Creating jobs in tough times

The global economic downturn poses serious challenges to South Africa's hopes of halving unemployment between 2004 and 2014, a target most recently reaffirmed in the ANC election manifesto, released in January, says Miriam Altman.

The news lately has been depressing, with extremely low growth forecasts and large scale retrenchments. Just as the SA economy seemed to be getting on track, the global economy imploded. But the prospects are not as bleak as they might seem. Growth between 2004 and 2014 could still average 4% per annum, and if so, the Human Sciences Research Council Employment Scenarios show that halving unemployment could still be achieved with special interventions.

What does this meltdown mean for halving unemployment? The answer is not found in figures for a quarter or two, or even a year or two, but over a decade and beyond. Already, the economy has grown by an average of 5% annually between 2004 and 2007. Employment has grown by an average of 450,000 net new jobs per annum, and unemployment has fallen from 26% to 23%. While we should be concerned that forecasts for 2008/9 and 2009/10 are now falling to around 1.5%, average growth over the decade from 2004 to 2014 could still be around 4%, if the economy starts to pick up again from 2010/11.

This is a possibility identified in one of three HSRC Employment Scenarios in which special interventions would be needed to keep 1.5 million people in work in any one year. These would be generated through public works, community works and special employment programmes. Certainly, this is achievable.

Was the employment growth path sustainable?

It had started to look as if the economy's response to the existing suite of policies could be enough to achieve the Asgi-SA target. But not all believed that the growth and employment path was sufficiently sustainable. While the formal sector has increasingly been the main source of new employment, this has mostly been in low paid, relatively precarious service jobs. Many of these sectors, like retail or personal services, rely substantially on the expansion of other, more dynamic, globally traded sectors like mining, manufacturing, tourism, IT or finance. The overwhelming growth of non-traded services in SA might have indicated that this source of employment would have soon played out, even in the absence of a global meltdown. So, were we edging up from 5% to 6% growth, or perhaps just having a good few years, with the prospect of growth falling back from 5% to 4%?

In the next couple of years, jobs will be lost in mining, manufacturing and especially services such as retail and hospitality. Most new employment will be found in government generated construction projects and the public sector. These opportunities may generate less than 150 000 net new jobs in 2008/9 and in 2009/10, with more substantial recovery from 2010/11.

What might raise the rate of market based job creation?

If there is a major shortfall, government should be committed to stepping in. But public works jobs are not sustainable, and require continuous state funding. It is imperative that dynamic growth inducing sectors be stimulated. These are sectors that are globally integrated, have deep supply chains, retail networks, and enable substantial employment linkages. Examples include transport, capital equipment, high value agriculture and mining related industries.

There should also be substantial potential in many globally traded service sectors where SA has demonstrated capability such as civil construction, mining services, finance, or business services. The Asgi-SA agenda has already identified some of the key interventions needed, and it is imperative that these are fully implemented over the next period of government. A higher path that improves the growth and employment generating capability of the economy could be created by improving the quality and competitiveness of network infrastructure. New industries rely on world class network infrastructure like telecommunications, transport, energy and water. This requires greater commitment to delivery, shareholder investment and effective regulation.

These interventions would not necessarily help create jobs over the next 2 or 3 years, but would certainly set the economy on a more labour absorbing path into the future. SA would be better prepared for the global recovery period so that economic and employment growth rates are higher than they would otherwise be from 2010.

What can be done now?

Identifying ways of protecting unnecessary job loss in viable businesses are certainly worth investigating. Government's continued commitment to its construction projects will be essential. Within these projects, there will be substantial opportunity to stimulate local private sector investments.

There is another angle to these challenges. Each year about 500 000 to 700 000 school leavers enter the labour market. They have a 50% chance of finding a job before the age of 24.

This is even more severe for black school leavers. If this is the situation during a growth acceleration period, then the next few years will not be happy ones for most young people. Every year, hundreds of thousands of school leavers are added to the pool of long-term unemployed. This is surely one of SA's greatest social and economic challenges. What can be done over the next few years? Firstly, it would be a good idea to incentivise young people to keep studying - that is, to stay out of the labour market and to add to their skills. Secondly, special employment programmes should target 18 to 24 year olds. How so? Amongst other ideas, what about offering jobs to matric graduates to mentor grade 11s and 12s. Who knows better how to pass matric, and communicate that knowledge, than a recent graduate?

SA began its democratic life with an unacceptably high level of unemployment, poverty and inequality. This severely impacts on the ability of the majority to meaningfully participate. We need to stick to ambitious targets on the path to full employment, by all means possible.

Dr Miriam Altman heads up the Centre for Poverty, Employment and Growth.