SA 10th on Worldwide Misery Index

2015-05-14 06:00

SOUTH Africa is ranked 10th overall in the latest Worldwide Misery Index (2014) compiled by Steve Hanke, a professor of applied economics at Johns Hopkins University.

He uses a simple sum of inflation, lending rates and unemployment rates, minus year-on-year per capita GDP growth, to construct a ranking of misery for 108 countries across the globe. The main factor that drags South Africa down is its persistent high level of unemployment.

The top five most miserable places on Earth were Venezuela, Argentina, Syria, Ukraine and Iran. The least miserable (most desirable) places on Earth to live were Brunei, Switzerland, China, Taiwan, and Japan, which all enjoy a combination of relatively low levels of inflation, ­unemployment and lending rates, along with relatively high levels of GDP per ­capita, according to the data provided.

The latest South African quarterly labour force survey (QLFS) states that approximately 4,909 million working-aged adults are officially unemployed. This equates to an official unemployment rate of 24,3%. However, a further 3,187 million did not actively search for work in the month prior to the survey but indicated that they would work if jobs were available. If we include these discouraged work ­seekers, the total number of unemployed increases to 8,096 million and the ­unemployment rate shoots up to the more sombre but realistic rate of 34,6%.

Two-thirds of this 34,6% of South ­Africa’s potential workforce have been ­unemployed for a year or longer. This ­extraordinarily long unemployment period is of particular concern because the longer people are unemployed, the less likely they are to find employment because their skills sets erode over time. Moreover, being unemployed negatively impacts an individual’s psyche and causes untold harm to family connections.

The Economic Freedom of the World: 2014 Annual Report rates South Africa’s hiring and minimum-wage regulations (4,43), hiring and firing regulations (1,55), centralised collective bargaining (2,84), administrative requirements for business (3,20), and bureaucracy costs (3,11) out of a potential score of 10 in each case. These figures explain why South Africa has such a high unemployment rate. If the labour laws were less severe on employers, if there were fewer administrative requirements and less bureaucracy, in fact, if South Africa’s rating on each one of these factors were to improve to eight out of 10, the country’s ranking would improve from its current 93rd place out of the 152 countries measured, to 72nd place. But that would not be the most important development. More notably, the unemployment and poverty rate would drop by at least 50% in the next few years and the GDP would increase substantially. Such positive developments would certainly lead to a vast improvement in our ranking on the Misery Index.

South Africa’s unemployment rate could be reduced rapidly if unemployed people were allowed to decide for themselves what level of wages and conditions of employment they find acceptable. The Free Market Foundation has for many years been suggesting that the long-term unemployed should be exempted from the labour laws to relieve the fears, especially of small businesses, of heavy legal and other costs for what could be accidental contraventions of the labour laws. A written exemption could be granted, which would be conditional on the parties entering into written employment contracts on whatever conditions they agree upon. Dramatic increases in the rate of hiring would occur if unemployed people were allowed to make their own decisions about their lives.

If the eight million currently unemployed people were allowed to negotiate their own terms of work and earned just R2 000 each per month to take home to their families, it would mean that a total of R16 billion rand would be added to those monthly family incomes and their annual earnings would total R192 billion.

Critics who talk about “decent jobs” and “decent pay”, and even resort to the disparaging term “slave wages”, encourage the government to continue blocking entry into the labour market by millions of people desperate for work. It is their situation of having to face the daily misery of no job and no real income that places this country in such a shameful position on the Misery Index.

How does anyone’s common sense not inform them that the unemployed would far rather be able to choose to earn that R192 billion than be kept destitute because someone else, who does not even know them or their situation, considers the wage they would accept not to be one that is “decent”. What is more, their wages would not stay at a low figure. As they learnt skills, they would work their way up the job ladder, and the total would become a multiple of R192 billion. South Africa would then move down the Misery Index to become one of the least miserable countries in the world, rather than one of the most miserable. — Free Market Foundation.

• Eustace Davie and Jasson Urbach are directors of the Free Market Foundation

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