Economy of South Africa - Labour Market

Labour Market

South Africa has an extreme and persistent high unemployment rate, which interacts with other economic and social problems such as inadequate education, poor health outcomes and crime. South Africa's mass unemployment dates back to the 1970s, and continued to rise through the 1980s and 1990s. Unemployment has increased substantially since the African National Congress came to power in 1994, going from 15.6% in 1995 to 30.3% in 2001. In the second quarter of 2010, the jobless rate increased to 25.3%, and the number of people with work fell by 61,000 to 12.7 million. The biggest decline in employment was recorded in the manufacturing industry, which shed 53,000 workers. Agriculture lost 32,000 jobs, employment in the construction industry fell by 15,000. In the third quarter of 2010, 29.80% of blacks were officially unemployed, compared with 22.30% of coloureds, 8.60 of Asians and 5.10% of whites.

The official unemployment rate, though very high by international standards, understates its magnitude because it includes only adults who are actively looking for work, excluding those who have given up looking for jobs. Only 41% of the population of working age have any kind of job (formal or informal). This rate is 30% points lower than that of China, and about 25% lower than that of Brazil or Indonesia. The relatively generous social grants reduces the political cost of unemployment. There is some evidence that households view paid employment and social grants as substitutes at the margin: households that lose a pension-eligible member subsequently report increased labour force participation.

The unemployment problem is characterised by its lengthy duration: in the mid-1990s nearly two thirds of the unemployed had never worked for pay. The 2005 Labour Force Survey found that 40% of unemployed individuals have been unemployed for more than three years, while 59% have never had a job at all. The unemployment rate has fuelled crime, inequality and social unrest. The global economic downturn has made the problem worse, wiping out more than a million jobs. In September 2010, over a third of South Africa’s workforce were out of work, and so were more than half of blacks aged 15–34, three times the level for whites.

Some experts contend that higher wages negotiated by politically powerful trade unions have suppressed job growth. According to a study by Dani Rodrik, the shrinkage of the non-mineral tradable sector since the early 1990s and the weakness of the export-oriented manufacturing were more to blame for the low level of employment.