South Africa unemployment rate is improving. According to Trading Economics, it averaged 26.20 per cent from 2000 until 2021, reaching an all-time high of 44.4 per cent in the second quarter.
In fact, it surged to the highest on a global list of 82 countries monitored by Bloomberg. The metric indicates that about four in every South Africans in the labour force can’t find work.
The unemployment rate isn’t as good a measure of hardship as it generally is due to additional financial relief many are receiving like SASSA social relief distress grant. But that aid expired after April.
So, what does the unemployment rate mean and why is it important?
According to CNBC, the unemployment rate measures how many people who want a job and are available for work can find a job. Simply put, the unemployment rate is typically an indicator of hardship for South African families. That’s because an unemployed person’s income drops after losing a job.
Nearly 7.2 million South Africans were unemployed in July. And the employment situation soured far more quickly than at any other point in history, doing so over the span of a few months. COVID-19 has triggered a rise in unemployment in South Africa.
In fact, the pandemic is not only affecting adults but young people as well. Back in June, Stats SA reported that the youth unemployment rate in South Africa in 2021 stood at 46.3 per cent, which includes youth aged 15 to 34, implying that almost one in every two youth in the labour force is without a job.
It is important to understand how unemployment affects everyone. Thus, today’s post will cover everything about South Africa unemployment rate, from its causes and impacts to possible ways to combat it. Keep reading to find out more.
Causes of Unemployment in South Africa
As GCIS points out, there are various arguments about the causes of unemployment in South Africa, some of which are:
1. Legacy of Apartheid and Poor Education and Training
Some research shows that the deliberate exclusion of black people from the educational system and from skilled occupations under apartheid contributed to high rates of unemployment today.
Inadequate education and lack of productivity are costing jobs. Unemployment increases progressively with decreased educational levels, and the education system is not producing the skills for the labour market.
2. Labour Demand and Supply Mismatch
Labour supply is affected by the increase in the number of job seekers over the years. The rate of entry of women, especially African women, into the labour market has risen sharply.
Furthermore, the South African population is a young population; more people enter the working age as compared to the number of jobs that become available in the labour market. Consequently, this leads to the soaring percentage of South Africa unemployment rate that plagues young people.
3. The Effects of the 2008/2009 Global Recession
During the recession, many workers lost their jobs, the largest number in manufacturing. This meant that companies could no longer afford to employ more people and had to reduce the workforce, therefore contributing to the unemployment rate in the country.
4. Role of Trade Union Federations in Government
Higher wage demands may lead to a decline in new employment. Some argue that labour demands make South Africa’s labour regime inflexible while others point to it as important to improve the quality of life through a living wage.
5. General Lack of Interest in Entrepreneurship
Irrespective of various government initiatives to enhance entrepreneurship, entrepreneurial activity in South Africa is low. For example, the number of young people involved in entrepreneurial activity remains extremely low at 6 per cent of the total youth population.
It is not just the regulations and practices that inhibit the willingness of employers to take on more labour. COVID-19 may as well have damaged the ability of the extended family to provide support for those not working or intending not to work, hence the fewer inactive members of the workforce, thus increasing South Africa unemployment rate.
Impacts of Unemployment in South Africa
Unemployment has both individual and social consequences that require public policy interventions.
When workers are unemployed, their families lose wages, and the nation as a whole loses their contribution to the economy in terms of the goods or services that could have been produced.
Unemployed workers also lose their purchasing power, which can lead to unemployment for other workers, creating a cascading effect that ripples through the economy. In this way, unemployment even impacts those who are still employed.
When companies are trying to cut costs, they often reduce their workforce as one of their cost-saving measures. Those workers who are left to do more work after a company lays off part of their staff are not likely to receive any additional compensation for the extra hours they are working.
For the individual, unemployment can cause psychological distress, which can lead to a decline in life satisfaction. It can also lead to mood disorders and substance abuse. Unemployment can affect one’s social status ascription as well, which manifests through stigmatisation, labelling, unfair judgement, and marginalisation.
On the other hand, unemployment can also have a negative effect on the mental state of those who are still employed. They may become more concerned about losing their jobs or be hesitant to search for other employment because they have a false belief that they “are lucky” to be employed at all.
How to Solve South Africa’s Unemployment Crisis
The key to South Africa’s jobs turnaround is introducing a number of structural reforms and restarting the country’s growth. Those reforms should include:
- Securing more generating capacity;
- Putting South Africa’s finances on a sustainable footing;
- Tackling the skills crisis through fundamental reform of basic education and training; and
- Encouraging as much skilled immigration as we can attract.
Policies that undermine property rights must also be rolled back, while the government will have to rethink its attitude to business, the role of markets and the size of the state. However, that growth alone will not make for a job-rich economy and that labour market reforms are also urgent.
The best route to decrease South Africa unemployment rate is to get as many people as possible into formal jobs. For example, the government should establish more youth programmes to equip South African youths with high-demand skills. In addition, other reforms that would achieve this include:
- Legal exemptions for small and new firms from collective bargaining agreements to which they are not a party;
- Rebalancing collective bargaining to ensure small and new firms are better represented;
- The existing biases of industrial policy – which work in favour of capital-intensive firms – should be reversed;
- the employment tax incentive should be expanded to include more workers and for a longer period; and
- Making it easier for firms to get rid of employees during their probationary periods would help de-risk the employment decision.
In short, it’s time the government got serious about the devastating South Africa unemployment rate. Tweaking around the edges of difficult issues or avoiding them will not result in faster growth or more employment.