannot be seen as the primary cause of high rates of unemployment in South Africa. However, they could contribute to slower rates of job creation if labour market interventions are not coordinated with efforts to address the other structural causes of unemployment.

Labour market regulations typically are assumed to affect labour demand by raising the cost of labour per unit of time (i.e. hourly wages) or in terms of unit labour costs (i.e. the cost of labour in one unit of output). However, other restrictions impact on hiring decisions by raising the overall non-wage costs of employing workers. For instance, employment protection legislation, such as restrictions on terminating employment, can raise the overall expected cost of employing workers or limit the employer’s ability to adjust to changing economic conditions ( Bhorat, Naidoo, and Yu 2014 ). In addition, policies that restrict the ability of employers to fire or lay off employees effectively reduce the cost of job loss to paid workers. According to efficiency wage theories, this may result in employers having to pay more to elicit a certain amount of effort or reduce on-the-job productivity, as workers are less concerned about being fired. The higher costs of employing workers combined with these efficiency wage effects would dampen labour demand.

In South Africa, institutions that extend employment protections may raise hiring and firing costs in ways that go beyond standard measurements, such as severance pay and prior notification ( Benjamin, Bhorat, and Cheadle 2010 ). Drawn-out dispute resolution processes, the treatment of probationary periods, and cumbersome procedures around dismissals can also raise the non-wage costs of employing workers with potentially detrimental effects on employment ( Bhorat, Jacobs, and van der Westhuizen 2013 ).

Studies of temporary employment services in South Africa suggest that extensions of employment protection legislation displace workers in temporary employment ( Cassim 2020 ; Bhorat, Magadla, and Steenkamp 2015 ). The 2014 Labour Relations Act (LRA) Amendment extended certain employment protections to temporary workers whose earnings fell below a certain threshold. Analysis of data before and after the LRA Amendment was adopted showed that more temporary workers moved out of paid employment or into informal forms of employment than moved into permanent jobs ( Cassim 2020 ). In addition, there appears to have been a positive wage effect for temporary workers receiving these new protections. These outcomes are consistent with expectations of the impact of employment protections that lower the expected cost of losing a job.

Like labour market rigidities that raise labour costs, employment protection laws and processes may have a negative impact on job creation. However, the estimated effects are not large enough to explain the high and persistent rates of unemployment in South Africa. Moreover, given the apartheid labour market system, with the pass laws, insecure urban residency rights, the ‘colour bar’, and limited or no protections from unfair dismissal, the introduction of employment protection measures in the post-apartheid period is a natural response to the country’s economic history. The apartheid labour market, with no real protections for the majority of the labour force, did not generate adequate numbers of good job opportunities. It is unlikely that removing such protections in the post-apartheid period would, in itself, solve the challenge of joblessness.

Some micro-level explanations of unemployment in South Africa focus on the supply-side of the labour market. One critical supply-side factor has already been discussed—the underinvestment in education and skills development. However, other supply-side explanations focus on the ability and willingness of unemployed workers to accept employment opportunities that become available. One such argument centres around the reservation wages of South Africa workers. The reservation wage refers to the minimum acceptable wage for an individual participating in the labour force. If an available job offers a wage or salary that falls below the reservation wage, an unemployed worker will refuse to accept that job. If reservation wages in South Africa tend to be higher than the prevailing wages, this could contribute to the high rates of measured unemployment.

There are a number of reasons to be sceptical of reservation wage explanations of high rates of unemployment. At a basic level, if workers refuse jobs that pay the prevailing wage and are not subject to substandard working conditions, it raises questions of whether such unemployment should be considered involuntary. Voluntary unemployment, when workers choose to remain unemployed, is deemed less serious of an economic failing than involuntary employment, that is, the absolute lack of job opportunities. Research into reservation wages in South Africa has shown reported reservation wages to be unreliable (i.e. they may be aspirational wages rather than true reservation wages) and that reservation wages are often not higher than predicted prevailing wages ( Kingdon and Knight 2004 ). Finally, it is unclear why workers would hold onto unrealistic wage expectations for an extended period of time. Expectations should adjust over time to reflect actual labour market conditions, raising questions about how reservation wages could explain high rates of sustained unemployment over decades.

Another, related, factor that could affect the supply side of the labour market is the system of transfer payments that exists in South Africa, including the Older Persons Grant and the Child Support Grant. Private transfers are also important, such as remittances from migrant workers. When these transfer payments raise household incomes, they may reduce the imperative to seek out paid employment to meet the household’s needs. In effect, they have the potential to raise reservation wages, with possible impacts on measured unemployment as described above.

Some researchers have found a negative correlation between the presence of pension recipients (Older Persons Grants) in the household and participation in paid employment ( Abel 2019 ). But other studies have not found the same negative correlation between labour supply and receipt of a transfer payment. Indeed, since labour force participation is not costless and often requires real resources, cash transfers can actually have a positive impact on participation in paid work. This is particularly relevant for South Africa, with its history of spatially fragmented labour markets. For instance, research has shown that the receipt of a pension facilitates the ability of household members, specifically young men, to migrate for paid work ( Ardington et al. 2016 ) although this effect depends on the educational attainment of the migrant worker. Other studies have shown similar positive impacts of cash transfers on migration for paid work among women ( Posel et al. 2006 ).

Moreover, even if the argument that cash transfer payments cause individuals to willingly leave the labour force were accepted, this would be considered a voluntary withdrawal from paid employment. It should not be considered as an explanation for involuntary unemployment. There may be other reasons to be concerned about a decline in labour force participation. However, as Figure 7.1 shows, South Africa has experienced a modest growth in the labour force participation rate, not a decline in participation. There does not appear to be a meaningful connection between South Africa’s system of cash transfers and the involuntary unemployment rate. Indeed, South Africa’s system of cash transfers have been shown to have a significant impact on reducing economic inequality ( Leibbrandt et al. 2010 ). In this respect, the transfer programmes help address one of the more serious socio-economic consequences of high rates of unemployment—the country’s dramatic economic inequalities.

7.5 Post-apartheid Economic Policy and Unemployment

South Africa’s historical development trajectory, structural factors, and labour market institutions all contribute, to varying degrees, to the persistence of high rates of open unemployment. But the story of South Africa’s unemployment challenge does not end there. Other policy choices affect aggregate demand and investment patterns and, through these channels, influence levels of unemployment. South Africa’s economic policy in the post-apartheid era was centred on liberalization and re-integration into the global economy. Along with liberalizing financial flows and loosening exchange controls, the policy regime reduced trade protections and removed export incentives. In addition, from 2000 onward, the central bank’s primary mandate of price stability was implemented through an inflation-targeting framework, despite the fact that inflation rates had been moderate throughout the country’s history.

These new policy directions could be seen as attempts to address some of the structural sources of unemployment discussed earlier. A stable, low-inflation environment might encourage greater long-term investment, faster capital accumulation, and more consumer spending if other factors (e.g. real interest rates) were not affected. Trade liberalization could increase aggregate demand through exports, if South African products were sufficiently competitive. Integration into global capital markets could attract foreign productive investment that has the potential to generate new job opportunities. However, in contrast to expectations, after adopting these policy measures, South Africa did not attract substantial levels of investment and, in most cases, trade liberalization proved to have net negative impacts on certain sectors, particularly manufacturing.

South African monetary policy has been based on an inflation-targeting framework since 2000, when the consumer price inflation target was set as a band of 3 per cent to 6 per cent. Through adjustments in policy interest rates—using interventions into the market for government bond repurchase agreements—the South African Reserve Bank has largely managed to keep inflation within the target band. This also means that the approach has sustained a high interest rate environment, with potentially negative consequences for aggregate demand and fixed capital investment. Between 2000 and the first quarter of 2010, the prime lending rate exceeded 10 per cent and between then and the end of 2019, has remained between 8 and 10.5 per cent ( SARB 2020 ).

Researchers have questioned the relevance of a strict inflation-targeting regime for developing countries due to variations in the sources of inflation, the role of exchange rate pass-through, and the negative impact of higher interest rates and over-valued real exchange rates on economic activity and employment ( Brito and Bystedt 2010 ; Epstein and Yeldan 2008 ; Heintz and Ndikumana 2011 ). For South Africa, Epstein (2008) estimates that over the 2001–04 period, a 4 percentage point reduction in the prime lending rate is associated with a 0.6 per cent increase in GDP growth and only a 1 percentage point increase in inflation. In a cross-country panel data analysis that includes South Africa, Brito and Bystedt (2010) find that the adoption of inflation targeting had a negative impact on output growth, with consequences for paid employment.

Regarding the employment effects in developing countries, Epstein and Yeldan (2008) show that many countries have experienced higher levels of unemployment after implementation of inflation targeting. Braunstein and Heintz (2008) find that countries that raise real interest rates above the long-run trend to curb inflation experience a slow-down in employment growth, with a greater negative effect on the employment rates of women relative to men. Therefore, the high interest rate environment required to maintain the inflation target and to manage capital flows may be a contributing factor to lower rates of output growth and higher levels of unemployment in South Africa.

As South Africa transitioned to democracy in 1994, economic policy focused on opening up the economy to foreign capital flows and trade. After a period of tight exchange controls in the 1960s to the 1970s to manage capital outflows during the period of political unrest, the 1980s ushered in a period of gradual exchange control relaxation. Liberalization continued in the post-apartheid period, which included relaxing exchange control regulations and a removal of the two-tier exchange rate system in favour of a floating exchange rate. These policies, along with tax amnesties and voluntary tax disclosure programmes, were implemented with a view to attracting foreign investment, encouraging residents to repatriate capital held abroad without excessive penalties, and reducing capital flight.

Despite the positive expectations in the post-apartheid period, net FDI to South Africa has remained low and capital flight has accelerated. The 1990s saw a net FDI outflow of $7 billion (in constant 2018 US dollars), which improved to a net inflow of US$43 billion in the 2000s, followed by almost equal FDI inflows and outflows in the 2000–18 period ( Ndikumana, Naidoo, and Aboobaker 2020 ). In addition, capital flight has accelerated in the post-apartheid period. In the 1990s, it is estimated that South Africa lost a combined $49.4 billion in capital flight and trade mis-invoicing, which increased to $130 billion over 2000–09, and further to $158 billion over 2010–17 ( Ndikumana et al. 2020 ).

Trade policy also affects employment opportunities. The process of trade liberalization began when the South African government agreed to the comprehensive tariff reductions under the General Agreement on Tariffs and Trade (GATT), which was then rapidly implemented from 1995 onwards through the World Trade Organization (WTO), of which South Africa was a founding member. The average tariff rate in the manufacturing sector declined from 22 per cent in 1994 to 7 per cent in 2004 ( Erten, Leight, and Tregenna 2019 ). In addition, the 1990 General Export Incentive Scheme was phased out between 1995 and 1997 ( Cassim, Onyango, and Seventer 2004 ).

The weak performance of South Africa’s manufacturing sector has been linked with the rapid liberalization of trade and the accompanying increased import competition. Early research analysing the impact of trade liberalization over the 1993–97 period finds that manufacturing employment lost through import competition was matched by employment generated through exports ( Edwards 2001 ). Over this period, there was also a significant shift away from low-skilled elementary employment, potentially driven by the nature of export competitiveness ( Edwards 2001 ).

However, later studies uncover a much stronger link between trade liberalization and reductions in manufacturing employment. Jenkins and Sen (2006) find that import competition explained about 10 per cent of the decline in manufacturing employment. While the authors find that productivity growth explained considerably more of the decline than import competition, the approach does not preclude the idea that productivity upgrades are also a response to increased imports. Furthermore, the rapid rise in imports from China in particular is also linked to substantial job losses in manufacturing in the 2001–10 period ( Edwards and Jenkins 2015 ). Erten et al. (2019) study the impact of tariff reductions on local labour market outcomes in South Africa in the first decade of the post-apartheid period and find that districts that are more exposed to tariff declines experience greater declines in manufacturing employment relative to less affected districts. In addition, more affected districts experience an increase in the proportion of the working-age population that are discouraged work-seekers.

Other research has investigated the poor performance of export-oriented manufacturing. South African manufacturing sectors have been found to have higher unit labour costs—indicating lower levels of productivity and competitiveness—compared to other developing countries over the 1970s to the 1990s, which negatively impacted export performance ( Edwards and Golub 2004 ). Rodrik (2008) points to the declining relative prices, a proxy for profitability, of South African manufacturing in the 1994–2004 period as an important determinant of the weak manufacturing performance and declining manufacturing employment. In further analysis, Rodrik (2008) finds that higher levels of import competition and the real exchange rate exert a negative impact on manufacturing profitability.

South Africa’s post-apartheid policy regime, with respect to monetary, financial, and trade policies, would have affected demand for domestic production, investment, and employment. While these policy changes cannot fully explain the country’s extreme unemployment problem, to the extent that they have dampened labour demand and job creation, they would have contributed to the persistence of unemployment in the post-apartheid period.

7.6 Conclusion

Numerous factors contribute to South Africa’s high and sustained rates of unemployment: the structure of the economy, the country’s apartheid history, labour market institutions, and the policies implemented post-apartheid. One striking observation that can be made based on the review presented in this chapter is that the determinants of unemployment extend well beyond the labour market itself. Therefore, an exclusive focus on labour market reforms—such as deregulation, rolling back social protections tied to employment, and enhanced flexibility—is not sufficient to address the country’s problem of joblessness. Labour market dynamics are important, but they must be considered along with other policy interventions, institutions, and structural features of the economy.

This overview points to factors beyond the labour market that have impacted on and continue to affect South Africa’s persistent unemployment challenge. These include the rate of productive investment, the changing sectoral composition of economic activity, factor intensity, educational attainment, skills development, capital flows, macroeconomic management, and trade policy. The economic structures that impede employment creation were built up during more than four decades of interventionist policies under the apartheid regime. These structures are slow to change and, if left alone, are unlikely to automatically adjust to lower the country’s elevated unemployment rates. Instead, deliberate directive policies are needed to transform these structural impediments to job creation in order to tackle South Africa’s unemployment challenge.

7.6 Appendix

Modification of malinvaud’s (1978) framework:.

Let N represent the total level of paid employment and L the total labour force. The rate of unemployment, U, can therefore be given by:

For a given level of L, the unemployment rate varies inversely with the aggregate level of employment.

We can define the level of employment as follows:

λ = labour productivity (output per unit labour)

K = fixed capital stock

Y ¯ K = output/capital ratio (indicator of capital intensity)

Y Y ¯ = rate of capacity utilization (actual output as a fraction of potential output).

From these expressions, the impact of different factors on the unemployment rate can be determined (all other factors remaining constant):

Higher labour productivity will raise the unemployment rate

Growth in the capital stock will lower the unemployment rate

Less capital intensity (a higher output/capital ratio) will lower unemployment

Greater capacity utilization (aggregate demand) will lower unemployment.

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The national minimum wage was initially set in 2019 at R20 per hour for general workers, R18 per hour for farmworkers, and R15 per hour for domestic workers.

The broad labour force is defined as individuals aged 15–64 who are either employed, strictly unemployed or non-searching unemployed.

Further discussion of the informal sector in South Africa is provided in Chapter 35 of this volume.

We calculate output-employment elasticities for the aggregate economy and by sector for the 1994–2019 period, according to the following equation:

l n L t = β 0 + β 1 l n Y t + ε t

Where l n L t is log employment, l n Y t is log real GDP at 2010 constant prices, and ε t is the error term. We summarize the results in Table 7.3 . For the analysis in this chapter, sectoral data on real output and the capital stock are obtained from the South African Reserve Bank. Sectoral employment and wages are obtained from PALMS, which is the primary source of labour market data and since these data are not available from the South African Reserve Bank at a sufficiently disaggregated level (i.e. for the nine main sectors).

For example, over the period October–December 2019, the Quarterly Labour Force Survey, using the narrow definition, estimated the labour force to be 23.15 million and unemployment to be 6.73 million, for an unemployment rate of 29.1 per cent. Reducing unemployment to 5 per cent (in terms of the narrow definition) would require generating an additional 5.57 million paid jobs, or a 24.1 per cent increase in employment. If we assume a wage elasticity of –0.5, for the sake of argument, well within the range of –0.1 to –0.7 discussed in the text, this suggests that wages would have to fall by 48.2 per cent. In other words, average wage incomes would need to be cut in half.

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Millions of young South Africans are without jobs: what are the answers?

Director & Professor, Stellenbosch University

Senior lecturer in Strategy and Sustainability, Stellenbosch University

Professor of Economics and Development Finance, Stellenbosch University

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The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.

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African countries are experiencing an unprecedented level of unemployment among young people. The unemployment numbers are expected to increase given the booming youth population in Africa.

Not only are more young people without jobs, the vast majority are employed in the informal economy. The International Labour Organisation puts the proportion of 15-24 year olds employed in the informal economy in the world at 95% in 2018. The proportion in sub-Saharan Africa is in the same ballpark.

If not arrested, this situation presents a ticking time bomb with adverse political and socioeconomic consequences.

The problem is particularly acute in South Africa. World Bank statistics show that in 2019 the youth unemployment rate in South Africa stood at 58%, which is one of the highest in sub-Saharan Africa. For South Africa , the unemployment numbers are expected to increase. Over 60% of the unemployed at the start of 2020 were aged 15-34.

The South African economy has consistently underperformed in the past decade, with growth in real GDP per capita declining since 2011. While South Africa experienced political emancipation in 1994, the population still suffers from high inequality. The country’s GINI coefficient stood at 0.63 in 2015 – one of the highest in the world.

South Africa is desperate for a more dynamic, employment intensive and innovative growth trajectory – even more so after the pandemic of COVID-19.

A sustainable and inclusive economic recovery that guarantees decent jobs will require an integrated response from policy makers, in partnership with the private, academic and community sectors.

We argue that promoting entrepreneurship has a role. But the data show that South Africa needs to step up entrepreneurship development for it to catalyse youth employment.

Joblessness and education

Unemployment is not limited to those with basic or lower levels of education. The trend of unemployed young people with tertiary education is also on the rise. According to the 2021 World Bank World Development Indicator the percentage of the labour force with an advanced level of education that is unemployed rose from 3.7% in 2007 to 14% in 2019.

Gone are the days when a university graduate was guaranteed a job.

A gender gap is also evident in the unemployment figures among people with advanced education. The unemployment rates of 2.3% in 2007 and 12% in 2019 for males with advanced education were lower than those of their female counterparts, which grew from 4.7% to 15%.

This status risks long-term scarring effects for young people along with increases in informal working and social isolation .

Rising unemployment has a severe effect on the wellbeing of families, in terms of hunger and mental health. According to research done at the University of Stellenbosch, roughly one in five (18%) families reported someone going hungry at the end of 2020, compared to 14% (one in seven) in 2018. At the same time, a recent study found that a 1% increase in youth unemployment led to a 1.6%-1.8% increase in murder crimes.

The already dire situation has been compounded by the COVID-19 crisis with its adverse economic and labour market fallouts. According to Statistics South Africa , the economy is still 2.7% smaller than it was in the first quarter of 2020 before the COVID-19 pandemic started.

And evidence suggests that the impact is disproportionately affecting young people with many more losing their jobs, or being driven into the informal sector.

• Entrepreneurship

Entrepreneurship has been cited as a key lever to transform local and global communities and societies.

We agree that entrepreneurship has a major role in promoting innovation, improving productivity and developing a business culture. And, importantly, it has the potential to create employment.

But data from the Global Entrepreneurial Monitor , coordinated by the University of Stellenbosch Business School , indicate that South Africa’s Total Early-Stage Entrepreneurial Activity between 2001 and 2016 was below average compared to most other similar countries.

Research shows that this measure has dropped below half that of the more entrepreneurial economies.

This suggests that South Africa isn’t doing enough.

A greater focus on entrepreneurship would permit the development of more enterprises to formalise many aspects of the South African economy.

Having said that, the evidence from across the world shows that entrepreneurs do not always create jobs. Indeed, research shows that many entrepreneurs are sole traders and involved in activities with limited potential to create employment.

Put simply, South Africa needs entrepreneurs that create jobs rather than simply setting up informal stores (known as spaza shops, which number more than 100,000 in the country).

South Africa should encourage entrepreneurship with three characteristics:

social entrepreneurship. This is the kind that addresses issues such as inequality, healthcare, hunger and environmental sustainability. These are based on business models that create tangible economic value at scale.

entrepreneurship that embodies the Schumpeterian idea of creative destruction – developed by Austrian political economist Joseph Schumpeter , the idea is that inferior solutions get replaced (partly or completely) with new products, services and business models.

entrepreneurship that unlocks multiplier effects for other small businesses to create employment. This would include fintech like Yoco , M-PESA and JUMO .

The challenge for policy makers is to understand, develop and nurture the support that helps entrepreneurs develop. And enables them to move on to become employers and creators of jobs as well as innovating products and services.

For innovative businesses to thrive, effective and supportive environments have to be created. This should include access to resources, such as capital or knowledge and a market for their innovation.

These supportive environments require an educational system that infuses intensive technical skill-based vocational education complemented with practical, innovative training at all levels. This would give young people the foundation, skills and mindset they need to become entrepreneurs.

Access to finance by youth enterprises and entrepreneurs is critical. But this needs to be tailored to their needs. Examples include loan guarantee schemes, direct loans and equity as well as structured finance.

There are signs of some progress. For example, the African Development Bank is developing Youth Entrepreneurship Investment Banks to finance youth entrepreneurship and innovation in Africa.

And the South African government has introduced programmes and schemes that provide finance for enterprises including those owned by young people. These could be strengthened.

Mentorship for young entrepreneurs is also needed. As is the creation of incubators and innovation hubs where young entrepreneurs can experiment with business ideas and learn from others.

Ultimately, critical capacity development in the field of entrepreneurship is needed. For South Africa this would include capacity in research, training, and advice with the aim to boost dynamism, growth and inclusion through entrepreneurship for more members of society.

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Tackling youth unemployment: What works, what doesn't

Youth unemployment is one of South Africa’s most intractable challenges, made worse by COVID-19. Prior to the pandemic the unemployment rate (including people who had given up looking for work) was just under 70% for people aged 15 to 24 .

A year later the rate had increased to 74% – despite government investments. So it is crucial to understand what interventions are working. But how do we evaluate whether youth employment programmes are successful, particularly when unemployment is caused by the structure of the economy ?

The obvious answer, of course, is whether a programme results in a young person getting employed.

This is logical and easy to measure. It can easily be linked to the release of funding to programmes. And it allows for programmes to be compared. This was done in a systematic review of 113 programmes internationally .

However, as we have explored in several recent studies, there are a number of drawbacks to relying solely on job placement as an indicator of successful intervention. Doing so misses out on outcomes that are equally important, or more so, amid high structural unemployment.

Together, these studies show that job placement alone is an insufficient goal and measure of the success of youth employability programmes.

These lessons are particularly important in economies that have been severely affected by the COVID-19 pandemic, where youth employment recovery will take time.

Inadequate measure of success

We make this argument based on several studies. The first looked at long-term employment outcomes of 1,892 youth between 18 and 25 who participated in youth employability programmes over the period 2017-2018. These are programmes run by NGOs, business and the state. They typically include technical and soft skills training.

The proportion of participants who found jobs and stayed in them over time was just 28% – somewhat better than a matched sample from the quarterly labour force survey data , but still low. But we also found evidence that programmes had other important outcomes. These included a continued positive orientation to the labour market, and improved self-esteem and self-efficacy – important attributes for managing the protracted transition to work in a low growth economy.

The second involved analysis of the quarterly labour force survey and general household survey data to understand the nature of young people not in employment or in education and training. It found that while many such youth have never worked, a significant portion find themselves in and out of work without making much longer-term progress.

The third study draws together several qualitative studies conducted in the past 10 years. It shows that young people are frustrated by the constant cycle of finding and taking up training and employment opportunities, without making progress towards a longer-term career.

Together, these studies show that job placement alone is an insufficient goal and measure of the success of youth employability programmes. Four reasons for this argument emerge from these studies.

First, job placement says more about demand than supply. A young person’s ability to find a job doesn’t depend only on their skills but also on whether the labour market is creating sufficient demand for employees. No matter how well a programme trains and supports a young person, if there are limited jobs, young people are unlikely to be employed.

Second, if a programme is getting young people into jobs even though job numbers are not growing – as in South Africa – these placements may be at the expense of other work seekers.

Individual programmes can get people into jobs while the overall youth unemployment rate stays stagnant or rises. In the context of a rapidly contracting economy in the COVID-19 era , this is a particularly important argument against job placement as the only measure of a programme’s success.

Third, using this single indicator takes attention away from longer-term pathways towards sustainable livelihoods. Many jobs in South Africa, especially at entry level, are insecure, part time or casual. There’s a risk of disregarding whether a job is decent and has prospects for learning and career development.

Young people typically do not stay in jobs . This is either because the job is not a good fit or is for a short term only. Other barriers, such as transport costs, also account for why they are unable to stay in jobs.

Qualitative and quantitative evidence shows that young people find jobs that are typically short lived, before having to look again for their next placement. Policymakers should consider whether these short term experiences add up to something longer term – or there’s a risk of perpetuating the cycle of underemployment.

Finally, and perhaps most importantly, evaluating programmes on the basis of job placement alone underestimates the multidimensionality of poverty . Evidence repeatedly shows how many barriers and challenges young people face as they leave the education system and begin to find their way towards a job, and perhaps even a career.

Evidence repeatedly shows how many barriers and challenges young people face as they leave the education system and begin to find their way towards a job, and perhaps even a career.

These barriers are not only related to the labour market or education system. They also include issues such as food insecurity, income poverty, and care responsibilities , among others. Each of these limit the ability of young people to look for work.

These interrelated challenges influence young people’s ability to take up training or job opportunities.

Taken together, these challenges require far more intensive support than simply training and placing a young person in a job.

Alternative approaches

It is crucial that funders, policy makers, and programme developers invest in more intensive support that can help young people meet the challenges they face in seeking work. They must also insist on measures beyond job placement as indicators of success. International evidence bears this out. It shows that across 113 programmes reviewed, multidimensional programmes that seek to provide more comprehensive support to youth are more effective than those that offer training only. They are particularly successful when they target the most vulnerable youth.

Further, our research recognises the crucial contribution such programmes play in keeping young people connected to opportunities, and reducing social exclusion and social drift. This is when young people become increasingly disconnected from the labour market, training opportunities and positive social inclusion, which in turn can have negative consequences on mental health.

Given this evidence and the fact that South Africa is facing a stagnant economy for some time, it is crucial that funders, policy makers and those working on youth employment interventions evaluate and invest in programmes on the basis of their ability to keep young people positively oriented towards the labour market. The programmes should help improve their employability, even if the young participant is not yet able to find an actual job.

Outcome indicators that can more adequately measure these factors include enhancing job search resilience, promoting self-esteem and self-efficacy, and reducing discouragement .

There are ample reasons to move away from evaluating employability programmes on the basis of employment outcomes alone. Rather, a range of indicators should be used to track whether young people remain engaged, believe in themselves and keep trying to find a job. This, while developing the personal attributes that will make them attractive to future employers.

Each of these outcomes is more difficult to measure than a simple count of job placements. But it’s not impossible.

Lauren Graham, Associate professor at the Centre for Social Development in Africa, University of Johannesburg, University of Johannesburg; Ariane De Lannoy, Senior Researcher: Poverty and Inequality Initiative, Southern Africa Labour and Development Research Unit, University of Cape Town, and Leila Patel, Professor of Social Development Studies, University of Johannesburg.

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Youth unemployment in South Africa: challenges, concepts and opportunities

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Mlatsheni, C., Leibbrandt, M. Youth unemployment in South Africa: challenges, concepts and opportunities. J Int Relat Dev 14 , 118–126 (2011). https://doi.org/10.1057/jird.2010.24

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2023 Unemployment Impact in South Africa Essay Guide and Example

2023 Unemployment Impact in South Africa Essay Guide and Example: Unemployment is a significant challenge faced by many countries worldwide, including South Africa. The COVID-19 pandemic has made the situation worse, with many businesses closing down, leading to job losses. According to a report by Visual Capitalist, South Africa is projected to see the highest jobless rate globally. As the most industrialized nation on the continent, unemployment is estimated to hit  35.6%  in 2023 . The unemployment rate was at  33.9%  in Q2 of 2022, down from 34.5% in Q1 and a record high of 35.3% in Q4 of 2021.The slow economic growth and stringent labor laws have prevented firms from hiring workers.  Over the last two decades, unemployment has hovered around 20% .

The government of South Africa has implemented various measures to address the issue, such as increasing social grants and job creation programs. This essay will provide a guide on how to prepare an essay on the impact of unemployment in South Africa in 2023. It will also present an essay structure and an example essay.

Table of Contents

Guide on how to prepare Unemployment Impact in South Africa Essay

• Choose a specific angle to approach the topic of unemployment in South Africa. For example, you could focus on the impact of unemployment on the youth, women, or the economy.
• Conduct research on the topic to gather relevant information and statistics to support your argument.
• Create an outline to guide your writing. Your essay should have an introduction, body, and conclusion.
• Write your essay, ensuring that it is well-structured and coherent.
• Edit and proofread your work to ensure that it is free from grammatical errors and typos.

Essay structure:

Introduction:

• Introduce the topic of unemployment in South Africa
• Provide background information on the issue
• State the purpose of the essay
• Present the impact of unemployment on a specific group or the economy in South Africa
• Provide statistical evidence to support your argument
• Analyze the causes of unemployment in South Africa
• Discuss the measures taken by the government to address the issue
• Evaluate the effectiveness of the measures taken
• Provide suggestions on how to address the issue of unemployment in South Africa

Conclusion:

• Summarize the main points of the essay
• Restate the thesis statement
• Provide a final thought on the topic

Unemployment Topic Ideas for South African Setting

When choosing a topic for an essay on unemployment in South Africa, consider the following factors:

• Relevance: Choose a topic that is relevant to the current situation in South Africa. This could be a topic that is related to the impact of the COVID-19 pandemic on unemployment, or a topic that focuses on a specific group that is affected by unemployment in the country.
• Interest: Choose a topic that you are interested in or passionate about. This will make it easier for you to research and write about the topic.
• Feasibility: Choose a topic that is feasible within the scope of your essay. Ensure that you can gather enough information and resources to support your argument.
• Originality: Choose a topic that is original and unique. Avoid choosing a topic that has been extensively covered in the literature.
• Significance: Choose a topic that is significant and has real-world implications. Consider how your essay could contribute to the existing literature on unemployment in South Africa and provide insights that could be useful for policymakers, researchers, or the general public.

Below are the 30 possible essay topics to choose from on Unemployment in South Africa:

• The impact of COVID-19 on unemployment in South Africa
• The relationship between education and unemployment in South Africa
• The effects of unemployment on mental health in South Africa
• Gender inequality and unemployment in South Africa
• Unemployment among the youth in South Africa
• The impact of technology on unemployment in South Africa
• The role of entrepreneurship in reducing unemployment in South Africa
• The effect of political instability on unemployment in South Africa
• The impact of global economic trends on unemployment in South Africa
• The effects of corruption on unemployment in South Africa
• The role of trade unions in reducing unemployment in South Africa
• The impact of immigration on unemployment in South Africa
• The relationship between poverty and unemployment in South Africa
• The impact of social grants on reducing unemployment in South Africa
• The role of vocational training in reducing unemployment in South Africa
• The impact of the gig economy on unemployment in South Africa
• The effects of outsourcing on unemployment in South Africa
• The impact of affirmative action on unemployment in South Africa
• The relationship between crime and unemployment in South Africa
• The effects of brain drain on unemployment in South Africa
• The impact of minimum wage laws on unemployment in South Africa
• The role of the private sector in reducing unemployment in South Africa
• The effects of the informal sector on unemployment in South Africa
• The impact of labour market policies on reducing unemployment in South Africa
• The effects of globalization on unemployment in South Africa
• The relationship between innovation and unemployment in South Africa
• The impact of natural disasters on unemployment in South Africa
• The effects of rural-urban migration on unemployment in South Africa
• The impact of family background on unemployment in South Africa
• The role of social media in reducing unemployment in South Africa.

Essay Example: Unemployment Impact in South Africa

Unemployment is a critical issue in South Africa, affecting various groups, including the youth, women, and the economy. The COVID-19 pandemic has made the situation worse, leading to job losses and business closures. This essay aims to explore the impact of unemployment in South Africa in 2023 and suggest ways to address the issue.

The impact of unemployment on the youth in South Africa has been devastating. According to recent statistics, the youth unemployment rate in the country stands at 33.9%. This has led to high levels of poverty and crime among the youth, with many resorting to drug abuse and other forms of criminal activities to survive.

The impact of unemployment on women in South Africa has also been significant. Women are more likely to be employed in low-paying jobs, and they face discrimination in the workplace. The COVID-19 pandemic has led to an increase in gender-based violence, with many women losing their jobs and becoming financially dependent on their partners.

Unemployment has also had a negative impact on the economy of South Africa. The country’s unemployment rate currently stands at 33.9%, one of the highest in the world. This has led to a decline in consumer spending and investment, which has slowed down economic growth.

The causes of unemployment in South Africa are multifaceted. These include a lack of skills and education, inadequate infrastructure, corruption, and political instability. The government has implemented various measures to address the issue, such as the Youth Employment Service (YES) program and the National Youth Service (NYS). However, these measures have not been effective in reducing the unemployment rate significantly.

In conclusion, unemployment is a significant challenge faced by South Africa in 2023. The impact of unemployment on the youth, women, and the economy has been devastating. To address the issue, the government needs to implement policies that create job opportunities, provide skills development and training, and promote entrepreneurship. Additionally, there is a need for increased investment in infrastructure and the

Home — Essay Samples — Economics — Unemployment — The Issue of Youth Unemployment in South Africa

The Issue of Youth Unemployment in South Africa

• Categories: South Africa Unemployment

About this sample

Words: 630 |

Published: Sep 1, 2023

Words: 630 | Page: 1 | 4 min read

Table of contents

Root causes of youth unemployment, socio-economic consequences, urgent need for innovative solutions.

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