Unravelling youth unemployment

The high youth unemployment levels in South Africa are a shame on our country's conscience- President Cyril Ramaphosa.

The youth of South Africa, more specifically those aged between 15 and 24 are the most vulnerable in the labour market according to data obtained from Stats SA. The youth unemployment rate in South Africa increased to a record high 56.4 percent in the second quarter of 2019 from 55.20 percent in the first quarter of 2019. These statistics portray the harsh reality of the youth in South Africa. South Africa has the highest levels of youth unemployment globally, with the closest contender being over 20 percentage points lower.

Domestic

• the youth are missing the opportunity to gain experience, as well as soft skills such as confidence, accountability and work ethic.
• prolonged unemployment results in the loss of skill and productivity.
• high levels of youth unemployment exacerbates the ever present social ills; as poverty, inequality and alienation continue to rise with no prospect of alleviation.
• long periods of unemployment could discourage the youth from being economically active and result in structural unemployment (loss of knowledge and skill).

Economic

• high youth unemployment translates into a struggling overall absorption rate, and thus a lower percentage of income earners.
• less income earners ultimately means lower levels of income and value added taxes.
• in addition to the declining taxes, the percentage of the population that is dependent on government support will also increase.
• economic pressure will rise as aggregate demand (AD) diminishes, thus further decreasing job opportunities.
• structural unemployment may deter foreign direct investment (FDI), and thus decrease growth possibility.

Could you be next ?

Almost 4 in every 10 young individuals in the labour force can not find jobs.

Among the 56.4 percent of unemployed youth, 33.7 percent are higher education graduates. At the highest levels of education, unemployment is a disturbing reality faced by the South African youth. Although the unemployment rate for graduates is still extremely high, there does seem to be a positive correlation between the level of education and employment opportunity, as the youth who obtain education levels below, or equal to matric, face unemployment rates of 58.9 percent and 55.8 percent respectively.

In addition to these staggering statistics, black females are still the most vulnerable to unemployment, with black males following closely behind.

The high youth unemployment levels effectively translate into more discouraged youth.

Of the youth aged between 15 and 34, females account for 44.3 percent of the youth disengaged from both work and education, while males account for 37.1 percent. In this regard, it is clear that yet again, the female youth population is severely affected by the unemployment rate.

The youth of South Africa; aged between 15 and 24, has been growing at a steady pace over time. In 2008 the youth consisted of 9693 000 individuals, compared to the 10292 000 that have been recorded in the Quarterly Labour Force Survey (QLFS) of 2019. Given the increase in the youth population, it would be expected that an increase in the Labour Force Participation Rate (LFPR) would follow. Yet on the contrary, data obtained from Stats SA shows that the LFPR has declined from 31.1 percent in 2008, to 26 percent in 2019.
The steady decline in the LFPR since 2008 could be better understood in terms of unemployment.
In the QLFS of 2008, Stats SA recorded a youth unemployment rate of 44.7 percent. This already high youth unemployment rate continued to rise over time, until reaching its peak at 56.4 percent in 2019. Over time, the prolonged youth unemployment levels have created uninspiring prospects of employment, as thus resulted in the growing quantity of discouraged youth.
The current percentage of discouraged youth lies at 74, in comparison to the 68.9 percent that was evident in 2008.

Over time, the youth of South Africa has grown, but the LFPR has declined as a result of continuous high levels of unemployment, and thus increasingly discouraged and inactive youth.

The reasons for the high level of youth unemployment have been discussed ad nausea, and, of course, the downgrade of South Africa’s sovereign credit rating by the three most important ratings agencies, Moody’s, Fitch and S&P, come into play, as does the country’s nosedive towards a full-blown recession.

It is known that Older South Africans grew up in a world where they and their parents worked for huge parastatals like the railways, Iscor and Armscor. It was quite normal for employees to stay at one company for 35, 40 years or even longer, while taking advantage of great medical aid and pension benefits. After the worldwide recession in 2008, the picture changed considerably.

There is a surplus of entry-level jobs at any given time, but there are not enough strategic resources dedicated to ensuring job longevity. The research shows that younger employees have the poorest job longevity, and as they have minimal financial responsibilities, they lack the resilience to push through the initial challenges of entry-level employment, which tends to be menial and physically grueling and offers little return.
They complete their tertiary studies with the expectation of a well-paid job and don’t understand that you must start at the bottom and work your way up. Hard work and talent are quickly noticed, but you need that work experience, no matter how menial and low-paying the job is initially.

In the short term, young people don’t see the benefit of working so hard for so little money. They don’t see the necessity of work experience in creating long-term success. As a result they tend to resign too soon to look for something “better”.

To add to this issue, when Jacob Zuma was in power, our leaders were more focused on their corrupt activities of state capture and defending their actions instead of developing policies to create an environment for investment and economic growth that will create jobs. Long story short, poor government leadership and the mindset of graduates lead to the state of our youth unemployment.

In attempt to alleviate the tragedy of Youth Unemployment, Kamal Ramburuth-Hurth, the chairperson of Rethinking Economics for Africa at Wits University states that the government requires "creativity" to relieve us from this distress.

The government needs to invest and develop industries aligned to the Fourth Industrial Revolution. South Africa needs to develop the skills learnt at institutions in such a way that it aligns itself with the direction of the economies of the world or else South Africa will always be left in this rut. The government needs to identify sectors that critical sectors that could equip the youth so that they are left with skills that are relevant to these sectors.

The various political parties such as The ANC and The DA commit themselves to create more jobs by reforming sectors and by creating a youth job-seeker rental subsidy voucher which are aimed at graduates whose skills are in demand in cities, but do not have the means to access the cities.

Under apartheid, state policy was used to remove black people from cities and to prevent them from acquiring skills or getting high-status jobs. This caused an oversupply of cheap black labour, which benefited the owners of business enterprises, particularly in agriculture and mining. Over time, these two industries have become more mechanized and capital-intensive, and less labour-intensive. This is an important historical factor that partly explains our current unemployment problem.

However, these reasons are not sufficient to explain our high unemployment rate. Several other countries have transitioned from primarily agricultural or resource-based economies without these levels of unemployment. Also, South Africa experienced a long period of economic growth from the mid-1990’s until the 2008 global recession. This was not a period of jobless growth.

Instead, what happened is that the net rate at which people entered the labour market exceeded the rate of job creation. This led to a situation of having both more employed people and more unemployed people simultaneously. At least part of the unemployment story involves substantial increases in labour force participation in the post-apartheid era.

There are three reasons stated in this article as to why our unemployment rate is so high:
1. South Africa has a quite a few industries with only a few active participants who dominate those industries. This leads to a lack of competition, less innovation and more barriers to entry for new small firms to enter.
2. A low trust society. This is evident in excessive bureaucracy and labour disputes which are costly to employee and employer. This results in risk averse employers when considering applicants with little work experience and lower level of qualifications.
3. Investors are wary of risks that affect their ROI. These risks are associated with threats to property rights, social and political instability and perceived levels of corruption. No investment in the country = no generation of new jobs.

Even though there are no immediate solutions to South Africa's unemployment problem, there a few sustainable solutions, such as:

• High quality educational sector which is available to everyone.
• Addressing widespread poverty, which limits human development.
• Cooperation between firms and labour.
• A dynamic and innovative economy where people are rewarded for experimentation and risk-taking.

Macro Level Contributors to Youth Unemployment

1. Extent of Economic Growth and the Relationship with Job Creation Low aggregate demand for labour is one of the key drivers of unemployment and, thus youth unemployment. This is caused mainly by low economic growth. During the apartheid era, South Africa was isolated from the international economic environment which led to a decline in employment opportunities in the various industries. However, during the post-apartheid era, South Africa became reintegrated with the global economy which gave us access to foreign capital, the expectation of economic growth and job creation. This growth however does not mean for a decrease in the employment rate.
2. Labour Supply Based on national level datasets, education and skills training policy changes has driven an increase in labour market participation among young people with inadequate level of skills to match the rising skills demand in the market.
3. The Economic Growth Path, Skills Requirement and Educational Deficits Job creation has been skewed to the tertiary sector, and typically requires higher skills levels than those of the typical or average work seeker. This is referred to as the ‘skills mismatch thesis’ and is commonly accepted to be a key driver of unemployment and youth unemployment in the country. Access to and quality of post-school education and training that could provide youth with skills that meet the demands of the growth in the tertiary sector, have also remained problematic. In an overview on post-school education, the returns to a college or university qualification: ‘In the 2011 Census, youth aged 25 – 29 with a college qualification are 14% more likely to be employed than those who have only completed matric, and those with a university qualification are 36% more likely to be in employment. Similarly, a college-qualified youth earns 60% more than someone with a matric and those with a university qualification earn nearly 1.5 times more.’ (2015: 2). However, participation rates in post-school education in the country remain very low, with only 8% of young people between the ages of 15 to 24 enrolled in either a university or a college. According to the authors, obstacles to accessing and completing post-school education are a lack of school-to-post-school guidance; financial constraints; a lack of support for young people to not only access but also complete post-school education; low levels of academic preparedness – which relate directly to the problems with the quality of teaching and learning at the basic education level; an institutional culture that does not take into account the ‘real-life experiences of staff and students’; and a lack of articulation between college and university sectors.
4. Labour Market Regulations So, while South Africa’s labour now has to compete in a pressurized global market, they have to do so mostly with a comparatively lower skills level. In addition, researchers point out that the South African labour market is also characterized by 'stricter labour market regulations' that make it more difficult to hire and fire, and by rising wages that stronger labour market rigidity in the country, and strong unionisation may result in employers’ unwillingness to hire young people.

Micro Level Contributors to Youth Unemployment
1. Educational Attainment and Low Skills Levels
A critical factor contributing to unemployment levels, and youth unemployment levels specifically, is the ‘skills mismatch’ driven by the current, high technology, third sector growth path on the one hand, and the inability of the basic education and technical and vocational education and training sectors to deliver on skills development, on the other hand. These are macro-level issues that have had significant consequences for individuals. The evidence is clear that young people today have significantly higher education levels than their parents; more young people today have completed matric than their parental generation did (Statistics
South Africa 2016; Finn, Leibbrandt and Ranchhod
2016). However, this achievement has not resulted in better employment prospects for youth. Further, survey data analyses indicate that there is still premium on matric in the labour market (Hofmeyr et al. 2013) but this is small compared with higher education (Pauw et al. 2006). Returns on investment in education really only accrue to an individual once they have a diploma or degree.
Consequently, the high levels of school dropout before matric among a large proportion of young South Africans place them at a significant disadvantage in the labour market. Not only do they face longer spells of unemployment, this may ultimately also result in discouragement and the often-mentioned longer term ‘scarring effect’. In addition, evidence indicates that many young people exit the schooling system without the required literacy and numeracy skills – even when they do complete their matric year. Thus, while some young people do achieve higher levels of education, this does not necessarily mean they exit the schooling system with the skills required by the
labour market.
2. Aspirations, Perception of Opportunity and Reservation Wages
There has also been debate about whether young people’s wage expectations (reservation wages) hinder their engagement with the labour market. The economic literature generally assumes that high reservation wages have a negative impact on a person’s probability of finding work.
3. Lack of Information
In part, the mismatch between young people’s aspirations and the opportunities available for them in the labour market is a feature of limited
career guidance provided at the school level. Career guidance is intended to form part of the high school curriculum and is meant to be provided mainly through the life orientation programme. However, several qualitative studies indicate that young people – especially those from a lower socio-economic background – are not thoroughly informed of the need to choose subjects that match their skills and interests, or are simply not given the opportunity to choose the subjects they would like – or need (Branson et al. 2015). The absence of adequate career guidance has a potentially severe effect on the learning and career trajectories of high school learners, who are expected to make choices about their matriculation subjects already in the second half of Grade 9.
4. Discouragement and Mental Health
Some qualitative evidence indicates the severe strain that unemployment and unsuccessful job search has on young people, but does not capture levels of depression in comparable manners. Depression may, among other things, hamper young people’s access to interventions aimed at connecting them to labour market opportunities. This has important policy effects: it is possible that discouraged youth require additional attention and interventions aimed at improving their emotional and mental health alongside of interventions
that connect them to work.
5. Geography and Costs of Work Seeking, Lack of Income
There is a convincing body of evidence pointing to how apartheid-era spatial planning continues to affect young people’s ability to search for and enter jobs. Poor people typically still live in townships on the outskirts of the cities, or in less economically developed rural areas, far from areas where jobs are located and with limited reliable and affordable transport options to search for work.
6. Lack of Work Experience
Young people wait longer in the labour market queue, especially before finding their first job. Evidence indicates that a lack of
work experience is a factor that contributes to this.
7. Limited Social Capital
There is considerably more information about the role that social capital plays in the South African labour market, and in turn how it affects the experiences of young people in the labour market. Social capital is defined as the social networks that can be leveraged for access to information about the education system, the labour market, job availability, or for access to jobs themselves. Both survey and in-depth data have indicated extensively that employment in South Africa is mainly found through informal networks of friends or family who are aware of job openings or who
put people in touch with employers.
8. Gender and Care
Young women in South Africa are disproportionately affected by unemployment. This gender dynamic is clearly indicated in various survey analyses, but remains poorly understood. While it is often assumed that the higher vulnerability of young women to unemployment is either a result of labour market discrimination (Mlatsheni and Rospabe 2002;
Lekena 2006) or a feature of gendered expectations of care for children and other household members, there is limited evidence reliably pointing to these as explanatory factors. While Schöer and Leibbrandt (2006) indicate that domestic responsibilities were a factor hindering active job search, the analysis was not youth specific.

Macro Level Interventions

• EPWP Two components: a) A fund to finance employment creation projects through the development of the Community Based Public Works Programme, which would also provide rapid and visible relief for the poor, and build capacity of communities for development. b) A process of reorienting expenditure on infrastructure to make it more labour intensive

I believe that this type of intervention will reduce youth unemployment because as based on prior research, during the apartheid era, communities were forced into areas where there is currently low human development and less access to education and job opportunities. Therefore by building communities and creating an infrastructure for them to work in would lead to a more productive and fulfilled society.

It was initiated to address the high levels of unemployment and poverty and, recognising the low skills levels
of the unemployed, meant to provide temporary employment for low-skilled unemployed people; provide an income to promote economic inclusion; support SMMEs; and train EPWP participants

The programme set a target of delivering one million jobs in phase 1 (2004–2009) (Simkins 2007) and 4.5 million jobs for the second phase (2009–2014) (Cohen and Moodley 2012). In November 2013, Cabinet approved the continuation of the EPWP and, for Phase 3 (2014–2019) a target of six million work opportunities was set (Department of Public Works 2015). Within these targets, 40% of the opportunities were to be afforded to women and 30% to youth with a further 2% being allocated to people with disabilities (ibid.). In addition to the employment targets, the EPWP is intended to ‘increase the potential for at least 14% of participants in the programme to earn future income by providing work experience training and information related to local work opportunities’

Micro level interventions
1. Skills development and training interventions
By far the most widespread interventions amongst those assessed are programmes that offer skills training to young people as a mechanism for addressing youth unemployment. In all of these programmes there is an assumption that the challenge of youth unemployment is largely driven by a deficit of skills amongst youth. The skills development and training category of
interventions was divided into three types:
• Apprenticeships, learnerships, internships, and
other work-integrated learning (WIL);
• Service programmes;
• Skills training only.

This would be a good way to alleviate the high unemployment rate as a lot of the youth, even though they graduate, do not come out skilled or educated. This intervention will be a good way for the younger population to gain skills and knowledge about the industries and job market.
2. Intermediary Interventions
One of the areas that emerges as a contributor to youth unemployment is inefficiencies in the ‘matching’ processes in the labour market, as was discussed above. Intermediary interventions emerge as programmes that should address these inefficiencies.

Intermediary interventions are those that bridge the gap between young work seekers (18–35 years) and employers. Intermediary interventions aim to minimise the barriers, costs and risks faced by youth whilst looking for work and/or by employers wishing to hire youth. These can be classified into three types:
• Temporary employment services (labour
brokers);
• Recruitment agencies or on-line job portals; and
• Interventions that aim to minimise barriers to
employment.

This is also a good way to alleviate high youth unemployment because it is facilitating searching for a job and allowing the youth to have a wide scope of job opportunities set out for them as their means to searching for jobs could be limtied.