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We can beat unemployment through state jobs schemes, says former Treasury official

South Africa can afford a much bigger public employment programme, argues top economist.
Income support alone is not enough to make a more equal society, says economist Andrew Donaldson. Image: Barbara Maregele

Employing more people in the public sector is the way to tackle the jobs catastrophe, economist Andrew Donaldson said on Tuesday. The number of people in jobs programmes such as the Expanded Public Works Programme (EPWP) could be increased fourfold in six years, he said.

Speaking to financial journalist Alishia Seckam at the Think Big Series, organised by PSG, Donaldson said South Africa’s public sector employment programmes were too small and unambitious.

Read: A budget for growth and employment

Donaldson is a Senior Research Associate at the Southern Africa Labour and Development Research Unit (SALDRU) at the University of Cape Town, and was formerly Deputy Director-General in the National Treasury with responsibility for the Budget Office and Public Finance.

After a decade of sustained job growth between 2000 and 2010, when unemployment dropped to just over 20%, South Africa’s unemployment rate has steadily crept up, sitting at 35% in the fourth quarter of 2021, according to the latest Quarterly Labour Force Survey.

Donaldson argued that state-funded jobs programmes are the best way to sustained economic growth, and South Africa can afford these programmes.

Since 2015, jobs offered through the EPWP, the main way of growing public sector employment, have declined.

The programme now offers the equivalent of 300 000 full-time jobs – accounting for less than R10-billion in wages a year, according to Donaldson.

“When you compare that with what we’re spending on social transfers, on income support to the poor, our employment programmes are really much too small,” said Donaldson.

The R350 Covid-19 Social Relief of Distress grant, recently extended for another 12 months, will cost R44 billion a year alone.

However, the Presidential Employment Stimulus programme’s youth employment programme, launched in the second half of 2020, offers hope. In six months, 300 000 young people were employed in schools, effectively doubling those employed through public employment programmes.

“This tells us you can be ambitious, you can think big about public employment,” he said. For Donaldson, this should be extended to other sectors, particularly safety on trains.

He said these new jobs should be permanent, not temporary as in the EPWP. The people employed were “doing useful things”, he said.

“They’re preventing fires, they’re assisting in schools, they’re providing community-based health services, they’re providing early childhood development programmes. These are not temporary needs.”

People in these programmes should be paid at least the minimum wage, he said.

Municipalities should play a major role, and should co-ordinate with businesses in their areas. To start with, the programmes should be low-cost and labour intensive.

Public sector wage bill

Asked if South Africa’s public sector wage bill was not already too high, Donaldson said that doubling wages from public employment programmes would be the equivalent of 5% of the public sector wage bill. In spite of the tough fiscal climate, he said, these programmes need to be prioritised, and prioritised to grow over time.

He argued for a balance between income support to households, such as social grants, and employment programmes. Income support alone, he said, is not enough to make a more equal society.

He also called for more interaction between the Department of Labour and the Unemployment Insurance Fund (UIF) in developing support for work seekers.

“We have to invest in a more equal economy. We’re sometimes a little preoccupied with the new opportunities of the fourth industrial revolution … Water services, housing investment, improved transport, telecommunications – those investments are still incomplete. We still have a huge amount of investment to do; the creation of opportunities that contribute to improved living conditions in things that the world has known how to do for a hundred years.”

“If we rely only on income support and our social assistance system for ensuring redistribution, we will find that is not enough.

“You can’t build sustainable futures, decent livelihoods, and a more equal society unless you’re making progress through investment, job creation, opening up employment opportunities to all and bringing the unemployment rate down systematically,” said Donaldson.

“We need to set targets for that and we need to ensure that our growth is more balanced than it is at present.”

© 2022 GroundUp. This article was first published here.

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Thanks to the ANCs employment patronage scheme and allowing 10m illegal immigrants in, we are in the current state of mess we are in.

So no new govt employment scheme will help.

Get rid of 10m illegal immigrants and let the private sector deliver growth, without the constraints of BEEs.

And no Union membership for these people. In their culture to start striking once members. Time to appreciate a job when you have one

It does not add up. The economist suggests that taxpayers should first employ a politician and a government official who in turn, will employ unemployed people to serve the consumer. Why can’t the consumer, the actual taxpayer who has to pay for the entire scheme, not employ these people directly?

What kind of stupid socialist solution is this when the taxpayer has to pay R500/hour in additional taxes to indirectly employ vagrants at R25/hour. This is a value-destroying solution that turns the purchasing power of taxpayers into a glorified social grant.

These unfortunate people are unemployed because the consumer doesn’t want to, or cannot afford to buy their labor at the minimum wage. Now, the government, by the threat of force, has to coerce the consumer to employ those people indirectly via SARS.

If these unemployed individuals had the ability to add value at the legally enforced barrier to entry(minimum wage) they would have been employed already. It is government interference in the market economy that destroys jobs. Big government equals large unemployment. We have an overburden of bankrupt SOEs and municipalities with monopoly powers, that crowd out the private sector that could provide an efficient, value-adding service.

The entire public sector wage bill is a glorified social grant and vote-buying exercise for privileged union members and Tripartite members. They are the new wealthy elite who live in opulence while their brothers in the streets are starving. Their Marie-Antoinette moment is at hand.

Another Ivory Tower bit of gumph! Do these people walk and drive around looking dead ahead, can they not see what is happening in the every Government department!? There are no good examples for new entrants to learn from and aspire to, and it’s getting worse not better.

Hmmm, who declared Andrew Donaldson a ” top” economist ? Money web or Groundup ?
Sorry, never heard of this person.
What I have seen of the EPWP “workers” roaming around in this Muni, that they hardly do anything useful. They are hardly supervised. They only get R 104/day, but as taxpayers we hardly get any value for money. Their employment as such, only increases the perception of work for the outside, creates or increases within the EPWPers the completely wrong impression that loafing around doing mostly useless things incorrectly, is worth anything. Augments the Mahala mentality, the culture of entitlement.
It is not the duty of govt to supply jobs for everybody, that is for a large part on the shoulders of people themselves, to make themselves employable through having the right skills, competence, discipline and attitude. Govt can only make sure that there is good education, appropriate skills training and must above all create the conducive environment for the private sector to boom, and create jobs.
Less than R 10 B for 300,000 EPWP jobs per year would mean about R 2750 pm per person, indeed way below the official minimum wage. Maybe the NMW is too high and should be reduced to R 2750 pm. Most of all, are we getting REAL value for money out of this expense, and the massive public wage bill ?
I sincerely doubt it.
I believe actually salaries as a whole in the formal sector have risen completely out of any economic proportions. Especially in the public sector, and even more in the completely unsustainable SOEs like Eskom and the SABC. AFAIK packages for starting unskilled workers at these last two entities are R 350-400k per annum, and average packages are near R 800k.
At the heart of this is the completely outrageous, undeserved influence and power of the HOLY trade unions in this country. From the media, govt and the general public. They have pushed up wages and are at the core of the enormous unemployment.
One cannot take certain human, social aspects like health and safety out of employment, but even more, one cannot ignore the basic laws of supply and demand in labour and employment.
How come that SA spends massive amounts in social grants, SRD, and EPWP and that for a large part that money is spent on goods manufactured OUTSIDE SA.
Already 20 years back the unions told us that “we” cannot compete with China. In the meantime other countries did compete with China, and scored millions of jobs. Already 12, 14 years back Korean companies like LG and Samsung started massive factories in Vietnam, and closed others down in China, because of the rapid rising wages there.
Why has Bangladesh a booming clothing industry, and almost nothing is left in SA ?
Lesotho still has considerable apparel manufacturing.
The trade unions telling us that we cannot compete with China, is like a coach during the break of an absolutely crucial, do-or-die match, when his team is trailing, telling the players that he understands they are tired after such a long competition, and that losing it doesn’t really matter.
Instead of firing them on, giving them tactical advice, if needed, mixed with some expletives.
Trade unions and the Mahala mentality, together with massive crime and corruption, made SA into an economic pariah state, a bunch of losers.
But when it comes to demand, demonstrate, toy-toy and destroy, then there is always energy left.
Giving people temporary jobs in the EPWP and other social work programs, will make them in no time demanding permanent employment and a ” living” wage of R 20k a month, plus transport, housing and medical aid allowances.
What would now late economist Mike S would have said about this ?

We have 1.2 million persons being paid by the public service at a cost of 600 billion. Or R500,000 per person per year. It is not clear whether that 600 billion includes people like that R10m per year roads agency ceo.

Government employs 13% of the workforce but it incurs 33% of the total employment cost. Something is wrong!

It would be very instructive to get a breakdown of how many public workers are paid how much?

End of comments.

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