Articles by Reads
Adcorp’s employment and unemployment figures are not taken seriously by researchers – yet they can do much harm
Adcorp’s unemployment figures are derived from weak research and is repeated too often by gullible journalists. Based on a flawed methodology and dubious assumptions, the Adcorp figures imply that only about a million people are unemployed and that the total unemployment rate is 5%. At the same time, Adcorp has published an inflated figure for graduate unemployment (600 000) – a grave inconsistency. Whilst serious researchers will not touch Adcorp data, it can harm decision-making by policymakers and potential university students and their parents.
The middle class is a hot topic in media and policy circles. But how should the middle class be defined, particularly in a country with high levels of inequality? Individuals and households which fall in the actual middle of the income distribution in South Africa have a standard of living well below a ‘middle-class lifestyle’. Defining the middle class on the basis of the ‘actual middle’ versus ‘relative affluence’ provides vastly different pictures. This necessitates great care in using these conceptions, especially in policy design.
The frequently reported ‘crisis in graduate unemployment’ in South Africa is a fallacy based on questionable research. Not only is graduate unemployment low at less than 6%, but it also compares well with rates in developed countries. The large expansion of black graduate numbers has not significantly exacerbated unemployment amongst graduates. Contrary to popular perception, such graduates – many from ‘formerly disadvantaged’ universities – have been snapped up by the private sector. Black graduates are, however, still more likely to be unemployed than white graduates.
This article examines the contrasting business models in the spaza shop sector, and compares foreign-run businesses with South African businesses. We argue that foreign shop keepers are more successful than South Africans because of the strength of their social networks, which provide them with access to labour and capital and enable collective purchasing and market domination. The article argues for a two-pronged policy that would formalise larger shops whilst permitting and encouraging informal micro and survivalist businesses.
In trying to reduce unemployment in South Africa, the pursuit of higher economic growth is the single most agreed-upon policy strategy. The consensus on this ‘obvious solution’ may blind us to the fact that economic growth, though important, may only be half of the solution. Attempts to fine-tune and turbo-boost the formal-economy ‘engine of growth’ to absorb more labour are fundamentally constrained. Economic policy makers must look at other options for generating employment and self-employment for unemployed people.
The official rate of unemployment includes only the unemployed who are actively searching for work. However, findings from new data challenge this practice. The ‘searching unemployed’ are no more likely to find employment than the ‘non-searching unemployed’. This casts doubt on the idea that non-searchers are not committed to finding work. Furthermore, many people find jobs through social networks – but this job-finding strategy is not adequately recognised as ‘searching for work’ in official statistical surveys. StatsSA should reconsider how they count the ‘officially’ unemployed.
There is a widespread view that countries no longer need to industrialise in order to develop. However, in South Africa manufacturing remains the core driver of GDP growth and direct employment while other sectors – particularly many services sectors – are likely to increase employment on the basis of growing demand flowing from a growing GDP. A nuanced understanding of the direct and indirect linkages through which diversified manufacturing growth can boost economy-wide employment is essential.
The introduction of minimum wage laws in five non-agricultural sectors has not been associated with a significant loss in employment in the years following their promulgation – a period when most sectors also saw a significant increase in real hourly wages. Indeed, several sectors recorded an increase in employment. However, in some sectors there is evidence of a relatively small reduction in the hours worked by employees. On the whole, the effects of minimum wages are varied.
Average wages in agriculture have risen substantially in all provinces since the introduction of minimum wages in 2003 - the gap between the actual and the minimum wage has declined significantly. Compliance has been highest in the Western Cape and Gauteng, where average agricultural wages were close to or above the minimum wage even before it was introduced and wages have continued to rise thereafter. Although enforcement appears to have had a limited impact due in part to limited penalties, more effective inspection would be an important way to improve compliance.
The Employment Incentive Tax Bill offers tax subsidies to firms to employ new young workers. An evaluation of the impact of a wage subsidy voucher indicates that employment incentives increase the likelihood of young job-seekers being employed; they also increase the time young people remain employed. There is no evidence of older or existing workers being replaced. Such incentives are a relatively cheap and effective way to create employment, but are unlikely to create large numbers of jobs for young people.