Sunday, May 27, 2012

Unemployment remains a crucial social and economic issue facing the South African Labour Market.

Unemployment remains a crucial social and economic issue facing the South African Labour Market. Critically discuss the nature of unemployment in SA and possible solutions to address unemployment.

The inheritance of the apartheid socio- political and socio- economic history in the South African labour market has created some structural imbalances that have resulted in alarming and remorseless high rate of unemployment in the labour market. Sixteen years after the post apartheid era, social policy programmes to address the problems of socio- economic and socio- political have done nothing to alleviate unemployment in the South African labour market. They are also external forces such as world economy recession in the period of 2008 and 2009 influenced the instability in the labour market and also placed South African in an unviable position. This essay is going to discuss the nature of unemployment in South Africa and the possible solutions to address unemployment and why it is a crucial social and economic issue facing the South African Labour Market.

With the South African economy strong in Southern Africa the problem of unemployment still remains a crucial social and economic issue that needs to be addressed politically, social and economically and to revisit the inadequacies that occurred during the apartheid era that are contributing to the high unemployment rates in the modern South Africa Labour market. The rise of unemployment in the South African labour market can be linked to the problems that occur in the supply of labour and the demand of labour according to Bean and Layard (1986; 2) the popular explanation that sometimes advanced to explain the rise of unemployment is that of primarily a consequence of rapid labour force growth with the supply of jobs lagging behind the demand for them. The South African labour market unemployment rate is rising responding to population growth and the immigration of foreigners, the lack of demand for labour in the formal sector has been a proximate cause of the rise of unemployment.

According to Barker (2007; 174) an unemployed person is a person who is without work, is currently available for work, and seeking work or wanting work. But however the definition varies the LFS (labour Force Survey) and the ILO (International Labour Organization) have different definitions hence contributing to different figures of the rate of unemployment in South African as different statistics are gazetted by varies institutions according to Barker ( 2007:174) LFS use the expanded definition . The work of varies institutions bringing together major users and experts such as Stats SA, COSATU, the Reserve Bank, the National Treasury, the Office of the Presidency, the Department of Labour, the Department of Trade and Industry and others to come up with unemployment rates but the LFS is the main body to determine unemployment rates. According to Barker (2007:174) LFS defines unemployment as those people within the economically active population who do not work during the seven days prior to the interview, want to work and are available to start work within a week of the interview and have taken active steps to look for work or start some form of self employment in the four weeks prior to the interview. Unemployment rates vary accordingly to the definition that is used to define it hence they are a major difference on the strict definition and the expanded definition used by the LFS. According to Year Book of Labour Statistics time series (415:2008) national definitions of unemployment may differ from the recommend international standard definition, the national definitions used may vary from one country to another as regards inter alia age limits reference periods, criteria for seeking work, treatment of persons temporarily laid off and of persons seeking work for the first time.

The LSF use varies ways to extract figures that can be compiled as to be the unemployment rate in South Africa according to Barker (2007; 178) there are three types of measurement of unemployment the sample survey method which entails that a survey is undertaken among a number of households to determine the economic status of the members of the households, the census method that attains its economic status by asking individuals about their economic status and the last method the registration method that requires all the people to register in not employed. The LSF depends on the sample survey method to determine the unemployment rates in South Africa labour market.

The South African nature of labour market originated from the brutal oppression nature of the colonial era and the apartheid era that marked the emergence of forced employment and unpaid labour as well discriminatory ways of the majority of the population in the labour market, it was mainly characterized with poverty, income inequality, unemployment, high labour costs and low productivity. According to Terrablanch (374:374) the segregated system of education for different levels of literacy and schooling of the different population groups and the large qualitative difference between these different types of education, should be blamed for the undersupply of certain categories of the skilled and professional labour as well as the oversupply of the other categories. Employability disaster in the South African labour market is caused by some of these attributes that occurred in the apartheid era as well lack of government seriousness to implement its policies regarding unemployment in the labour market.

The labour market in 2008 according to ILO Year Book of labour Statistics time series (430:2008) there were 3945000 people unemployed in South Arica, the South African population growth ranges between 47 million and 49 million the availability of a larger labour force is available but job creation has between sidelined with economic growth in the past government policies. According to Barker (185:2008) higher economic growth does not invariably and automatically translate into increased employment. The 2005 unemployment rate according to Barker (179:2008) was 26, 7% which represented 4.5 million people of the 16.8 million total labour force persons in labour market. 2010 the unemployment rate has increased at an alarming rate according to 2010 Budget Review (2010:36) the broad unemployment rate increased sharply from 26.7% to 31.1%. With an estimate of 80% black population in the South African they are the most unemployed group in the multi-racial state Barker (181:2008) elaborates that the rate of unemployment among Africans was 31%, compared to 5% among whites, a total of 3.9 million Africans were unemployed in 2005.The lack of implementation of the government policies lacked to address women emancipation in the South African labour force according to Barker (182:2008) the unemployment rate is serious among women, with official the unemployment rate of 37% as compared to men with only 27%. The unemployment rate according to Altman and Hemson (2007:9) is also serious among the youth more forcefully: about 37% of those aged 15 - 34 were unemployment by the strict definition in 2005 (Labour Force Survey, September 2005).From 1995 the high rate of unemployment has increased according to the 2010 Budget Review (2010:36) employment fell by 870 000 during 2009, raising the jobless rate to 24.3% – the highest level in five years.

Due to structural imbalances in the economy they have always been some unfortunate scenarios of the educated work force with qualifications not attaining jobs according to Barker (182:2008) a total of 34% of the unemployed in 2005 had at least a matriculation certificate compared to 21% which actually means the demand for semi skilled workers in the labour market is decreasing. The attributes of the apartheid in the South African labour market shows that blacks might be highly skilled and have attained qualifications to enable to find employment but they are unable due to inequalities in the labour market according to Bhorat (2004:958) the unemployment rate among black Africans tertiary qualifications went up from 10% in 1995 to 26% in 2002, the BEE (Black Economic Empowerment) as a government policy has not been able to address the inequalities in the contemporary labour market. According to Terrablanch (2002:381) the supply in the African labour will increase to 76% of the total in 2020, the large numbers of Africans that will enter the market during the next 20 years will undoubtedly contribute to African unemployment until 2020.

The South African unemployment labour market is being affected by the structural imbalances in the economy according to Barker (2007;177) structural unemployment refers to the overall inability of the economy ,owing to the structural imbalances ,to provide employment for the total labour force even at the peak of the business cycle. South African economy coming out of the global financial recession period the South African labour market has experienced alarming figures of unemployment. Bendix (418; 1996) elaborated that structural unemployment is now caused by the lack of education and training of the population, structural unemployment is caused by the lack of available labour which possess qualifications or skills necessary to fill in vacancies due to basic inadequacies in the labour force or because of the technological advancement in the South African economy which render existing skills obsolete. The important paradigm shift in the South African economy in the adoption on the neo-liberal democratic capitalism system but this has resulted in the treatment of FDI (Foreign Direct Investments) as highly important than the National Investment thereby resulting in the peripheralise and casualize part of the labour force from the formal sector to the unaccountable informal sector hence creating unemployment in the process as most entrepreneurial activities lack funding from the government.

Although they are various types of unemployment in the South African labour market for instance the frictional, cyclical and seasonal unemployment, structural unemployment is the form of unemployment affecting the labour market. This has caused the South African labour market creating costs of unemployment that affect the economy as a whole according to Haydam (2002:199) the costs of unemployment is divided into two the economic and non economic costs, the economic cost is the lost of output of workers who are unproductive and the non economic cost results in the high level of crime and labour unrest. In South Africa the economic cost of unemployment can be noticed in the low level of GDP and the increases in transfer payment of the government for example the child grants and the UIF (unemployment insurance funds) this raises government expenditure. The South African unemployment is mainly structural in nature but it has been compounded the cyclical unemployment, the fundamental resolution to the problem of unemployment is restructuring of the economy as elaborated by Terrablanch (2002:425) that the RDP that envisaged the restructuring of the economy should have been entrusted to free market capitalism, neo liberalism, globalization and high rate of growth.

According to Bendix (414:1996) the present dilemma of the South African labour market is attributed largely to the past practices which hampered the achievements of the technical and educational qualifications by Blacks hence prevented horizontal and upward mobility and led to sanctions and disinvestment. The lack of employability in the South African labour market can be a cause of the alarming rates of unemployment according to McKenzie & Wurzburg’s (1997) employability is the capacity to be productive and to hold rewarding jobs during a working life, and to be equipped with up-to-date skills and competences. “Is it the fact that South African workers lack the skills and competence that results in the high levels of unemployment?”

The government has put in place various policies to eradicate unemployment in the South African Labour market for instance the GEAR (Growth, Employment and Redistribution Policy), ASGISA (Accelerated and Shared Growth Initiative of South Africa), EPWP (Expanded Public Works Programmes) and RDP (Reconstruction and Development Program).Within the 2010 Budget Review (2010:36) the government focused on the monetary policy and inflation targeting as this will boost investment which will lead to employment opportunities. With the government objective of halving unemployment according to Altman (2008:11) between 2004 and 2014, the unemployment rate would need to fall from about 26% to 13%. The ultimate target will be 6.5% by 2024. Through government policies this objective is attainable if full implementation and accountability within government structures is fully monitored. Minister of Labour Membathisi Mdladlana in 2010 Budget Review (2010:34) said that “stemming the rising tide of retrenchments is critical for us all. What will also be critical will be high-quality and courageous leadership from government,” Government leadership on implementing its policies is very crucial to solve the problem of unemployment.

The 2010 Budget Review (2010:36) targeted education of the South African population as the long term policy and in the interim, a multifaceted approach, driven by clear medium-term objectives, some of the interim approach is job creation maximisation, wage growth needs to be aligned with productivity growth, wage and non-wage costs need to be flexible enough to maintain jobs, air labour protection needs to be effectively enforced, workers should not be intentionally or unintentionally discriminated against in their search for work by practices, regulations or laws. Government policies to alleviate the problem of unemployment in the labour market should be implemented in the public and the private sector of the economy to achieve the unemployment objective.

The GEAR as one of the governmental policies was implemented in 1996 as a way to enhance economic growth and job creation according to Barker (2008:186) GEAR recognizes higher economic growth and significant job creation as the key challenges of the economic policy. As unemployment is one of the macroeconomic objectives of the Government of South Africa GEAR was to address the problems of unemployment according to Barker (2008:186) it had several aims and objectives to among them to structure labour market flexibility within the collective bargaining system, enhance human resource development, a social agreement to facilitate wage and price moderation, small and medium-sized enterprise development, restricting of state assets, tax incentives to stimulate new investment ,expansionary infrastructural investment and anti-inflationary monetary policy. Economic growth is also a government macroeconomic objective that overspills or has a “trickle down effect” to alleviate unemployment but an economy can experience positive economic growth with alarming unemployment rates such as the case with South Africa. Infrastructural development ahead of the 2010 world cup created a lot of jobs, as one of the GEAR core elements of expansionary infrastructural investment infrastructural development has been successful to a greater extent.

The GEAR employment strategy according to Barker (2008:186) was that of measuring to promote investment and exports, one third of the increase in jobs is to be accounted for by the economic growth, special government programmes are to add another quarter of the new jobs and 30% of increases employment are envisaged from institutional reforms in the labour market, employment enhancing policy shifts and private sector wage moderation. GEAR policies if they were fully implemented the unemployment rate in the South African labour Market should have reached the single digit as that projected in 2014 and 2024 but lack of implementation of core elements of GEAR buy the government resulted in the GEAR policy’s failure. The government focused most on economic growth and not employment according to Terrablanch (2002:424) the GEAR was the best example of the na├»ve optimism about large labour –absorptive capacity that would unlock if an economic growth rate of 6% can be attained.

The GEAR policy was centered on creating a competent labour force according to Barker (2008:186) the policy emphasis the importance of various measures to increase productivity, including improved training and education, better management training and modernization of work practices. Although the aims and objectives of GEAR were to reduce the rate of unemployment it resulted in consequences in the South African labour market of destroying other jobs according to Terrablanch (2002;424) 1.3 million jobs opportunities supposed to have been created by the GEAR policy by 2001 more than 1 million jobs have been destroyed in the modern sector. The GEAR policy also advocated for flexibility of labour and wage and price moderation, flexibility of the labour according to Barker (2002:186) entails the market’s regulation in a manner that allows for flexible collective structures, variable application of employment standards while wage and price moderation was to ensure that they do not exceed average growth. The most important attribute of the GEAR policy was according to Barker (2008:186) was the concentration of the public resources on enhancing the educational opportunities of historically disadvantaged communities the approach was to be supported by government programmes to provide a powerful vehicle for the equitable redistribution of income.

The government through the establishment of the Expanded Public Works Programme (EPWP) was able to address the problem of unemployment in the Labour market the EPWP was launched in 2003 according to Altman and Hemson (2007:5) the EPWP was a short to medium term response to high unemployment and marginalization aimed to provide work opportunities, training and launch –pad trainees into labour market. With the South African government the last resort of employment creation, government programmes to halve the rate of unemployment in the labour market is crucial to achieve its macroeconomic goals such as the EPWPs. The EPWPs have created a lot of opportunities in the South African labour Market according to the 2010 Budget review (2010:39) the expanded public works programme created 1.6 million short-term jobs during its first phase from 2004 to 2009, exceeding its target of 1 million, 52 billion in the budget was allocated to the EPWPs and 2.5billion of the total will be allocated for labour intensive this means a lot of employment opportunities will be created this year.

The EPWP was established in line with the government objective to halve unemployment by 2014 according to Altman and Hemson (2007:5) EPWP has generated approximately 716400 work opportunities in three against the one million target in 5 years. This achievement by the EPWP shows that it is ironic for the government to create jobs than the relaying on economic players like businesses. Without the establishment of the EPWP the large population unemployed was going to be abjectly poor as capitalist enclavity is raging on form the apartheid era. According to Altman and Hemson (2007:7) the EPWP was designed around service delivery projects that are needed, such as rural infrastructure, clearing of alien vegetation or community-based social services such as early childhood development or home community-based care as well as to intensify labour absorption in the delivery of these services and infrastructure.

The EPWP although criticised as a short time employment that cannot really solve the problem of unemployment however it has made significant strides to address the problem of unemployment Altman and Hemson (2007:7) elaborates that in 2006/2007 approximately 300 000 people were engaged in the EPWP opportunity, with South Africa with one of the highest rates of open employment in the world the EPWP reaches currently about 7% of those unemployed by the broad definition and about 4% by the official definition. Kwazulu Natal region of South Africa has one the highest unemployment rates but the increasingly pauperised of the people has been solved by the EPWP according to Altman and Hemson (2007;12) Kwazulu Natal has the highest number of the EPWP work opportunities and the second number of the unemployed people. The EPWP contribution to employment creation in the provinces of South Africa has limited the number of the unemployed and boosting the house hold incomes hence reducing poverty.

EPWPs face a lot of problems the lack of government funding to the programmes according to Barker (2008:196) such programmes usually involve the denial of resources to some other programmes, EPWP might conflict with the fiscal and monetary policy of the government and largely it’s a temporary role and South Africa’s structural unemployment problem cannot be addressed through such programmes. The arguments against the EPWPs are outweighed by the favours according to Barker (2008:196) the communities are able to manage their own affairs through economic development, programmes have negligible effect on the balance of payments, EPWPs are linked to developmental initiatives by government, workers gain marketable skills to improve their employability and unemployment can be reduced to low levels by the EPWPs in the labour market of South Africa.

Whilst the South African government is focusing on economic growth and economic integration with other global economies that will cause the “trickle down effect” to alleviate unemployment problems in the labour market they indirectly have created socio- economic problems in South Africa. The trend towards capitalist enclavity resulted in the demand for labour while the effects of demographic trends have increased the supply of labour on the labour market hence creation a large pool of unemployed people. All of the policies to eradicate unemployment taken by the government have not been fully implemented for instance policies such as GEAR was not fully implemented resulting in all efforts to address the unemployment problems in the South African labour market uncertain. The problem of unemployment will remain a crucial social and economic issue that will face the South Africa labour market in the next years to come the government has set objectives to halve employment by 2014 from 26% in 2004 to 13% in 2014 but can this targets be achieved, as the reluctance of the government can be noticed in non implementation of its policies to eradicate unemployment.


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