Economic growth not jobs-for-all cure

The South African government has not created the right climate to achieve the targets of the New Growth Path economic strategy, according to a study by Unisa's Bureau of Market Research that was released yesterday.

"It became clear that the conditions created by the government do not favour the achievement of the stated targets," the bureau said in a statement.

The New Growth Path aims to increase economic growth to sustainable rates of between 6% and 7% a year to create five million jobs by 2020. This would reduce the unemployment rate to 15%.

Official unemployment in the second quarter of this year, according to Statistics SA, was 25.7%.

For higher economic growth to translate into more jobs, economic growth must be labour-absorptive.

The researchers - Professor Carel van Aardt, Professor André Ligthelm and Johan van Tonder - looked at whether this would happen in South Africa.

They found that employment growth was negative in five of the 10 years between 2001 and 2010, whereas only one year of negative economic growth occurred.

"Employment in especially the agricultural and mining sectors suffered, each registering seven negative employment growth years," the bureau said.

The researchers came to this finding through analysing the relationship between gross value added - a measure of the value of goods and services produced in an area, industry or sector - and employment per sector. They also found a weak relationship between gross value added and employment creation in most of the sectors.

"This implies that factors other than economic growth have a major impact on both job creation and job destruction in South Africa."

This could be because of employers favouring capital over labour in production. "Higher economic growth, for example, of 7%, will thus not automatically translate into the creation of five million jobs," the bureau said.

"Should this preference for capital persist, economic growth rates of more than 10% per year might be necessary to create the five million jobs."

The researchers calculated a capital-to-work ratio to see whether the sectors on which the New Growth Path was focusing - utilities, transport, communication, construction, agriculture, mining and manufacturing - would create jobs.

The researchers found a major shift away from workers to capital in all but one of the economic sectors.

"Only in the financial sector did the capital-worker ratio decrease."