Human capital formation and the labour market

Early results from Census 2011

Skills shortages in the South African economy have long meant that those with higher levels of educational attainment generally have better odds of finding work and, when employed, earn higher wages. Investment in human capital – health and education – is therefore attractive to households as a means of improving their economic lot. Morné Oosthuizen looks at what the results from Census 2011 say about service provision by the government and participation in education.

Educational attainment of the adult population (20 years and older)

Investment in human capital is also an important policy objective as greater equality in human capital endowments underpins greater equality in labour market outcomes and the prevention of the transmission of poverty across generations.

The government has had significant successes in improving the environment for human capital accumulation through the provision of services. Census 2011 shows that the share of households in formal dwellings has increased from 65% in 1996 to 78% in 2011, with similar improvements in access to piped water in the dwelling and access to weekly refuse removal.

The use of electricity for lighting has increased by 26 percentage points over the period (85% in 2011), while access to flush toilets now stands at 57%. Such improvements to households’ environments free up their expenditure and time, allowing them to prioritise other needs, including food, education and health. They also allow household members to derive greater benefits from this spending, potentially improving school performance for example. Importantly, young people may remain in education longer due to reduced pressure to support the household.

Participation in education

The census does reveal greater participation in education. Participation rates have increased particularly for those under 13 years of age, although all cohorts under 18 years saw some improvement.

For seven-year olds (grade 1), the participation rate increased from 73% to 96% between 1996 and 2011, while for five-year olds the difference was 58 percentage points (81% in 2011), the latter attributable to the growing importance of grade R/0 within the education system.

Improvement in education levels among adult population

For those aged 18 years or older, participation rates have declined over the period. This is particularly true after the age of 20, and is the result of the efforts to reduce the number of over-aged individuals within the schooling system.

Greater participation in education has led to improvements in the profile of educational attainment among South Africa’s adult population (Figure 1). The past 15 years have seen the share of the adult population without any secondary education fall to 25.5% in 2011, from 43.1% in 1996.

At the same time, the shares with matric certificates (grade 12) and higher education qualifications increased by 12 percentage points and nearly five percentage points respectively. The differences are even starker when comparing age cohorts: less than 10% of 20-24 year olds do not have at least some secondary education, compared to 25% of 40-44 year olds. While the proportion of Africans with higher education has more than doubled over the 15 years, racial patterns of disadvantage persist.

Hope for gradual improvement in skills base

These shifts in educational attainment mean that the skills base from which the South African economy is drawing may be gradually improving. However, the Quarterly Labour Force Survey (QLFS) data shows that, despite a superior profile of educational attainment relative to older cohorts, young people continue to struggle to find employment.

This is true even among those with identical educational attainment, resulting in higher youth unemployment rates within each educational category. As a result, the educational profile of the unemployed is steadily rising, while returns to education – in terms of employment probability and, arguably, remuneration – are under increasing pressure, reducing the incentives for young people to prioritise their education. Improved profiles of educational attainment are, therefore, not a sufficient condition for unemployment reduction; other issues such as educational quality and the employment intensity of economic growth need to be addressed.

Author: Morné Oosthuizen, deputy director, Development Policy Research Unit, School of Economics, University of Cape Town.