Employment has started to recover slowly in South Africa
Job creation started to recover in the beginning of the year. In the
first quarter of 2010, employment grew by a modest 0.3%, following a decline
of more than 6% in the previous year.
The modest employment recovery has, however, been insufficient to make
significant inroads into the high unemployment rate, which stood at 25.2% in
the beginning of 2010, compared with 21.9% at the end of 2008 when the
crisis started. Unemployment affects more than half of young South African
workers.
An increasing number of job seekers have become discouraged and stopped
looking for work. Consequently, the labour force participation rate declined
by almost 3 percentage points between the first quarters of 2009 and 2010 to
54.3%.
The employment gap (the difference between current employment and
employment required to return to pre-crisis levels) remains large, with more
than 800 thousand jobs disappearing since the onset of the crisis (Figure
1).
Despite the timid nature of the labour market recovery, job growth is
primarily in full-time employment, allowing for a more fruitful recovery of
disposable income and domestic demand, which could fuel a stronger recovery.
Figure 1: Missing jobs with respect to pre-crisis levels (in
millions)
UPPER-MIDDLE INCOME COUNTRIES
Total
-2133.34
Russian Fed.
-1665.34
South Africa
-870
Venezuela
-756
Poland
-372.5
Latvia
-216
Bulgaria
-211.25
Romania
-211
Lithuania
-146
Serbia
-134
Argentina
-107.75
Malaysia
-96.25
Brazil
-95.75
Chile
-71
Jamaica
-47.5
Kazakhstan
-23.25
Mauritius
-22.5
Macedonia, FYR
-14.75
Belarus
-4.75
Peru
68.25
Mexico
86.25
Turkey
311.75
Colombia
1466
NET
-3133.34
NEGATIVES
-5065.59
The labour market recovery was supported by strong fiscal
stimulus
Authorities in South Africa reacted swiftly at the onset of
the global economic crisis, enacting a stimulus package of around 4 percent
of GDP in 2008, based largely on infrastructure projects and transfers to
low-income households. This has helped save some 165 thousand jobs in the
short-run.
The crisis response benefited from the tripartite nature of
its design and implementation through consultations at the National Economic
Development and Labour Council (NEDLAC), a national forum for social
dialogue. This allowed for a rapid set-up of a targeted National Response
Framework, taking into account aspirations of business leaders, trade unions
and local communities.
Moving forward, authorities remain committed to keeping
stimulus measures in place to absorb labour market slack. Given the
low-level of public sector debt and the importance of South Africa for the
wider region, authorities are encouraged to continue using their fiscal
space to support job creation, possibly putting stronger emphasis on labour
market measures at the expense of scaling down some of the tax cuts
introduced earlier.
Rebalancing the global economy would support the South African
labour market
Similar to other countries in the region, South Africa
suffers from high income inequality and declining wage-income share.
Nevertheless, export growth is lagging due to specialization in
capital-intensive primary commodities that follow global price cycles
unrelated to domestic production conditions.
A rebalancing of the global economy, and in particular
stronger domestic demand growth in some Asian countries or a re-evaluation
of the Yuan, would go some way in improving the competitiveness of South
African exporters, thereby contributing – albeit modestly – to a reduction
in unemployment rates.
South Africa benefits from a well regulated financial sector
that proved resilient against contagion from the global financial crisis.
Banks remained profitable and well capitalized even at the heights of
financial sector stress in early 2009. South Africa would however benefit
from reforms in the international financial system geared towards making
capital flows less volatile, as discussed in the G20.
World of Work 2010: From One Crisis to the Next? is available at
(www.ilo.org/INST). For further comment, journalists are invited to contact
Ekkehard Ernst (tel +41 22 799 7791; email: ernste@ilo.org) or Raymond Torres (
Member
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