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Youth unemployment: Two knock-on effects to expect

The unemployment rate of those under the age of 35 is concerning not only because of its impact on those individuals to earn an income, but also because of its indirect impact on the economy at large.
The one certainty is that the status quo is unsustainable. Image: Naashon Zalk/Bloomberg News.

As youngsters approach the end of their schooling, they invariably feel their lives are ahead of them as they start making plans for the future. Some will have the opportunity to pursue further education, some may want to get an early start in the job market, some may be taking a break.

The exuberance of youth coaxes us towards our life goals, but there are several realities in the current job market that affect an individual’s ability to attain these goals.

South Africa has historically battled high unemployment rates and unfortunately these rates have deteriorated over the last decade and a bit.

The Stats SA Quarterly Labour Force Survey (QLFS) provides unemployment data going back as far as 2008 and the trajectory of the labour market in South Africa is alarming, as depicted below.

Source: Stats SA QLFS Q2 2021 Trends Data

The unemployment rate has declined from 21.5% in Q4 2008 to 34.4% in Q2 2021.

Focusing on the youngest two age categories (15 to 24 and 25 to 34) we have seen the unemployment rate (over the same period) increase from 44.9% to 64.4% and 24.9% to 42.9% respectively as illustrated below.

Source: Stats SA QLFS Q2 2021 Trends Data

The unemployment rate of those under the age of 35 is concerning not only because of its impact on those individuals to earn an income, but also because of its indirect impact on the economy at large.

This article focuses on two specific examples:

  1. How does this impact the likelihood that someone will have sufficient income to retire?
  2. How does this impact skills development in the economy?

The first impact of unemployment is that a person cannot earn an income to support themselves and their dependents.

Retirment savings deferred

In terms of retirement, this means that the person cannot provide for themselves in the future as they aren’t able to start any form of retirement savings until later in life.

The above unemployment data suggests that only a small proportion of the population under the age of 35 have the ability to begin saving for retirement.

The nature of retirement savings vehicles is that they require long periods of time to allow the effects of compounded growth to add far more significantly in the last five years of the investment vehicle compared to the first five years.

Starting later in life reduces the potential size of this fund and hence the impact of the compounding growth over time.

Ultimately, this means the burden on the state in terms of providing for the elderly will be higher if citizens are not afforded the opportunity to begin saving for their retirement earlier.

Skills development impact

The second impact to consider is how the high youth unemployment rate affects skills development in the economy.

This point is something of a self-fulfilling prophecy in that when an economy has a high unemployment rate it means that there are a large number of prospective employees chasing few jobs. This means that employers will often have their choice of high calibre employees (relative to the job requirements), which makes it more difficult for an inexperienced employee to find an entry level job where they can gain experience (and the cycle continues).

This means fewer youths are being presented with opportunities to professionally develop and hence professional development is only taking place at a later point in one’s career than is optimal.

This has a knock-on effect in the organisation and creates pressure on those who have received early career development opportunities while those new to the workplace catch up on the development they have missed. This makes it more difficult for an organisation to appoint an entry level worker when more developed employees are available and willing to work for the same salary.

An issue desperately in need of a solution

The picture painted in this article is one of an economy that desperately needs to address broader unemployment issues but more specifically, youth unemployment.

The troubles associated with youth unemployment affect not only the social spending burden on the state (in the form of retirement benefits) but also the productivity of the country (as employees are developing later in life due to lack of entry level job opportunities).

The exact intervention to be used to rectify this youth unemployment crisis is beyond the scope of this article, however, what is certain is that the status quo is unsustainable.

Bryden Morton is executive director and Chris Blair CEO at 21st Century.

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The largest problem created by this vast scale of unemployment is the knock on effect of criminal behavior !!!
This will spiral out of control !!!!

Crime.. sure.

Civil unrest & regime change is what I’d worry about.

Every country with a high youth unemployment & big population in youth tends to have this happen. SA thus far has been an outlier.. but for how long? And when this happens it’s not going to be a moderate form of government they will prop up.

Zimbo? Africa is different..

Labour laws are so tough and hidden taxes so high that there is nothing left for a small business to make a profit from. It is Easier to pack up and take business abroad. This loss of jobs continues till socialism/communism destroys SA.

Just keep dumbing down the scores and see the reliant sub-culture you create. This way they need government. What chance for a future are you giving these kids???????????????????????????

Unemployment does not have a life of its own. It results from a lack of economic growth to absorb the job seekers, or excess population growth relative to the size of the economy. It comes down to economic growth either way. Populism, short-termism, and redistribution rhetoric from the legislature kill entrepreneurship. Entrepreneurs have high cognitive ability, per definition. They identify an economic ambush from a distance and avoid it stealthily.

We hear the obtuse ANC politicians with their rhetoric, while the entrepreneurs who hold the key to job creation look the other way. We can count the number of unemployed, but we cannot determine the number of employers who refuse to employ people. Nobody knows the number of entrepreneurs who took their money and skills offshore to create employment overseas. For every unemployed person, there is a disheartened and antagonistic employer.

It has been stated that 30% of young people are mentally underdeveloped due to malnutrition in their early years. These individuals are unemployable, but they are able to vote. South African politics prove that the majority of voters do not have sufficient cognitive ability to think, read, learn, remember, and reason. Such people are easily manipulated by charismatic self-interested opportunists. The local demographics are a gold mine for populist career politicians. That is why we have full employment in the political sphere. Every opportunist with the gift of the gab becomes a politician at the expense of the taxpayer and the unemployed.

We have an oversupply of useless career politicians who crowd out the economic agents who pay their salaries. When any government grows beyond a certain point it smothers economic activity. That is when the leeches overpower and kill the emaciated employers. We are far beyond this point.

It is a recipe for unemployment when organised labour has control of the legislature through an unholy alliance with the ruling party. Nobody voted Cosatu into power. This militant and socialist labour union slipped in through the back door at parliament and took over the law-making process to extract personal gain for the connected elite at the expense of the unemployed masses.

Now, we have a parliament that legislates against employers, in the interest of Cosatu members. and to the detriment of job seekers. One thousand job opportunities are destroyed for every one Cosatu job that is created. For every member of the Tripartite Alliance, we have 1000 unemployed people. For every socialist party in parliament, we have millions of hungry unemployed voters.

In effect, our parliament makes laws that enslave entrepreneurs and employers and punishes them with exorbitant wage and tax demands. We have the surest recipe for unemployment. That is why we have the highest unemployment.

Excellent points made. Sadly, no one will listen and the Corrupt ANC are incapable of taking any action. I note that the international community state that South Africa has an average IQ of 75: enough said (if this is true).

Exactly! We can try to downplay this fact by saying that people are not being tested in their home language and that they do not understand the test because of the local education disaster.

They can even point to the fact that the test was designed by a member of the same demographic group that scores highest in the test, namely the Ashkenaz Jews. That fact could point to some cultural bias.

Irrespective of all the excuses and explanations, the standard is the same for everyone on earth.

According to test done by the US military, individuals with an IQ below 85 is untrainable and poses a risk to the lives of their fellow soldiers.

Well, the average voter in SA falls in that category! We are screwed genetically, economically as well as intellectually. The average voter poses a risk to the welfare of the average citizen!

We should also take cognizance of the reality that antisemitism is rooted in inferior cognitive ability. The PLO and the ANC should put that in their pipe and smoke it.

It’s true.

Hey EFFY,
Another monumental positive achievement by the ruling party.
Check the the steady decline over the Zuma and Ramaphosa eras, this despite the constant claims of constant PLANNING to turn this trend around.
Wait another 2-3 months when the current batch of school leavers will turn this disaster into a catastrophe.

The governing party has failed the youth of South Africa and they will look to the EFF for leadership.

This will reduce the ANC’s support to below 50%, in the 2024 General election.

The ANC will need a coalition partner and the closest party in ideology, is the EFF.

So, with political power and key ministerial positions (Vice-President, Finance Minister etc.), the EFF will be able to provide economic power to the people.

The EFF are much worse than the ANC, and that’s saying a lot.

Economic power belongs to the capitalist class, my brother. If you antagonize the capitalist class, economic power will move overseas, leaving the Economic Freedom Fighters fighting for nothing, without Freedom, and without an Economy. You see, those who understand economics have figured this out long ago already. That is why the EFF does not exists anywhere else in the world. Only here. Sadly, it is also an issue of cognitive ability. In the civilized world, they have institutions for people with special needs like EFF members. Here they are accommodated in parliament with the rest of the mentally handicapped.

You see, Commissar, the problem lies with ‘economic power’. It is never ‘for the people’ and it certainly doesn’t help if you have economic power and you have a misconception of what to do with it. The only thing economic power is any good for in Africa, is to take what is not yours. Economic power is never used to start something from scratch and to build up something. BEE, AA and all those forms of economic power is used to get a seat at a table that you never put there in the first place. It is used to suck dry the host, instead of learning and improving what is already there, or starting up a new venture. Your economic power is parasitic, adding nothing to expand the economy. It is done solely to benefit a small elite. In its wake it leaves a smaller economy, less employment, more dependents and more desperation. It is a political mindset and attitude that is prevalent right through Africa, built on a warped ideological idea. On these pages you have read countless people explaining how socialist ideas can’t work, yet you pursue on that path, despite the overwhelming evidence to the contrary. I would have liked to believe that it is arrogance, or hard-headedness, but unfortunately I’ve come to the conclusion that it is due to a lack of knowledge, aptitude, drive and ability which keeps you prisoner in a web of underperformance and dismal failure. And, of course, a staggering lack of empathy for the rest of the unemployed masses. It truly will help tremendously if you educate yourself (something like matric will help, or even a trade, or a degree in the natural sciences will be far more preferable than yet another political science genius). It will also be of much help if you stop demanding and start doing something for yourself… like starting a business. But no, you will wave your hands around after you read this and go back to planning your next demand and power grab. I challenge you to start a business and to supply employment opportunities to the many jobless (like I’ve done). I must warn you, though, that you will find it a hard, risky, disheartening, joyless, much maligned endevour in our country, specifically made so by politicians like you, who use your democratic and economic power for precisely the wrong reasons.

The toxic cocktail of ANC corruption, criminality, unsustainable and un-controlled immigration and pathetic ANC policies of cadre deployment, policy uncertainty, BEE and growth destructive policies have resulted in the knock-on effects of a declining economy and massive general unemployment.

The ANC have stolen the futures of the youth of SA.

34% unemployment is low. When the ANC are done “transforming” SA, it will be more like 80%.

Comment removed

Wasn’t it your best friend’s mother-in-law’s neigbour’s hairdresser’s cousin perhaps?

Birth control would have sorted this problem out.

Famine is the safety-valve that solves the problem when birth-control fails to compensate for the lack of economic growth. Famine is everywhere a result of a lack of property rights and economic freedom. Socialism sets the Malthusian trap. The EFF and the ANC are the harbingers of famine and disease. This is how ignorant voter use populism to commit mass suicide.

Hi Sensei,

Two questions please –

1. I can’t find on google any reliable mention of this 30% of population who are mentally damaged due to malnutrition at a young age. Could you point to where this comes from please?

2. I’m not sure that famine is a likely outcome in today’s world, at least not at a large scale. It looks like a logical theory that would apply in the days when famine was “common” but in today’s world large scale famine doesn’t really occur as far as I can see. Your view?

Pin

Which planet are you from?

1.
“In 2018, 11% of children (2.1 million) lived in households that reported child hunger. More than a quarter (27%) of children in South Africa are stunted – the most common manifestation of malnutrition.” – https://theconversation.com/south-africa-needs-to-change-direction-on-maternal-health-to-solve-child-malnutrition-155493

https://www.researchgate.net/publication/43351598_Household_food_insufficiency_and_mental_health_in_South_Africa

“In South Africa the prevalence of household food insufficiency is very high compared with studies conducted in the developed world, and is independently associated with having a 12-month and lifetime DSM-IV diagnosis. The relationship between food insufficiency and mental health has implications for reducing the burden of common mental disorders in South Africa since, unlike a number of major risk factors for mental illness, food insufficiency may be relatively amenable to intervention.” – https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3195371/

“Therefore, the 38% of South Africans who experience household food insufficiency not only face the risk of physical health problems associated with an inadequate diet and nutritional deficiencies, but also the risk of having a mental illness.” -https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3195371/

2.
Famine-like conditions are present this year in Ethiopia, Madagascar, South Sudan and Yemen, as well as in pockets of Nigeria and Burkina Faso, with 584,000 affected.”

“At least 155 million people in 55 countries faced acute hunger in 2020 — 20 million more than 2019, according to figures from the 2021 Global Report on Food Crises, released today” – https://www.wfp.org/stories/acute-hunger-five-year-high-study-warns-famine-looms-millions

Pin, Sorry. I should have made the point more clearly. My point is based on the economic theory or the “Tragedy of the Commons” as well as the phenomenon called the “Malthusian Trap”.

The concept of property rights enabled communities to grow exponentially larger than what was possible under communalism. When a society abandons the sophisticated idea of property rights to embrace the archaic concept of shared resources or socialism, they set the Malthusian Trap for themselves. This implies that the population growth that resulted from the system of private ownership of the means of production will be turned around, and has to shrink to compensate for the lack of private ownership under communalism.

This is the source of famine across all nations that moved away from property rights under the banner of “decolonization”. It was creeping socialism and currency debasement that led to the decay and eventual implosion of the Roman Empire.

Did I answer your question properly this time?

Hi Sensei,

Thanks for your considered and thorough responses. I appreciate the effort.

I believe I have understood the theory around property rights and the Malthusian Trap. I have read most of Hayek’s books and some other ad-hoc reading, but after that I don’t have the tenacity to dig deeper into many other authors.

My straight-forward intent was to better understand (a) the extent and severity of the effects of early childhood malnutrition on mental ability of adults in SA, and (b) the likelihood of the Malthusian trap ‘springing’ in SA in my lifetime and whether it would in fact take the form of a famine, and/or, as I suspect, an uprising of sorts.

I suspect that I worded my note poorly and you may have thought I was attacking your views or that I was blind to the realities.

Thank you for both responses!

I have worked in other ‘decolonialised’ countries and have witnessed what I agree are the effects of poor nutrition in ALL of them without exception – both stemming from childhood, and stemming from lack of breakfast or lunch on a given day. I feel that it is a terrible abuse by our government to allow school children to go hungry at school because their parents won’t or can’t feed them. It is cruel in my view and I believe that this is an area where our government can legitimately ‘meddle’. I am not sure that the references you provided are conclusive on the 30% figure, but that is neither here nor there. The purpose of my question was that I had hoped to find stronger evidence of the extent (30%) and the severity. (I appreciate that the articles do measure severity using the DSM and other scales, and by multiplying percentages they arrive at what I consider to be a slightly weak estimate of 30% prevalence.

Regarding famine, thank you also for those statistics. Probably my question was a bit dumb. I just find it hard to believe that we might see a famine in SA during our lifetimes. My own ‘mental hurdle’ to understand and deal with!

Anyway, a longer message than I had intended. But what’s the point having half a conversation when there’s more to be said…

Pin. I appreciate your reply. You have read Hayek, so I have no contributions to improve on what you already know.

I got that 30% statistic from a local academic article I have read at some stage but I cannot remember where though.

KEEP LOWERING THE PASSING GRADES AND GIVING THESE CHILDREN NO FUTURE TO SEE. Great job ANC Keeping the poor poorer and making new ones.

PIN, you don’t remember Ethiopia then?

End of comments.

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