Employment and Unemployment In South Africa

10 downloads 310 Views 550KB Size Report
Causes of Unemployment in South Africa: A Line-Up of the. Usual Suspects .... Output-Employment Elasticity: Comparable Measures. Source: .... legislation on.
Unemployment in South Africa Descriptors & Determinants

PRESENTATION TO THE COMMISSION ON GROWTH AND DEVELOPMENT WORLD BANK, WASHINGTON DC, OCTOBER 15TH School of Economics & Development Policy Research Unit, University of Cape Town E-mail: [email protected] Website: www.commerce.uct.ac.za/dpru

HAROON BHORAT



Population: 40.2million



Life Expectancy at birth: 47.7



GDP (current prices): $255 bill.



GNI per capita: $5390



Merch. Trade (% of GDP): 47.1



Total Debt Service: 6.9



Internet users: 108.8 per 1000

OVERVIEW y A Descriptive and Econometric Overview y Causes of Unemployment in South Africa: A Line-Up of the

Usual Suspects y A Menu of Possible Interventions

Unemployment Rates Around the World

Source: ILO (2007)

Unemployment In South Africa: The First Decade of Democracy National Unemployment Rate: 1995-2005

y

Unemployed numbered approximately 7.8 million individuals in 2005

y

Discouraged work seekers constitute 42% of broadly unemployed

y

Data Quality & Reliability.

45.0 40.0

40.6

41.8

41.8

41.0 38.8

35.0 34.3

Percent

30.0

30.8

25.0

29.4

30.4 28.2 26.2

25.4

26.7

20.0 15.0

17.6

10.0 5.0 0.0 1995

2000

2001

Broad Unemployment

2002

2003

2004

Narrow Unemployment

2005

Unemployment Rates In South Africa: Race & Gender 0.6

53%

47%

0.5

0.4 Male Female Total

0.3

0.2

0.1

0 African

White

Total

Unemployment Rates In South Africa: Age Distribution 1200

34%

No. of Ue

1000 800 1995 2005

600 400 200 0 15 18 21 24 27 30 33 36 39 42 45 48 51 54 57 60 63 Age

Youth Unemployment Rates: The Global Context

Source: KILM, 2007

Unemployment Rates by Education Level 60% 50% 40% 30% 20% 10% 0% Up to grade 11

Matric 1995

Tertiary 2005

% Change

All

dF/dx Std. Err. Unemployment: Multivariate Analysis z

Independent Variable Coloured

0.082

0.013748

5.70

Asian

0.220

0.0167439

9.76

White

0.304

0.0102678

18.26

Female

-0.114

0.0080705

-14.06

25-34 years

-0.007

0.0249169

-0.26

35-44 years

0.129

0.0224165

5.42

45-54 years

0.232

0.016194

11.81

55-65 years

0.341

0.0060921

28.91

No education to Incomplete GET

-0.003

0.0018769

-1.61

Complete GET

-0.011

0.0042696

-2.59

Complete High School

0.017

0.0130646

1.28

Diploma

0.212

0.0126801

13.62

University Degree

0.065

0.0200266

3.21

Metro

-0.016

0.0090603

-1.77

Lambda

-0.345

0.0356939

-9.67

The Markers of Unemployment in South Africa y Race, Gender, Age, Location & Schooling serve as the key

attributes defining and explaining broad and narrow unemployment rates in South Africa. y The failure of the schooling system & in part, the further

education & training System (FET) is particularly important for policy formulation. y Differentiating between the unemployed and the unemployable.

Two Worrying Footnotes: 1 The Legacy of Apartheid Schooling A bifurcated schooling system, where disadvantage is still located within former African Schools y Management of schools; knowledge infrastructure; Teacher Quality y Variable/Former Department High School Pass Rate

African

White

48.39

95.14

31.04

23.72

0.20

0.92

Pupil-Teacher Ratio Schools with User Fees

Two Worrying

Footnotes: 2

The Composition of Graduate Unemployment 200,000 (3%) of all Ue are ‘graduates’ (up from 2% in 1995) y Only 18% of unemployed graduates have degrees: Clearly the bulk of the problem is with diplomas and certificates y African diploma 73%

Other diploma 9%

Other degree 6%

African degree 12%

Possible Causes of Unemployment in South Africa y Output & Employment y LFP Growth Rates y Labour Demand-Supply Mismatch y Wages and Employment y The Role of Trade Unions & Bargaining Councils y Labour Regulation y The Nature of Economic Growth

Output and Employment Simple GDP Elasticity of Total Employment

y

No Evidence for Jobless Growth Thesis

y

For Given Level of Growth, Employment Expansion Adequate

y

The Nature of the Growth Path…..

Annual Percentage Change in: Total Employment

GDP

Elasticity

1990-1995

0.13

0.8

0.16

1995-2005

2.60

3.27

0.80

Output-Employment Elasticity: Comparable Measures

Source: KILM, 2007

Post-Apartheid Labour Supply Trends

Category

1995 (Oct) (‘000s)

2005 (Sep) (‘000s)

Change Absolute (‘000s)

Target Growth Rate

Employment Absorption Rate

Percent

Broad Definition Estimates

Employment 9 515

12301

2786

29.28

4 239

7800

3561

84.01

13 754

20100

6346

46.14

Unemployment (broad) Labour Force 66.69

43.90

Skills-Biased Employment Growth: 1 25 22.2

y

Skilled Employment: Share increased from 9 to 11%

y

Semi-skilled Employment: Share increased from 59 to 61%

y

Unskilled Employment: Share declined from 31 to 27%

20 15 10 3.4

5 0 -5

Skilled

Semi-Skilled

Unskilled

-10 -15

-12.9

Skills-Biased Employment Growth: 2 Industry-Based Relative Demand Shift Measured by Occupation, 1995-2005 Between

Within

Total

Share of within in Total

Manager

1.28

18.24

19.52

93.46

Professional

1.42

7.50

8.92

84.08

Clerical

2.43

14.66

17.09

85.78

Service

2.24

14.34

16.58

86.50

Agric.

-0.17

-17.23

-17.40

99.00

2.39

14.68

17.08

85.99

0.73

5.20

5.93

87.62

Elementary.

-0.13

-0.53

-0.66

80.37

Domestic Workers

1.48

10.16

11.64

87.26

Craft Oper. & A

Between- and withinsector shifts estimates for 1995-2005: SBTC evident. y The nature & trajectory of labour demand results in the co-existence of an excess supply of labour with a chronic skills shortage in the economy y

Wages & Employment Wage-Employment Elasticities by Main Sector, 1990-1998 Sector

1990-93

1994-98

Mining & Quarrying

-0.19

-0.96*

Manufacturing

-0.06

-0.45*

Construction

-0.49*

-0.63*

Utilities

-0.02

-0.03

-0.13

0.50*

-0.1

-0.22

0.20*

-0.01

Community, Social & Personal Services

0.05

-0.50*

Private Sector Total

-0.35**

-0.53**

Commerce,Catering & Accommodation Transport & Communication Financial Services

y

Elasticity value not unusual for developing country estimates

y

Translate into, ceteris parabus, an argument for wage adjustments?

Source: Fields et al. 1999

Trade Unions & Bargaining Councils Union-Wage Premia in the SA Labour Market, 2005 Dependent Variable: Log of Monthly Earnings

y

Union-wage premia very high by international standards

y

Role of bargaining councils (and renewed power of public sector BC) not to be underestimated

Quantile:

OLS

0.1

0.25

0.5

0.75

0.9

Private Sector BC Member Public Sector BC Member

0.03

0.05

0.01

0.02

0.02

-0.01

0.28*

0.32*

0.33*

0.26*

0.26*

0.19*

Union

0.23*

0.35*

0.31*

0.27*

0.21*

0.15*

-0.05

0.05

Coefficient 0.15 0.25

0.35

Trade Unions & Bargaining Councils

0

.05

.1

.15

.2

.25

.3

.35 .4 .45 .5 .55 Logwage percentile bc_pub union

.6

.65

.7

bc_pub_mean union_mean

.75

.8

.85

.9

.95

Labour Regulation as a Cost of Doing Business Hiring and Firing Rigidity

y At the 65th p. for hiring

0

20

Index Value 40 60

80

100

rigidity y And the 60th p. for firing rigidity y High ranking also for UMI sample only 0

20

40

60 Percentile

hiringrig hoursrig firingrig

hiringrigsa hoursrigsa firingrigsa

80

100

Labour Regulation as a Cost of Doing Business Hiring and Firing Costs & Employment Regulation 500 400 Index Value 200 300 100 0 0

20

40

60 Percentile

emplindx firingcosts hiringcosts

emplindxsa firingcostssa hiringcostssa

80

Overall Employment Rigidity Index: 58th p. y Driven though by high levels of hiring and firing rigidity y Source of Rigidity: legislation on dismissals; unfair labour practices; fixed-term contracts etc. y

100

The Labour Regulatory Environment: 3 Caveats y

Above sub-indices measure legislative provisions, they do not measure the interpretation of this legislation by the relevant courts of law .

y

Institutional capabilities and efficiency: Entirely possible that neutral legislation could be rendered rigid, by virtue of a malfunctioning institutional infrastructure.

y

Nature of the industrial relations environment, specifically measured by the strength of employer and employee organisations can often shape the nature and extent of labour regulation, almost independent of the regulatory environment .

Annual per cap growth in expenditure 6 8 2 4

Looking Ahead: Pro-Poor Growth? Growth Incidence Curve for South Africa: 1995-2000

0

y Growth path in the

0

20 40 60 80 100 Poorest p% ranked by per cap expenditure Growth Incidence Curve Mean of growth rates

Growth rate in mean

Source:Statistics South Africa,1995 and 2000 & own calculations

1995-2000 period biased against the poor y State Transfers in post-2000 period assist in spreading gains from growth

Pro-Poor Growth and the Informal Economy Informal Employment : Share of Total Employment

60 50 40 30 20 10 0 B ots wana

B raz il

India

P oland

S outh Africa

Turkey

Unemployment in South Africa: Possible Solutions y

Fix the Higher Education System to Focus on Narrowing Gap Between Supply & Demand

y

Improve Employment Placement (Information Asymmetries)

y

Labour Regulation and Regulatory Efficiency

y

A dual (youth/non-youth) labour market A Youth Cadet Service for the Public Sector

¾

y

Picking Winners in the Schooling System