South Africa, you have a crisis. You have a younger generation that’s facing more labour market risks than previous generations, and neither the State nor business knows how to help you.
There is no doubt that when the incumbent president’s time comes, he will be leaving an economy that’s infinitely worse off than when he inherited it.
I’m struck by how, in this moment in our history, youth unemployment has reached the crisis level it’s currently at. This indicator clearly shows that the economy is unable to bear the burden of its people.
Everyone wants to feel good about the occasional positive news that comes from Statistics South Africa, especially in the Labour Force Surveys. However, before we get too excited, it’s worth remembering that earlier this year the McKinsey Global Consumer Sentiment Survey 2016 estimated that more than 50% of South Africa’s households with income, live from pay cheque to pay cheque. The problem is that most of these households will never know financial independence, ie being debt free or having savings. It is a terrifying notion that most of us don’t have a back-up plan for unexpected expenses.
Looking at how the economy is performing, it’s safe to say that even a 5% increase of median household income is only going to make a tiny dent in their lifestyles. When you consider that in South Africa on average one income supports a minimum of five people – unless the other four get jobs – the 5% median increase remains insignificant. One can now understand how unemployment is a driver of increasing poverty.
South Africa has 36.6 million people of working age, 15.4 million of whom are economically inactive. Even these shocking numbers paint an incomplete picture, given how poverty cannot be captured by just statistics. It’s time we remind ourselves that poverty is not a line in graph. While numbers might ease up our conscience, they are just the threshold of reality and most of us are oblivious to them. The very poorest matter most. What are we doing about those families that have lifespans of unemployment, as if an heirloom to be passed on to the next generation? Graphs and charts tell you nothing about this.
To become fully aware of the depth and persistence of SA’s labour market problems, unemployment and poverty require an open perspective. There are two groups to consider:
- First, the people who can be classified as the ‘near poor’ are those who live just above the poverty line and can fall back any time if they’re deprived of their source of income. For some, the income source is a gogo’s government grant, augmented by vending on the street or selling recyclable goods.
- Second – those who are ‘barely making it’ work temporary jobs, or are dependent on a pension, payouts and also have some sort of government grant. These are households that can afford to pay their bills and the basics of life, but are tied down by debt and have no way of ensuring a better life for their families.
We must find a broader way of uplifting these groups of people. The younger generations face systemic labour market challenges and are at risk of remaining in the same categories as their parents.
The scarring effects on the children of ‘near poor’ and ‘barely making it’ parents are that they become trapped in the net of long-term unemployment.
For this reason, one could argue that using the youth unemployment rate understates the problem of the broader joblessness. Past this crisis, we are witnessing an economy that can’t absorb skilled retrenched workers. The economy is not only failing to create jobs for its graduating youth, it’s also unable to put those retrenched back into work. A more dire picture is that of the older (40 year plus) jobseekers, who are often overlooked due to age.
We need a credible perspective on what it means to move from the official poverty line to slightly above, which in reality remains a dismal and precarious place. We can only then begin to make a forward momentum through reforms such as a national minimum wage and free education.
Moreover, the alarming unemployment rates have been very helpful in creating a political agenda for the rise in service delivery protests, mostly led by the youth.
The continued #FeesMustFallReload protests bear witness to that. In tying these two, it becomes clear how the problems of young people neither solely concern education nor unemployment, nor stop the moment they get a job.
The heartbreaking consequences of being children of ‘near poor’ and ‘barely making it’ parents are that even access to education is not just a temporal issue but an embedded challenge emanating from structural inequality and unemployment.
Looking at the variety of labour market challenges that young people face, I will retreat from the critique side and offer these suggestions to decision makers. For these two suggestions to be worth discussion, our departure point will be acknowledging that economic growth creates a bigger pie with broader benefits.
- First – growth through increasing productivity of individuals, business and government. No more complacency: the State and business must invest in research and development, technology, infrastructure and human capital. If more people become economically active and productive, economic growth will accelerate.
- Second – create community-based programmes geared towards job creation in specific geographies. Supported by the State, create a public-private partnership that will find a way to tap institutional investors for deals, by partnering with investment intermediaries. If done properly, the social and direct benefits will be a thriving local economy, job-training programmes and entrepreneurial hubs.
As a country, we have to find a way of moving the ‘near poor’ and ‘barely making it’ people into the economic mainstream. To do so, we must have strategies of how to grow the economic pie.