Op-ed: Millions of unemployed youths need sweeping structural transformation| Business Day

17 Aug 2017, by Ann Bernstein
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Proposals for creating jobs put forward during countrywide workshops are unlikely to resolve catastrophe.

It is hard to convey the depth of the catastrophe that is SA’s youth unemployment crisis. It is so big, it brings to mind the insight often attributed to mass murderer Josef Stalin that one death is a tragedy, but a million deaths is a statistic. There are 7.5million people between the ages of 15 and 34 who are not in employment, education or training Neets. It comprises about 40% of all young people.

Although this number is even bigger than the enormous number of 5.8million unemployed young people, we think 7.5million is the right number on which to focus. This is not to sensationalise the challenge, but to emphasise it is not just jobs that young unemployed people need, it is appropriate opportunities for work-related training too.

The province with the biggest share of the country’s employed people is Gauteng, where just more than 5million people have jobs — 2.5million fewer than the number of youthful Neets. The number of Neets is twice the number of people employed in the economy’s largest sector community and social services, nearly three times as big as the number of workers in our third-largest sector finance, and nearly six times as large as the number employed in mining and agriculture combined.

There is no way that SA’s economy could possibly generate new jobs on this scale without profound structural transformation. As First Rand chairman Laurie Dippenaar pointed out after reading that the population of unemployed young people increases by about 140,000 annually, accommodating them would require building the equivalent of three First Rand companies every year.

The task is made considerably more worrying when the trends are studied. There were nearly 200,000 fewer young people in employment at the end of 2016 than there were at the start of 2008. On average, SA has lost nearly 60 jobs for young people daily for nearly a decade, figures that August’s new unemployment data suggest understate the trend by 100,000 more.

Yet, instead of being gripped by a sense of national crisis, a strange complacency has set in, with political, civic and business leadership proposing projects and interventions that, however successful in their own terms, have no chance whatsoever of moving the dial on youth unemployment.

The Centre for Development and Enterprise CDE recently completed a project that took us to 20 of the country’s youth unemployment hotspots: from Msunduzi in KwaZuluNatal to Cape Town, from Alexandra in Gauteng to Bushbuckridge, Mpumalanga In workshops with politicians, officials, business, nongovernmental organisations and young people in cities, towns and townships, most proposals we heard fell into one of four categories, none of which is likely to make more than a marginal contribution to resolving the crisis of youth unemployment.

The first set of proposals argues for drastically increasing the number of young people in higher education. Obviously, this is a recommendation the CDE supports. However, some realism is necessary. Proponents of an education-led solution to the crisis of youth unemployment generally fail to take adequate account of two facts. SA has done better at increasing the skill levels of its workforce than is often realised: from 1995 to 2011, the number of workingage adults with a degree or diploma doubled. One can argue that this growth might have been somewhat faster or of better quality, especially for those with diplomas. However, given the challenges of quality, throughput and affordability, it is important to appreciate that trying significantly to increase the size of the higher education system now is likely to yield diminished returns.

This is because the school system, although it appears to be starting to produce some better results, is still failing most pupils: of the 1.1million children in Grade 2 in 2005, only 350,000 passed matric with marks high enough to be eligible for university or college.

Even if it were possible to expand higher education much more rapidly, using this as the primary vehicle for improving employment outcomes for young people is only one part of what is required. Millions of young people cannot plausibly return to the education system, and millions more will drop out of school in the next decade.

SA needs an employment strategy for the workforce it has, not the highly trained workforce it wishes it had.

A second set of proposals related to public sector employment. This, too, is a solution into which SA is already heavily invested and from which we cannot expect much more. Public employment levels have fallen a little in the past few years, but over a longer period, the rate of growth of public sector employment has been far higher than in most of the rest of the economy. From 2008 to 2016, employment in community and social services increased 32% and employment in construction, in which the state plays an important role as purchaser, grew 24%. Over the same period, employment in the rest of the economy grew only 4%.

Expanded Public Works programmes have created about 1.4million “work opportunities” annually, which translates to the equivalent of about 400,000 fulltime jobs, about half of which were for young people.

However, these figures need to be treated with caution because some of these projects would have been executed anyway. These jobs, which provide little or no training or future prospects, are best seen as a form of social security rather than a key component of an employment strategy.

There are real costs involved in expanding public employment. How to pay for this at a time of stagnant growth and growing public sector debt?

As increasing taxes affects growth prospects and productivity generally grows slowly in the public service, a large public service holds back national growth.

Expanding public sector employment takes a particularly pernicious form in local government. Corruption has led to large numbers of people — connected people without appropriate skills — getting employment at the expense of delivery to citizens. This has diverted attention from what municipalities should be doing to promote local growth and sustainable employment.

The third set of interventions often proposed relate to youth entrepreneurship promotion. SA is a country with desperately low levels of entrepreneurship, so creating a more entrepreneurial economy is vitally important. The hard truth, however, is that most young unemployed people have had very poor education, come from homes where few work, and they have no experience of work. In this context, very few of the young people who cannot find work are likely successfully to start new businesses.

New business formation is an inherently risky activity in which most people fail. It is considerably more risky in circumstances in which the beneficiaries of projects generally have little or no experience in any business.

Most successful entrepreneurs have worked in an industry for some years before they can find a niche for their own firm.

They also have a level of education higher than matric. The best training for one entrepreneur is to be in the employ of another, Unemployed million 8 Quarterly and the idea that special courses or finance can substitute for the knowhow that would be entrepreneurs need is naive.

The last category of popular recommendations involves improving the efficiency of labour markets by making more accurate information available to firms and job seekers, by providing unemployed people with various kinds of assistance in finding work and in establishing organisations to improve the matching process between firms and work seekers. These interventions have the potential to help tens of thousands of people find work. However, helping some people find work more efficiently is not a strategy that will expand employment significantly. Without new employment opportunities, moving some people to the front of the queue does not shorten it and the result is that the improved prospects of some people are offset by others’ diminished prospects.

All these interventions aim to tackle an aspect of the challenge created by mass youth unemployment. The implausibility of these activities as solutions to SA’s crisis of unemployment is generally not a reflection of the inherent weakness of most of the ideas. It is simply that they cannot achieve the kind of scale needed to make a meaningful difference to young people’s prospects.

This reality requires a fundamental rethinking of SA’s current approach to its crisis of youth unemployment, one based on a more realistic appreciation, both of the scale of the challenge and of the limited potential of these kinds of intervention.

Unless and until SA grasps the nettle, it will continue to have a growing, generations-long crisis of mass youth unemployment, a crisis that has deepened even as layers of new projects and initiatives have been proposed, designed and implemented.

Bernstein is head of the CDE. This article is based on a new series of reports from the CDE, Youth Unemployment: An Agenda for Action, www.cde.org.za






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