2011: South Africa's Year of Job Creation?

The latest figures from the Quarterly Labor Force Survey (QLFS) indicate that the unemployment rate has fallen from 25.3% in 2010Q3 to 24% in 2010Q4.

After shedding 86,000 jobs between 2010Q2 and 2010Q3, employment increased by 1.2% q/q, adding 157,000 jobs between 2010Q3 and 2010Q4. Although these figures are encouraging, unemployment has been persistently high over the past decade.  Unemployment has not fallen below 21% since 2001. Moreover, as a result of the global financial crisis, over 1,000,000 jobs were lost.

Things look worse if other factors are taken into consideration. First, unemployment is unacceptably high among young work-seekers. One out of two young workers is unemployed –and an even higher proportion if we also include discouraged workers. Given the severity of the problem, job creation is the top priority in both the budget announced for FY2011/12 and the State of the Nation Address by President Zuma.  Among other measures, a Jobs Fund and a Youth Employment Subsidy were announced. Second,  workers find it increasingly difficult to find a job: 68% of the unemployed (a striking 16.3% of the labor force) have been without jobs for more than a year, with the deterioration of skills set that long-term unemployment conveys.

What will it take to bring down unemployment? How many jobs need to be created in the next ten years? The working age population has been growing at 1.5% per year. Suppose the government wants to reduce the unemployment rate by 10 percentage points. If the participation rate were to stay constant around 55%, roughly 4 million jobs need to be created in the next 10 years. But if the participation rate were to increase to the upper-middle income country average, the economy would have to create between 7 and 8 million jobs in the span of 10 years.

Is this feasible? Post-apartheid South Africa achieved the highest economic growth rates (at least 4.5% per annum) between 2004 and 2007.  Between March 2004 and March 2005 approximately 680,000 jobs were created, and between March 2005 and March 2006 another 734,000 were created. Job creation decelerated between March 2006 and 2007, with only 89,000 being created.  Although it’s not an impossible task, data indicate that creating even 500,000 jobs per year--an objective set in the New Growth Path—might be a formidable task without taking some bold measures to address structural issues . So, will 2011 be the year of job creation?