YOUTH UNEMPLOYMENT: A STRUCTURAL PROBLEM
Updated: Aug 21
Youth unemployment in South Africa represents a socio-economic crisis and poses a significant threat to the stability and health of the South African democracy. Despite many policies and implementing a range of public and private interventions, youth unemployment rates have remained high. Youth unemployment is at 66,5% for youth aged 15-24 years and 43.8% for youth aged 25-34 using the official definition (excludes discouraged work-seekers) compared to 34,9% national unemployment. The 2021 Quarterly Labour Force Survey (QLFS) also indicates that amongst young people aged 15-24, about 33,5% were Not in Education, Employment, or Training (NEET), with the majority being female at 34.9%. The NEET group represents the most vulnerable section of the youth. Having such a significant proportion of young people not engaged either in education or employment presents an obstacle for poverty and inequality eradication
The high level of youth unemployment is primarily driven by both demand and supply-side challenges. Demand-side challenges relate to the lack of work opportunities for young work-seekers in the economy, and supply-side challenges relate to educational and skills levels among the youth. A wide range of policies and interventions have focused on both supply-side and demand-side are being implemented. Interventions have also included using intergovernmental fiscal instruments such as conditional grants and equitable share allocations to boost employment creation. The Employment Tax Incentive (ETI) and Expanded Public Works Programme (EPWP) are examples of labour market interventions.
Labour market interventions may be suitable for addressing some supply-sided challenges and preparing job seekers to enter the labour market. Still, their effect will remain limited if there is no corresponding increase in the supply of jobs through improving and expanding the capacity of tradeable activities such as manufacturing. Manufacturing is primarily recognised for its significant employment of low-skilled job seekers. The tradability aspect of the manufacturing sector means that it doesn't require economy-wide domestic demand to take off, unlike the services sector, which requires demand from other sectors.
Therefore, high unemployment and low growth are consequences of the decline of the non-mineral tradable sector since the early-1990s. The weakness in export-oriented manufacturing has denied South Africa growth and employment creation opportunities. This pattern of structural change is also a key driver of unemployment because tradable activities (including manufacturing) are intensive in low-skilled labour compared to services. The share of total employment of tradeable activities come down from more than 23% of employment in quarter 1 of 2008 to 18% in quarter 3 of 2021. Public non-tradeable activities share of total employment increased from 19.5% in quarter 1 2008 to 23% in quarter 3 2021. At the same time, private non-tradeable activities' share of total employment increased.
The ongoing pattern of structural change implies a significant decrease in the relative demand for low-skilled labour because the declining sectors constitute the least skill-intensive parts of the South African economy. The limited skills among the youth coupled with low secondary school completion rates mean that many young people are at a considerable disadvantage in finding employment in an economy biased towards high skills services activities.
Conventional labour market interventions centring on education, training, and wage subsidies are necessary but on their own inadequate to address today's youth unemployment challenge. The government can support employment through Industrial and regional policies directly targeting tradeable activities such as manufacturing and innovation policies that incentivise labour-friendly technologies. The government can also use its public procurement policies to boost and support local manufacturing and value chains.