The country’s staggeringly high unemployment — especially among young people — is a huge challenge, made worse by the global financial crisis and SA’s economic downturn. The essential economic policy priority must be to encourage the creation of more jobs. Every other economic goal and policy should be tested by whether it helps to generate jobs.
The challenge is to create jobs for the people we have now, not those we hope to have one day when our education system is vastly improved. This means focusing both on lower- wage, start-up jobs and strategies to provide access to work for the young and unskilled and not only on formal, higher paid employment.
About three-quarters of the unemployed are young. The official unemployment rate for people between the ages of 15 and 24 is almost 20% higher than the rate for the population as a whole. In 2007, 72% of 15- to 30-year-olds who wanted a job had never worked before.
Unemployment at an early age often scars people for life. Young people excluded from the labour force for long periods are deprived of on-the-job learning, leaving them with permanent skills deficit. On the other hand, young people are the quickest learners. Skills acquired in youth are deeply ingrained. If we can’t find everyone a job — and the truth is that we can’t — we should focus on the young.
Many in business feel that the best way to tackle unemployment would be an across-the- board removal of the barriers preventing labour markets from functioning efficiently. However, given the entrenched opposition to this approach from other quarters, the group developed — as a second-best approach — some politically feasible and fiscally affordable ideas to create many more jobs.
These ideas have been chosen for their potential to stimulate debate in a policy area that is sorely in need of new ideas and fresh approaches. We also believe that it will become easier to make a case for broader initiatives once it becomes obvious that business-friendly policies can lead to real improvements in the lives of unemployed and poor South Africans.
On the basis of a careful survey of domestic and international experience, the group developed four proposals that could generate jobs for young people:
- Promoting the hiring of young first-time employees through tax incentives and a year- long exemption from hiring and firing laws for employers — piloted in core business districts such as those in Gauteng.
- International experience shows that Special Economic Zones (SEZs) — whose location and orientation are chosen for economic reasons — are effective in creating employment for young people, especially women. Businesses that set up in these zones should be exempted from certain costs, including company taxes, tariffs, and specific labour and health and safety laws. Different patterns of incentives and exemptions could be tried in different SEZs to see what works best.
- SA has the unusual double problem of mass unemployment and a shortage of skilled workers. One major reason for this is the mismatch between what the schools are producing and what employers require. We need to start creating a much larger and more effective vocational education stream in high schools. Vocational education programmes tightly linked to the private sector should be piloted in some of SA’s rapidly growing medium-sized towns, such as Nelspruit, Witbank, Klerksdorp, Carletonville, Rustenburg and Welkom. Companies in these towns should be directly involved in curriculum development, on-the- job training opportunities and apprenticeships.
- Large and simple employment guarantee schemes in the poorest provinces (Limpopo and the Eastern Cape). The schemes would guarantee dignified, useful employment (helping to build roads; providing basic social services) for every person who applied to them. The wage should be at a level that would guarantee subsistence; and keep the fiscal demands of the scheme to acceptable levels. These schemes should be regarded as temporary initiatives while we remove the regulatory barriers and address the education and infrastructure constraints that make it difficult for private companies to generate the new jobs needed for everyone who wants to work.
Aiming to create millions of new jobs while being battered by a deep global recession is not something that should be based on theories. We should be thinking town by town, city by city and province by province about what exactly we could try.
Take KwaZulu-Natal as an example, with about 20% of SA’s population. Our proposals could — with determined leadership and effective public private partnerships — lead to as many as 1-million jobs in about five years. How? Expand the existing Richtek vocational training programme at Richards Bay to other metros and large towns. Expand KwaZulu-Natal’s labour-intensive rural road construction programme. Use the Development Facilitation Act to set up new industrial development zones near Durban, Richards Bay and La Mercy airport. Develop three new world-class “must see” tourist attractions, including a game reserve on the Bluff. Expand the South African Sugar Association’s Inkezo land company model for support of black farmers into other agricultural sectors; coupling this with a boost to established sugar and forestry businesses by settling all remaining land claims in one year.
We defined a number of prerequisites for our task of developing a series of practical proposals that could help SA change our future by dramatically reducing unemployment rates. To tackle unemployment of the scale that faces SA, we need projects that:
- can be scaled up to reach the millions of people who need jobs;
- do not stretch our public finances beyond the country’s means;
- can be implemented taking into account our constraints in terms of state capacity;
- do not have negative unintended consequences;
- could start off on an experimental basis so we can all learn by doing to implement effectively as we go along — expand what works and ditch experiments that prove impractical.
We know that some of our proposals will be controversial to some. That’s fine. We hope our work will encourage a constructive — and probably heated — democratic debate. We are challenging everybody to make their own serious contribution to the debate. Look at the facts. If you disagree, present alternative proposals that are affordable, realistic, have no unintended consequences that negate their aims, and have the potential to create real jobs for the millions of South Africans who need them.
- This article by James Motlatsi, Jayendra Naidoo and Ann Bernstein is based on the CDE and BLSA “5-Million Jobs” initiative, in which the writers participated with 20 others. Working papers can be found here.