Good business basics: Jobless growth syndrome plagues economy
The South African economy has been plagued by the ‘jobless growth’ syndrome for the last 20 years.
Unemployment figures for the last quarter were published revealing that the percentage of the workforce out of gainful employment had edged up to 32,6 percent. Put another way, this translates to just 38 out of every 100 adults in the country being in paid employment.
The South African economy has been plagued by the ‘jobless growth’ syndrome for the last 20 years, simply put, even when the economy is growing at a reasonable rate, this does not translate into growth in employment. A number of reasons have been postulated based on the theory of labour, such as job market inflexibility, and the structure of the economy. I believe though that conventional economic theories do not adequately cover some of the factors unique to a newly democratic South Africa.
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The first theory I would like to submit is that the salaries and benefits offered by the public sector has dramatically skewed the labour market, forcing wages in the private sector up to unrealistic levels. This is particularly applicable to the unionised sectors of the economy.
Secondly, in an effort to redress the injustices visited on (particularly) the non-white workforce prior to 1994, the labour laws have created a severely inflexible labour market, in which employers are reluctant to employ permanent labour to the extent that they may be willing to. This is not to advocate for the hire and fire mentality that underpinned the behaviour of employers in the ‘old’ South Africa, rather a more measured approach balancing the rights of workers with the requirements of business.
Thirdly, the skill and competence levels, of even entry level workers pushes up the cost of employment, in that businesses must invest significantly more to skill workers to the levels that their organisations require.
This is an indictment of the country’s education system, and the constant lowering of the bar to achieve a National Senior Certificate pass can only exacerbate the situation. Alarmingly, evidence is emerging that even technical graduates from universities and TVET colleges are emerging not entirely ‘fit for purpose’, indicating that the quality of tertiary education is also degrading.
Finally, policy uncertainty is a major disincentive to investment decisions by business. Even where expansion is mooted, particularly in manufacturing, more emphasis is being placed on mechanisation and the massive opportunities presented by 4IR (artificial intelligence, robotics).
It is evident then, that escaping from the jobless growth syndrome is going to take more than a high growth economy. A holistic and practical approach to some of the constraints highlighted above is needed.
Vijay Naidoo writes in his personal capacity as CEO of the Port Shepstone Business Forum.
The views expressed are the author’s own and do not necessarily reflect those of this publication.
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