South Africans are becoming unemployable

Long-term unemployment, which measures those unemployed for one year or longer, is not a standard headline grabbing figure when quarterly labour force survey results are released. It should be.

The full picture of the crisis of unemployment in South Africa lies in the number of unemployable, not just unemployed, people whose proportion can be partially gauged by the long-term unemployment figures.

This is what we know about the features of those who experience long term unemployment:

– The likelihood of remaining unemployed is greater for the long term unemployed.

– People who have been unemployed for longer than a year become discouraged and stop looking for work. On average the long term unemployed give up looking for work and join the ranks of the economically inactive in greater numbers than they reintegrate back into the job market.

– Long term unemployment strongly and negatively effects psychological well-being, increases social exclusion and propensity to crime. Furthermore, when reemployed those returning after a long period of unemployment tend to earn less than in their previous jobs and are demoted from their past career paths.

Unfortunately, the long term unemployed are not a tiny subset of the unemployed in South Africa, they are a significant majority.

People who have been unemployed for longer than a year make up 75.3% of the unemployed population according to the latest results released by Stats SA for the first quarter of 2021. Many of them have been unemployed for a great deal longer than a year- 60% of unemployed South Africans have been out of work for longer than 5 years, and at least 1 in 3 have never worked before. 

The situation has grown more critical over the years. The proportion of the South African labour force which has been in long term unemployment has increased from 16% of the labour force to 24.5% of the labour force, between q1 2010 and q1 2021, a 53% jump. Frighteningly, according to 2018 data about two-thirds of those in long-term unemployment were youth (15–34 years). Young people often struggle to find work due to lack of experience, long term unemployment further exacerbates this handicap. 

There are several reasons the long term unemployed find it increasingly difficult to secure work: employers are more likely to filter out candidates who have gaps in their work history, especially long recent gaps; long periods of detachment from one’s profession erodes skills and professional networks; money to finance job search costs runs out; and after a long time out of work many spend less and less time looking for work. South Africa with one of the world’s highest proportion of unemployed workers, the majority of whom have been unemployed for a long time, is at risk of becoming one of the most unemployable populations in the world.

A large cohort of the labour force being inexperienced, young, and never employed imposes severe consequences not purely for the individual but for the future of national and regional economies. We are witnessing the erosion of human capital at an alarming scale, which is going to be felt for a very long time to come.

It is not just the young who are at risk. There are also significant consequences for older workers, for whom long term unemployment means they enter retirement inadequately prepared. The long term unemployed are an indicator of the future strain on welfare support for the elderly who were unemployed for most or all of their working lives.

Long term unemployment further exacerbates the risk of jobless growth, should South Africa be able to reverse its economic downturn. Unemployment becomes particularly difficult to address when we are talking about the reintegration of people who have been out of work for many years instead of many months.

These are people who are most likely to be left behind even in the event of an economic upturn. The concern is that a significant proportion of the unemployed are not poised to be able to take advantage of a change in South Africa’s economic fortunes.

In the opposite direction these features of the South African unemployed have an impact on growth; as the combination of low qualifications, low experience and low productivity work together to kill off prospects of growth.

As a result of its impact, there needs to be greater attention and analysis focused on long term unemployment. One could argue it is the most important labour indicator for South Africa right now because it is a measure of the population most vulnerable to never finding employment.

For comparison, during the Great Depression of the 1930s, the unemployment rate reached almost 25% of the labor force in the United States. We have proportionately more people in long term unemployment than the US had unemployed in the Great Depression. Remember these are just the people for whom finding a job is unlikely, the total unemployment rate is much higher at 32.6%.

The results of the quarterly labour force survey are one of the most, if not the most, highly anticipated statistical releases in the country. Considering that the long term unemployed constitute the majority of the unemployed we should amass more detail about this demographic. Yet it is typically not mentioned in reporting of the survey results.

We need to regularly track and scrutinise long term unemployment including by province, duration, age, previous sector, education level etc. Another approach developed by the Boston Consulting Group for a pilot in Frankfurt involved more detailed segmentation of the unemployed. In that study segmenting by ability and motivation.

The point is we need to understand more about this cohort, if we are to develop policies which will help absorb the long term unemployed into the labour market. We cannot take it as a given that their reintegration will come about organically if economic output improves. It won’t.

Part of the solutions will likely need to include reducing obstacles in the way of the long-term unemployed finding work. Germany is the only country in the world which excluded the long term unemployed from minimum wage prescriptions it introduced in 2015. The results of that are now slowly coming in.

A recent paper by Matthias Umkehrer and Philipp vom Berge found that there has been low take up of the exemption in Germany. The authors note that “long-term unemployment remained disturbingly persistent” in Germany at around 2,4%.

This makes it difficult to know what the effect of minimum wage exemptions for the long term unemployed would be in South Africa, in part because the take up rate by businesses could be higher.

We know South Africa has a large and rising unemployment rate. The release of jobs numbers needs to be accompanied now by analysis and conversation on the nature of the unemployed.

The danger of South African unemployment is not just that it’s rising but that the unemployed are not a fluid cohort- they are trapped. And that view is a shift of perspective in how we think about unemployment, i.e. it’s not just new people entering unemployment.

Unemployment numbers have a false newness about them in the way they are communicated, “there are now 25% unemployed”, “there are now 32% unemployed” etc. Instead of also including that 60% of the people unemployed 5 years ago are still unemployed, are still trapped.

This better conveys that we are running out of time and that dislodging unemployment becomes more difficult the longer people remain unemployed. Placing a spotlight on the long term unemployed introduces a temporal aspect to the unemployment data, and with it hopefully a sense of urgency.

DA to attend next ANC NEC meeting to discuss economic policy?

I have written today to the Acting Secretary General of the ANC, Ms Jessie Duarte, to ask for the ANC’s protocol on private citizens attending the party’s NEC meetings. If senior state officials, like National Treasury DG Dondo Mogajane, can attend these meetings in their “private capacity”, then presumably the meetings are open to others in their “private capacities” too.

In that regard, I would be delighted to attend the next NEC meeting in my private capacity, to make some remarks on the topic of “economic policy”.

In a reply to a DA parliamentary question, the Minister of Finance, Tito Mboweni, confirmed that Director General Mogajane attended the National Executive Committee (NEC) meeting of the ANC on 23 and 24 January 2021.

My letter, and the parliamentary reply, are available here and here.

I note the Minister’s claim that the DG attended in his “private capacity”. The Minister has resorted to this formulation because, I believe, he knows that it is not appropriate for senior civil servants, who are subject to the Public Service Act, to attend the NEC meeting of the ANC.

I do not for one minute believe that the DG attended as a private citizen. He would not be invited or allowed to attend did he not hold the position in government that he does.

I will be submitting a separate application under the Promotion of Access to Information Act, to obtain minutes, notes or recordings of anything Mr Mogajane said at the meeting. As he is a public official, this is a matter of public interest.

I look forward to hearing back from the ANC about this. Since I too would be attending in my “private capacity”, I presume they will have no objection to me attending the next meeting.

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Vaccinate our teachers; save our kids’ education

Please find attached soundbite by Baxolile ‘Bax’ Nodada MP.

The DA welcomes the announcement by the Department of Basic Education that learners from Grades R to 7 will return to normal schooling and calls on the Departments of Basic Education and Health to now ensure that all teachers are vaccinated as a matter of urgency.

On Friday, the Minster of Basic Education, Angie Motshekga, gazetted regulations that primary school learners “must return to the daily attendance and traditional timetabling model from 26 July 2021, provided that the risk adjusted differentiated strategy is implemented”.

We believe that it is entirely feasible for schools, particularly primary schools, to become fully functional from the beginning of July, a full month from now, given the crisis of children losing months of schooling they will in all likelihood never be able to regain. Why wait till the end of July?

Since the start of the Covid-19 lockdown in March last year, learners have lost months of schooling, with the impact being especially felt by children from rural and poorer communities. Already there are serious concerns regarding the completion of the curriculum, which is a problem in many schools, even without disruptions. Given the time lost to Covid closures, the problem will be that much greater, and many schools have no hope at all of completing the curriculum.

It is therefore high time that our children’s education return to normal urgently, and this will be significantly accelerated by the rapid vaccination of our teachers. As experience has shown, the risk to primary school children returning to school is minimal, unless they have serious co-morbidities, in which case medical advice should be followed.

The Department of Basic Education also need to ensure that all Covid-19 safety protocols are strictly adhered to regarding water and sanitation at schools and hostels, where relevant, and that the crucial National School Nutrition Programme is implemented once more.

This disruption of basic education’s consequences will have far-reaching consequences for millions of children, long after the pandemic has ended, and the Department must do everything necessary to ensure children are getting the full access they require to education.

The urgent vaccination of all teachers along other frontline workers should be a top priority for both the Departments of Basic Education and Health.

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SA needs a job-creation drive in labour-absorbing sectors

Please find attached a soundbite by Dr Michael Cardo MP.

The fact that the expanded unemployment rate now stands at an all-time high of 43.2%, according to the Quarterly Labour Force Survey (QLFS) for the 1st Quarter of 2021, underscores the need for a concerted job-creation drive in labour-absorbing sectors.

The key takeaway from the QLFS released today is that between the 4th quarter of 2020 and the 1st quarter of 2021, the number of discouraged work-seekers increased by 201 000. This takes the number of unemployed people, including those who have given up looking for a job, to 11.4 million. The expanded unemployment rate for those aged between 25 and 34 stands at an alarming 51.4%.

South Africa needs urgent legislative changes to make the labour market more flexible and absorptive. The government is preoccupied with public employment projects and a localisation drive that is somehow expected to make a dent in unemployment. This is the wrong focus. It will only ever provide a drop of jobs in the ocean of joblessness.

We need to support value-adding, export-led growth sectors to recover from the pandemic and lockdown, and to ramp up jobs at scale. We must free them from over-regulation by the state so that they can grow and expand their workforces.

A study published by the African Growth Initiative at the Brookings Institution earlier this year found that the so-called “industries without smokestacks” – especially tourism, horticulture, agro-processing and logistics – could produce both the number and type of jobs required in South Africa. These sectors are tradable; they have relatively high value-added per worker, and they show a capacity for technological change and productivity growth. Above all, they have the potential to absorb low- and semi-skilled workers.

Only the private sector can create jobs at scale and rapidly absorb predominantly low-skilled workers into the economy. This means we need to unleash the private sector through legislative and policy reforms to the labour market.

Until that message sinks in, our unemployment numbers will continue to rise.

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