Job creation needs serious rethink

19 July 2015 - 02:00 By JP Landman

We are hearing a lot of noise about South Africa's labour markets, which prompts the question: What are the real trends around (un)employment? From a variety of public sources we can establish that in the 19.5 years between September 1995 and March 2015, six million jobs were created in South Africa.In September 1995, about 9.5million people were working. By March this year, 15.5million people had formal or informal jobs in agricultural, industry, services, public works programmes and domestic work. That is an increase of 63%. Over roughly the same period (20 years) the economy expanded by about 82% (constant 2010 numbers). This implies that for every 1% GDP growth, jobs grew by about 0.77%. So much for the noise around "jobless growth".The six million new jobs in the economy was in spite of the jobs lost in 2009, when the global financial crisis hit South Africa and sent the economy into recession. This was the only recession since 1994 - even the five-month platinum strike last year could not do that.block_quotes_start Where job growth did take place was in municipalities. New municipalities were created and more people employed block_quotes_endBut in 2009, 870000 people lost their jobs, with employment falling from 13.8million in December 2008 to 12.9million people a year later.To put the job destruction into a different perspective: in 1995, 39% of the working-age population in South Africa worked. By 2008, 45% of working-age South Africans had jobs - a substantial improvement. We were, as the saying goes, "cooking with gas". The 2009 carnage reduced the percentage of working-age people who were working to 41.5%. Better than 1995 (39%), but worse than 2008 (45%). From the low point of 2009, more jobs were created again, bringing the total to 15.5million in March this year - an increase from the 41.5% of 2009 to the current 43.2%. A slow crawl back.But how many were public sector jobs? The best source of information is the government payroll system, Persal, which covers all national and provincial government departments and constitutes the bulk of the public sector. It does not cover local government, parastatals and entities with their own payroll, such as the defence force and universities.story_article_left1In March 1995, there were 1.275million civil servants on Persal. Eighteen years later, in 2013, this number stood at 1.25million - about 24000 fewer.This seems counterintuitive. We know that more police officers were appointed, more clinics were built and more children are going to school. Yet the old South Africa had a national civil service and 10 homeland and three "own affairs" administrations. Many of them were grossly overstaffed.The integration of the national, homeland and own affairs administrations led to rationalisation.So if 24000 fewer people were on Persal, the departments so covered could not contribute to the six million jobs.story_article_right2Some new entities, such as the South African Revenue Service, were moved out of the civil service and that would have created jobs, but not enough to swing the numbers.Where job growth did take place was in municipalities. A new local government dispensation came into operation after democracy, whereby the whole country was carpeted with municipalities. New municipalities were created and more people employed.There are numerous anecdotes of local municipalities overemploying, with capital budgets being spent on salaries. Unfortunately, there are no comparable numbers. The available data for municipal employment is 268000 in 2010. If we assume that local government employment doubled since 1995, that would imply job growth of about 134000.We likewise do not have comparable data for parastatals. Transnet and Telkom have seen huge reductions in staff; Eskom has employed more. But data indicate that in 2011, 176232 people were working at parastatals. Again, if we assume that half of the jobs were created after 1995, it would amount to 80000.Combining national and local government and parastatals, the public sector could not have contributed more than 5% of the six million jobs.Public works programme jobs - such as in Working for Water, people picking up litter along roads or waving red flags at roadworks - are temporary, with wages of R100 a day. There are more than 5000 expanded public works projects nationally and in the year to March, 1.24million "job opportunities" were created. These jobs cannot be compared with a civil service post where salaries are more than R100 a day with paid leave, a 13th cheque, pension and medical aid benefits. To claim them as part of the civil service is simply noise.story_article_left3In 1995, there were 1.9million unemployed people in South Africa (a narrow definition), or an unemployment rate of 17.7%. In March 2015, there were 5.5million unemployed people, or a 26.4% rate.The number of jobs increased by six million and the number of unemployed increased by 3.6million. How is it possible to have an increase in both numbers?The answer is simple: the growth in the labour force far exceeded the growth in jobs. Many more people became economically active (think of all the women who joined the labour market). The country is now more than 60% urbanised - the result of migration from rural to urban areas. The problem is not that jobs were not created - they were - it is that many more people have become economically active.These social and demographic forces are huge and to address them requires more than tinkering with labour market legislation. We will have to do a big rethink on jobs and how to create more of them. The rethink will have to include ways to foster economic growth - if we want more jobs, we need "more economy" - and ways to create more labour-intensive jobs. Let's focus on the hard thinking and ignore the noise.Landman is an independent analyst. This article was first published by Nedbank Private Wealth..

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