Neva Makgetla
11 November 2009
opinion
Johannesburg — THE Quarterly Labour Force Survey now lets us monitor labour-market developments nearly in real time. And the latest reports from the economic downturn are scary. The third quarter of this year saw a sharp acceleration in job losses, especially in the formal sector.
These findings suggest the unemployment crisis is getting worse quickly, not better. In the past quarter, SA lost 485000 employment opportunities, or 3,6% of the total. That's slightly more than we lost in the nine months from September last year, when employment peaked, to June this year.
In the past year, we lost 7% of all employment. Since the economic crisis hit, then, one out of every 15 South African workers has lost her or his employment.
Formal job losses accelerated particularly sharply. In the last quarter alone, SA lost 285000 formal jobs outside of agriculture, compared to 180000 between September 2008 and June 2009. Formal employment dropped by almost 5% in the past year.
As the recession drags into its fourth quarter, many companies cannot avoid retrenchment. The National Framework Response, negotiated early this year between government, organised business and labour, saw companies commit to minimising job losses. But that commitment seems to have given way in the face of stagnation in demand.
That said, in proportional terms the most marginalised sectors with the lowest pay, worst insecurity and poorest working conditions, are still taking the biggest hit.
Informal, domestic and agricultural workers lost almost 500000 employment opportunities in the nine months to June. They lost a further 295000 in the past quarter. That means employment in these sectors has dropped by 11,5% in the past year. In the poorest communities and households, more than one in 10 workers lost their meagre income, mostly under R1000 a month.
Young people continue to suffer disproportionately from the downturn. Workers between 15 and 24 now face an unemployment rate of 48%, having lost 15% of their employment opportunities in the past year.
It's not as if SA had jobs to spare. The International Labour Organisation ranks SA among the 10 countries with the lowest level of employment for working age adults. Internationally, two out of three working age adults has paid employment; in SA, the figure is under half.
The downturn wiped out much of the employment gains of the economic upswing that ended last year. Total employment is back to levels last seen in 2006, although the working-age population has risen by a million. Only 41% of adults now have paid employment, a level last seen around 2004.
The acceleration in job losses reflects SA as lagging international recovery. The volume of manufacturing production fell by a quarter between October last year and April, then climbed back around half that much by August. But the value remained about 20% below levels of October last year.
In mining, the picture was even more dispiriting. Between October last year and May, the value of mining sales fell more than a third with coal and platinum down over 40%. By July, mining sales had climbed just 6% from their lows.
The slow pace of recovery reflects SA's dependence on international commodity markets, which rely on broader international growth. Mining products still contribute over half of SA's exports.
But the strengthening in the currency, thanks to volatile, short-run international capital flows into the stock market, has offset improvements in export prices while making it harder for domestic manufacturing to compete. It's easy to live with the huge job losses of the past year if you have a permanent salaried job, the situation of most policymakers. That can lead to policy paralysis, at least until unrest and crime start to climb. But we can ill afford complacency in the face of the devastation of working-class communities.
Rather, we need urgently to find much more effective and creative solutions. With a deficit approaching 8% this year, there is not much scope for further fiscal stimulus. But there are other options.
To start with, government should find more effective ways to limit capital inflows in order to hold down the value of the rand. Treasury has relaxed exchange to foster short-run depreciation, but that also makes the economy more vulnerable to international shocks. In contrast, Chile has had a tax to slow down short-run inflows and outflows for some time, and Brazil just introduced one.
In addition, we need a more urgent roll out of public employment schemes. The expanded public works programme was designed to address structural poverty, not as a crisis response to massive job losses. It needs urgent regearing to maximise its immediate impact, even if that means taking more risks and funding new kinds of project.
Makgetla is lead economist for research and information at the Development Bank of Southern Africa.
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