Massive unemployment among the younger generation has been a feature of the SA economy for years. What can be done about it? 

We’ve all heard the alarm bells sounding across the business, government and labour spectrum, warning us of the ‘armies of the unemployed’ and the ‘lost generation’.

Once the preserve of South Africans, these phrases have been gaining ground internationally, particularly in the advanced economies of Western Europe, where images of a disciplined movement of workers is being replaced with the reality of a mob of young non-workers who are expensive, if not dangerous, in welfare states with a history of high living standards.

The International Labour Organisation (ILO) late last year put youth unemployment globally at 12.7% as against the 2007 pre-recession figure of 11.7%. In real numbers that is a jump from 70.5 million unemployed youths to 75.1 million. These totals are based on the readily available official figures (excluding discouraged job seekers), which have long been pooh-poohed in SA and which the ILO concedes masks the true extent of the problem.

The crisis talk is tied to exceptionally hard-hit places such as Greece which recently had a 50% youth unemployment rate, or Spain where youth unemployment skyrocketed from 18.2% to 41.6% or Ireland where it went from 9% to 27.5% (and actually much higher if discouraged job seekers were to be counted), reflecting different degrees of economic collapse and state bankruptcy.

However, globally speaking, the ILO numbers show that neither the rate nor the absolute number of unemployed youth have still not gone near the levels of 2005, when global youth unemployment hit a record of nearly 79 million or 2002 when the highest rate of 13.2% was reported. But rising youth unemployment or unemployment in general is not a problem everywhere.

The new global crisis is in the rich world which has seen long-term trends thoroughly reversed. Due to the economic crisis, youth unemployment in OECD countries moved from only slightly above the global norm to very much above it at 17.4%. The old crisis experienced by, among others, SA, was astounding even before the significant damage done in the past three years. The conclusion has to be that we have generated several lost generations.

In SA the ‘expanded’ unemployment among the youth, including discouraged job seekers, is roughly 60% against the official 49.2% (this is based on Stats SA figures). This has increased from 51.2% in 2008 and is now even higher than in 2000 when the rate was 58%.

This rate has remained more or less fixed at just less than double the overall unemployment rate, which is already high by any standard. To put that into context, the head count of unemployed and discouraged job seekers has shot up from 5.1 million to 6.6 million since 2008. Of that total, young people, meaning 15–24 year olds, now constitute about 2 million, with another 1.5 million in the 25–29 age bracket. That’s 3.5 million young people not working, not studying and, in fact, not doing much at all.

It’s often repeated that SA has ‘among the highest’ youth unemployment rates in the world, but surprisingly few people stop to ask who exactly we stand ‘among’. Using official rates, the country with the closest youth unemployment rate is the Occupied Palestinian Territories. In 2009, UN data reveals that the West Bank and Gaza Strip had youth unemployment of 46.9%. SA had it slightly worse at 48.2%.

There are grimmer places to be a young job seeker, including the tiny French island territory of Martinique (61.2%) and the former Yugoslav Republic of Macedonia (56.4%). This is our peer group: small semi-colonies, the remnants of states dissolved by war, the only other place on earth accused of apartheid and, since 2010, Greece and Spain. Like these places, SA can be viewed as having a broken economy.

Exceptionally high youth unemployment stems from, among other things, the country’s relative lack of an informal sector, except in retail. That is as much a legacy of the thorough squashing of an entrepreneurial culture under apartheid as it is the fault of proximity to a disproportionately large modern economy for a developing country that leaves little room for informal manufacturing.

The last few years have seen a staggering amount of research and discussion around unemployment, much of it rigorous and some of it somewhat hubristic, with proclamations relating to the ‘year of the job’ or ‘5 million jobs by 2020’ – a target that the Development Bank of Southern Africa estimates would require an unrealistic annual economic growth of 10%. It has executives talking as though their businesses were public works programmes, publicising every temporary job opportunity created when something gets built.

Much larger direct and indirect employment by the state will be inevitable, including public works and a national youth service, but the general thrust of government thinking has been that the private sector must be induced to employ the young. Now there are indications that an intentional expansion of low-wage work outside the traditional capital-intensive core of the economy is not only acceptable, but must be actively strived for.

There are fundamentally two ways to look at the situation: either there is something wrong with the economy that it doesn’t employ people (i.e. it is on the wrong growth path), or there is something wrong with the unemployed that they are unemployable (i.e. they are too expensive or too unskilled).

On the employability front, the unemployment crisis may as well be called an education crisis.

Half the jobless don’t have matric certificates and these individuals also make up the vast majority of the discouraged job seekers. Matric, anyway, also doesn’t quite cut it anymore and for people under 24 it provides a scant advantage in the job market.

Even though concerns are often raised about graduate unemployment, there is a good reason for the annual stampede at the gates of universities on registration day. Even if nothing else, it shows that signals are reaching the labour market. No matter what your age, with every rung of the levels of the National Qualifications Framework you climb, your odds of having work does increase dramatically.

Two of the biggest disappointments in democratic SA have been the dilution of the matric certificate and the introduction of maths literacy as an alternative to proper mathematics at school, says Mike Teke, CEO of Optimum Coal. He believes the pass mark should be 50% and that every child should take maths.

Optimum has recently won a slew of CSR accolades and apart from a generous community trust, its focus has been on schools, including the building of a school near its mines, complete with teachers and a well-above-average pass rate. “You might say that because I pay a lot of tax, and my company pays a lot of tax, that it is then the government’s job to educate,” says Teke. “But the fact is that they don’t have the capacity.”

The well-known inadequacy of the education system towers over the labour market, but so does the increasing insistence that the youth have been priced out of the market, either by espousing unrealistic ‘reservation wages’ or due to the bargaining councils that set industry minimums.

It is easy to slate workers for being somehow greedy, but SA has a median wage of only R2 900. Half of the employed earn less than that and stand a good chance of receiving a state pension even if employed until retirement age.

If you turn your gaze away from youth unemployment towards those youth who are employed, it is clear they sit at the bottom of the food chain. Of all the youth with jobs, about 18% work in formal or informal retail with almost another 7% being waiters and another 8% doing construction work which is moreover sporadic.

A general desire for bold steps seems to have focused itself first on the proposed wage subsidy and then on trashing Cosatu after its concerns seem to have stalled the subsidy. We are now told that it is only being slightly re-engineered and still very much on the cards. Other major planned interventions include some new and drastic resuscitation of technical or artisanal training and an ever-larger public works programme that may balloon into a work guarantee based on the Indian model.

The subsidy would, according to Treasury, have created all of 133 000 long-term jobs in five years against the roughly 3.2 million jobless in the target age group. This relatively modest intervention would also, by Treasury’s reckoning, mostly have been a stimulus to existing employers of the young.

Cosatu’s opposition to the subsidy probably has the same basis as the cheer-leading from organised business, opposition politicians and think-tanks: the idea that it is the first dry-run before a larger attempt at making the youth more affordable.

What makes the subsidy a watershed, according to Ann Bernstein, director of the think-tank Centre for Development and Enterprise, is that it explicitly targets the bottom end of the labour market as opposed to the ‘decent work’ so often invoked by the government. It fits nicely into the general diagnosis provided by the still relatively newfangled National Planning Commission that high entry-level wages are the main barrier to larger youth employment.

Miriam Altman of the HRSC, and latterly the National Planning Commission, has pointed out a number of other underplayed problems in the labour market. Among these is the absence of networks connecting youth to employment. Prior research has shown that recommendations and word-of-mouth plays a significant role in finding work. Those whose peers are employed have better odds, something that in SA favours whites. Jobmatching is the service with which the politically beleaguered labour-broking industry defends its place in the labour market and it is also the target of the government proposal for a new, improved, and obligatory, public register of vacancies.

If the proposed wage subsidy is merely being fine-tuned in consultation with Cosatu and others, the outcome would likely be some kind of accounting system to track any displacement as opposed to net job creation. But even some displacement of older workers would not necessarily discredit the idea.

Possibly the most worrying thing about unemployment among those under 24 is that about 73% of them have never worked at all, and the longer someone is unemployed the less likely they are to ever be employed.

The popular ticking time bomb analogy, however, captures another crucial aspect that moves the youth to the top of the agenda: fear. Fear of vaguely defined ‘unrest’ in the form of so-called service delivery protests and criminality in general. The country also has a relatively young population, and if the youth are unemployed we could end up with the opposite of the famed demographic dividend – ever higher dependency rates and households living off the earnings or pensions of their elderly.

Speaking of welfare, the increasing grumblings about the sustainability of the child support grant cannot be separated from youth unemployment. Treasury is paying out 10.8 million grants every month, each equalling R280. On the receiving end, according to Stats SA’s Quarterly Labour Force Survey, there were only 2.8 million recipient caregivers. Of these none were employed and more than 1.1 million were unemployed youth under the age of 29.

From the viewpoint of general welfare, it’s not a foregone conclusion that targeting youth unemployment may be the best option. Favouring older job seekers that support proportionately more poor dependants could make more sense.