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South Africa: Two Sides of Jobs
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Business Day (Johannesburg)
EDITORIAL
28 March 2008
Posted to the web 28 March 2008
Johannesburg
THE latest employment and unemployment statistics tell an encouraging story of continued job creation and declining unemployment rates.
What's a little disconcerting though is that they tell more than one story, and the details don't necessarily line up. Statistics SA's Labour Force Survey (LFS), which is a survey of households, tells us the economy created 434000 jobs over the year to September.
That's a little less than in the previous year and not as fast as one might like, given that SA needs to create at least 600000 new jobs a year if it is to meet the government's target of halving the unemployment rate by 2014. But at this pace, job creation was sufficient to cut the unemployment rate from 25,5% to 23%. That's a steep decline from the 30,4% at which unemployment peaked in 2002, and even the broad measure of unemployment, which includes discouraged work seekers, is down to just over 35%, from over 40% a few years ago.
The LFS, which is telling us about the "supply" side of the labour market, from the perspective of the households supplying employees into the economy, shows more than 1,5-million new jobs have been created since 2004. So clearly higher rates of economic growth have gone with higher employment rates. And there are particularly encouraging signs in the latest figures such as the sharp drop in female unemployment rates, with many women absorbed into the growing services sectors.
But what's really striking about the latest LFS figures is they indicate that the formal sector of the economy created a really impressive 610000 jobs last year, an increase of 3,3%. That suggests that SA's formal sector businesses are indeed generating jobs at the rate we need to halve unemployment and that's really good news. The trouble is the informal sector shrunk , losing 387000 jobs, so the net effect was only 433000 jobs.
This is all rather peculiar, even more so if one contrasts the LFS with Statistics SA's Quarterly Employment Survey (QES), which looks at the "demand" side of the labour market, surveying the firms that employ workers. The QES shows the number of formal sector jobs increased by only 186000, or 2,3%, in the year to December. Not too bad, although it does suggest that even when an economy growing 5,1%, as ours did last year, creates formal sector jobs at only half that rate . The LFS is telling us a much brighter story though. Perhaps a lot of informal sector jobs, from taxi driving to spaza shop trading, are becoming more formalised, and that may be a good thing, creating more "quality jobs". It's possible too that many people regard their jobs as being formal ones even if they are not in formally registered enterprises surveyed in the QES. That might be a good thing too, in that people feel they have "proper jobs" in formal workplaces.
There are seasonal factors too in informal sector employment, especially in agriculture, which tends to fluctuate in line with planting and harvesting and tends to come out higher in the March LFS than the September one. But sharply declining informal sector employment is a worrying trend. The formal sector, at least if the QES is to be believed, evidently can't be relied on to create enough jobs to make a real dent in the unemployment rate. The latest QES indicates that's the case even when economic growth is at 5%. So how much more so now that economic growth is expected to slow to 4% or less.
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SA clearly does need a lot more entrepreneurial, informal sector activity to absorb those seeking work. But it also needs to find ways in which the formal sector can raise the rate at which it absorbs labour. Those are the policy challenges the LFS and the QES put on the table.
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