World of Work 2010 - Snapshot of South Africa
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|
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: ) or Raymond Torres (tel: +41 22 799 7908; email: ), Director of the ILO’s International Institute for Labour Studies.
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