A perspective on youth unemployment

2017-08-20 06:17
Grasping the nettle: Skills training and faster economic growth that uses more labour would reduce the catastrophically high levels of youth unemployment in SA. Picture: Emile Hendricks

Grasping the nettle: Skills training and faster economic growth that uses more labour would reduce the catastrophically high levels of youth unemployment in SA. Picture: Emile Hendricks

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Almost 6 million young South Africans were unemployed at the end of 2016, but 7.5 million were not in employment, education or training. Youngsters like these are doing nothing and going nowhere, writes Ann Bernstein.

At a time when there is much competition for the title, youth unemployment is the country’s most challenging crisis. It is a window on the many failures of our society and the ways in which a generation of policymakers has sought to address it.

The extent of the crisis is enormous. Almost 6 million young people were unemployed at the end of 2016, but 7.5 million were so-called NEETs – not in employment, education or training. They are doing nothing and going nowhere.

To put these numbers in perspective, the figure is about 50% larger than the total number of people who have jobs in Gauteng. It is also twice as large as the largest sector in the economy (community and social services), three times the size of the financial services sector, and six times the size of mining and agriculture combined.

In the face of a crisis this large, you would expect the country’s political, economic and youth leadership to see it as their priority and implement deep structural reforms that would fundamentally transform young work seekers’ prospects. Instead, a strange collective complacency has set in, one in which the chief response has been to double down on the existing model that has failed the youth so spectacularly.

Said model consists of two elements: a high-wage, high-skill growth path that fails to generate anywhere near as many entry-level jobs as there are young people entering the job market every year, and a series of projects and initiatives that are a salve to policymakers’ consciences, while generating few employment opportunities.

These projects also make up the core set of proposals that the Centre for Development and Enterprise (CDE) heard about from local political and business leaders, NGOs and young people in a recent project during which we hosted workshops in the 20 municipalities with the largest number of unemployed young people. The ideas come in four main forms:

- Projects that seek to impart skills that make young people more employable;

- Organisations that seek to link work seekers to potential employers;

- Proposals to expand public employment; and

- Programmes that seek to turn young unemployed people into entrepreneurs.

A systemic crisis

The problem with these initiatives does not lie with their intentions, most of which are good, but with the degree to which these kinds of initiatives – even if implemented flawlessly – would actually deal with an unemployment crisis of this scale. The short answer is that they would not.

Education and training initiatives, while critical, already consume considerable resources and it is implausible that they could be increased in scope and scale while remaining even remotely efficient. Indeed, technical and vocational education and training colleges and universities are already struggling to manage existing student numbers, and, as a result, graduation rates are much lower than they should be.

The main reason for this is that our schools generate too few matriculants equipped to cope with the demands of higher education: only about 30% of children pass matric with marks high enough to make them eligible for college or university.

Even if this challenge could be fixed (and it should be with great urgency), a response to the unemployment crisis that prioritised the expansion of higher education would leave behind millions of people who have already left school without acquiring the necessary education.

Other initiatives confront different questions about their plausibility.

It is all very well to try to connect young people to work opportunities more efficiently by giving them more information, but that does not increase the number of jobs available.

Programmes that train unemployed, inexperienced young people to become entrepreneurs tend to ignore the fact that the best way for an entrepreneur to acquire the knowledge needed to succeed is by being employed by an experienced entrepreneur, rather than by courses or soft money. Most entrepreneurs fail and chances of success are greater with work experience and at least matric or more education.

Public sector employment can grow only as quickly as taxes, so more public employment cannot be created while the economy stagnates. Productivity growth is slower in the public service than elsewhere, so the greater the share of employment it accounts for, the slower the economy will grow.

If these initiatives, however well implemented, are inadequate to the task of resolving our catastrophically high levels of unemployment, what will? The short answer is that we need much faster economic growth that uses much more labour, especially unskilled young people. Economic growth is essential for accelerated employment growth. Firms are the best, most sustainable, expandable employment-creating “projects”. Contrary to what many political, civic and business leaders say, growth alone is not enough; South Africa’s growth trajectory must be much more labour-intensive than it has been.

For that to happen, however, we have to understand that the reason firms are unwilling to employ more unskilled and inexperienced young people is that they believe that the costs of doing so are greater than the profits they will make. They also believe that employment costs – especially for the unskilled – are likely to continue to rise faster than productivity does, further reducing their incentive to employ more people.

Fixing this means grasping the nettle of deep structural reform of the labour market. Projects that address only a small number of beneficiaries, or which improve employment prospects only on the margin, are not adequate in the face of the forces working against faster employment growth.

Worse still, if the implementation of these kinds of programmes allows policymakers to delude themselves into thinking that they are addressing the crisis, they can actually make it harder to get the kinds of changes we need.

A systemic crisis demands a systemic response. That is not what South Africa has tried so far, and, until we do, millions of young people’s prospects will remain bleak.

Bernstein is head of the Centre for Development and Enterprise. This article is based on a new series of reports from the CDE, Youth Unemployment: An agenda for action. For more information, visit cde.org.za

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