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Quantity vs quality: SA’s job-creation dilemma

Would government enable an environment that allows businesses to simply create jobs?

“In South Africa, the level of unemployment is high and there are few jobs that people can compete for,” says Statistics SA in its report on the Quarterly Labour Force Survey for the second quarter of 2019. “About 71.5% of those in unemployment have been looking for work for a period of a year or longer.”

The economy is well into the fourth quarter of the year and very little has changed in the labour market since July, when this was stated.

What South Africa needs more than anything else is uninterrupted job creation for the next three or five years. 

However, with the current slowing down of the global economy, is uninterrupted job creation possible, even within a growing economy?

Growth does not always translate to job creation; the two terms of former President Thabo Mbeki’s administration illustrate this. But could a tighter labour market achieve an effective redistribution between employers and workers in such a way that the latter benefit through a wage boom?

At times anecdotes have very little value, but it is disturbing that most of us know a few people who have lost their jobs, some of whom may still be unemployed, and no doubt at least one who has actively given up looking for work. Add unemployed graduates who have also given up and the crisis becomes clear. Gradually, South Africa will have more people who are no longer counted as unemployed, because they are discouraged or have completely given up looking for work.

The need for a decent wage

Then there are those who are employed but can barely survive on a single wage, considering the rising costs of the basics needed for everyday living. The spending power of most low- and middle-income workers continues to decline. What has caused this?

Can the decline and stagnated wages be attributed to the assumption that where labour is plentiful, the employer adjusts wages since supply outstrips demand?

It may be that inflation-adjusted wages have risen for unionised workers, but they represent a fraction of the workforce. The International Labour Organisation’s Global Wage Report for 2018/2019 shows that global wage growth has waned to its lowest level since 2007, and South Africa is among the 64 countries with the highest wage inequality in the world.

For many South Africans, the stagnation in wages couldn’t have happened at worse time. The weakening economy has sent the cost of basic necessities skyrocketing, creating insecurity and an inability to save money.

Obstructionist politics

These are a number of issues playing out at the same time here, including the persistent obstructionist politics of the governing party when it comes to addressing enduring challenges of the economy.

For one thing, politicians consistently mention tackling the rising unemployment crisis – yet the government is never clear on how it is going to approach this task.

Unemployment is inextricably linked to inequality and poverty, yet in the past 15 years policymakers have demonstrated an inability to find an implementable strategy.

This is alarming, especially when one considers the number of underemployed workers, the scarcity of opportunities for graduates under the age of 30, and the effects of joblessness on black women who continue to be left out of the economy. In particular, the latter are burdened with being primary providers in many rural communities throughout the country, despite being the most affected by stagnant wages, the rising cost of living, and wage inequality.

There’s no getting away from the fact that the country is in serious economic difficulty, with rising unemployment, falling incomes and weakening spending power.

In the face of this, what will inform government policies on the labour market – job creation or decent wages?

By the former, I mean creating an enabling environment that allows business to simply create jobs – with the emphasis on the quantity of jobs created instead of the quality. The risk in the former is that it will bind low-earning workers to the stagnant wage growth they have faced for more than a decade. The latter, however, may see employers creating jobs that pay better – but with fewer jobs available.

The big question to be asked

Importantly, whatever policy government comes with to tackle the imbalances in the labour market, policymakers and government leaders must be able to give a convincing answer when asked this question:

What obstruction to job creation or a decent wage are their policy proposals trying to remove?

In sorting out South Africa’s unemployment problem, have they considered structural or deficient-demand unemployment types? Present-day South Africa is symbolised by structural unemployment, where there is a mismatch between skills and demands in the labour market.

Furthermore, workers displaced in a sector struggle to find employment beyond that particular sector. Think about the rock drillers in the mining industry who cannot use that specific skill anywhere else in the economy. The effects of globalisation and technological advancements are other contributing factors – work itself has changed from being secure to precarious, and technology has made some jobs redundant, replacing them with new jobs that require new skills.

Do you think our leaders can get this? Or answer these questions? I hope someone can. Maybe, just maybe, they may even have a plan. Do not hold your breath though, you might pass out if you try.

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My vote on this aim for quantity of jobs even if not highest paid. Imagine everyone in and extended family works. Then one person on a small income doesn’t have to support 10. 5 folk support the 10.

Simplistic but seems to be the case in Thailand.

Although something that a few employers have mentioned is that they have hired 25 year olds and younger for low skilled jobs. In 3 cases the youth lasted 3 to 14 days and left because the work “wasn’t for them”

Do we have a youth entitlement problem or am I just an old fogey

We certainly do have an entitlement problem but I do not think it is specific to the youth. Unfortunately the youth are a lot more vocal about it but it is not solely a youth issue.

In South Africa, stop corruption. If we lived under China’s system, corruption would not happen. a Corrupt official would be taken out of the system immediately. They are after all taking away from the majority.

There is no quality or quantity if there is no growth.

The unemployment and inequality problems are merely symptoms of a deeper root cause.

This root cause is embedded in the social mores of the segment of society most afflicted by these problems.

Until the leadership in that segment comes to terms with the fact that the solution must come from within a self-inspired transformation inside their own heads, there can be no rational expectation of change in the current trajectory.

Maybe in 200 years time? But by then the rest of the other societies will certainly not have been standing still waiting for the penny to drop.

If customers can only afford a certain amount businesses have no option than to create products customers can afford. As a landlord I have not had rental increases – in fact had to accept declines recently. Businesses that can hire staff cheaper have space to trim prices. Lower inflation leads to lower interest rates.
I say anyone who can create a job at any cost should be left to get on with it – we will all be better off even if our nominal wages stagnate. Real value and real wealth creation is what we should be aiming for, not nominal high wages for non-productive people.

Tackle the cause instead of the symptoms.

Unemployment is when a country has created more people than jobs. Things are not going to improve if the cause is not addressed.

Unemployment is seen as a lack of second world, formal jobs. You cannot apply that to a 70% third world country. Thailand, comparable to SA, has 6% unemployment, through employing 40% of the labour force in agriculture. Here we can do much to make the traditional and rural areas more productive.

In today’s SA quantity surely is needed before quality. On the longer term, obviously quality before quantity, if SA wants to remain competitive on the world stage. For now business needs to be able to hire and fire, without the onerous requirements of getting rid of unwanted staff, unions must be curtailed (they are way to powerful), tax breaks for SMS’s are needed, government must get out of the way once they bring policy certainty back and government must stop seeing business as the enemy. On the longer term we need a better and more appropriately educated potential workforce, attitudes to jobs must change (employees must understand that you build a career over years, instead of this accelerated career path that everybody seems to crave at the moment), government must stop being useless, morality and ethics must return to the country, as a country we must strive to concentrate on valued added products, SOE’s must… well, the list continues.

Maybe those unemployed people shouldn’t be having children. I’m pretty sure that will help eventually.

To make matters worse we have a government sponsored welfare system that rewards those unemployed / unemployable people to have yet more children. I know that is a wide generalisation, but it holds a lot of truth.

Definitely Quantity first. As mentioned in previous comments it is better to have 3 dependents per income earner than 6, as an example. The added benefit is the output multiple. 5 employees SHOULD deliver more than 3 employees if it is at the same cost base. This is exactly how Asia became a manufacturing powerhouse. Short term pain for long term gain.

“Growth does not always translate to job creation; the two terms of former President Thabo Mbeki’s administration illustrate this”

Wrong. Take a good look at the unemployment chart under the Mbeki years at 5% growth. It was slowly yet certainly moving in the right direction. The problem with ‘living wage’ advocates is that they refuse to see the hard numbers right in front of them.

It takes DECADES of that growth, year in and year out to achieve low unemployment numbers. China has been doing it for 3 decades, and still has a few hundred million people to uplift.

It is utterly bizarre how we have no jobs and no opportunities for 10 million people, but want to dictate to business and investors to take money that could create jobs and funnel more of it to those already employed just further pushing inequality.

There won’t be any job growth whilst the unions run the economy and dictate to the government as to what, and what no, to do. Currently the government’s mantra is: Do Nothing but continue Talking About the Problem (pretending to care).
As others have said herein, population growth is the primary problem in S.A., as it is in the rest of Africa. Couple that with a poor education system, particularly for African children. Only astute governance and intelligent policies, as the Chinese have shown, can address the problem.

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