New South African Review 1. Anthony Butler
6 shows, the employment ratio in South Africa improved modestly through the mid-2000s, as economic expansion was associated with a relatively rapid rise in employment. Data before the introduction of the Labour Force Survey4 (replaced by the Quarterly Labour Force Survey in 2008) are unreliable, so we can only analyse trends from 2002. The downturn in 2008/9 returned the employment ratio to levels last seen in 2004.
The employment ratio reflected inequalities and economic marginalisation associated with race and gender, as the following table shows. In the third quarter of 2009, only 33 per cent of African women had income-generating employment of any kind, compared to 44 per cent of African men and 58 per cent of people in other groups. Moreover, only one in five African women had formal non-agricultural employment, compared to almost a third of African men and half of other people.
Table 7: Employment status by race and gender, third quarter 2009 (figures in parentheses are the employment ratios)
Source: Calculated from data on population group, gender and employment status in Statistics South Africa. Quarterly Labour Force Survey, Third Quarter 2009. Database downloaded from www.statssa.gov.za in December 2009.
Statistics South Africa publishes two figures for the unemployment rate. The ‘narrow’ or ‘official’ unemployment rate counts as unemployed only those workers who say they have actively looked for work over the past week. The ‘broad’ unemployment rate includes people who want income-generating employment but are too discouraged to look for it. As table 8 shows, both the broad and narrow unemployment rates declined through the boom years of the mid-2000s, but increased in 2008/9 as employment levels dropped. The broader rate jumped from 34.2 per cent in the fourth quarter of 2008 to 40.1 per cent in the third quarter of 2009, while the narrow rate climbed from 22.3 per cent to 24,5 per cent. The fourth quarter of 2009 saw only modest improvements.
Table 8: The unemployment rate and the employment ratio, September 2002 to fourth quarter 2009.
Source: Calculated from data on employment status in, Statistics South Africa, Labour Force Surveys and Quarterly Labour Force Surveys for the relevant periods.
Table 9: The unemployment rate by age, September 2002, fourth quarter 2008 and third quarter 2009
Source: Calculated from data on employment status and age in Statistics South Africa, Labour Force Survey 2002 and Quarterly Labour Force Survey Fourth Quarter 2008 and Third Quarter 2009. Databases downloaded from www.statssa.gov.za in December 2009.
The unemployment rate is more useful than the employment ratio for analysing joblessness among younger people, since it effectively differentiates between students and those who actually want income-generating work. As the following chart shows, the broad unemployment rate for those aged sixteen to twenty-nine dropped from 48 per cent in September 2002 to 37 per cent in the fourth quarter of 2008, but rose to 39 per cent in the third quarter of 2009. The narrow unemployment rate showed similar trends.
Between 2002 and 2008, 3.3 million paid employment opportunities emerged outside mining and agriculture, which shrank. Most of the expansion took place in the tertiary sector. Public and private services, construction and retail together accounted for 78 per cent. Of these sectors, only retail saw substantial job losses in the downturn from the end of 2008 to the third quarter of 2009.
Table 10: Employment by sector, September 2002, second quarter 2008 and third quarter 2009.
Source: Calculated from data on employment by sector in Statistics South Africa, Labour Force Survey 2002 and Quarterly Labour Force Survey Third Quarter 2008 and Third Quarter 2009. Databases downloaded from www.statssa.gov.za in December 2009.
Most of the employment creation in the mid-2000s also occurred in the formal sector. As a result, informal employment dropped from 18 per cent in 2002 to 16 per cent in the third quarter of 2008, and to 15 per cent in the third quarter of 2009.
The low employment ratio went hand in hand with very low pay in some major sectors, notably agriculture, domestic work, parts of business services and the informal sector. As Table 11 shows, in the third quarter of 2008, some 26 per cent of all workers earned under R1 000 a month.
Table 11: Share of workers earning under R1 000 a month by sector in third quarter 2008
Source: Calculated from data on income groups by sector in Statistics South Africa, Quarterly Labour Force Survey, third quarter 2008. Database downloaded from www.statssa.gov.za in December 2009.
The share of working people earning under R1 000 a month had dropped from almost 40 per cent in 2002, a reflecting real wage growth as well as inflation, in large part due to the introduction of minimum wages in agriculture and domestic work at around R1 000 a month in the mid-2000s. Unfortunately, Statistics South Africa stopped publishing wage data in the Quarterly Labour Force Survey after the third quarter of 2008, so the impact of the crisis on incomes cannot be tracked.
The high levels of joblessness and low incomes for many of those who found work meant that the sharp drop in employment from the end of 2008 had a particularly strong social impact. A major concern was that the bulk of employment loss occurred amongst the working poor, who had the fewest buffers against income loss. Moreover, as discussed below, most of the government’s response to the crisis aimed at protecting formal manufacturing and mining employment, with relatively little to assist those in more marginal sectors.
THE NATIONAL RESPONSE
From late 2008, the government responded to the international crisis through a combination of countercyclical fiscal decisions and efforts to support companies and retrenched workers in collaboration with social partners. The evidence available to date suggests that the macroeconomic measures were effective in ameliorating the impact of the crisis. In contrast, the microeconomic measures were implemented only after long delays and on far too small a scale to address the unemployment crisis directly. Moreover, the government did not deal effectively with the rapid appreciation of the rand from early 2009, which seemed likely to slow the economic recovery significantly.
The commitment to a countercyclical fiscal policy emerged from the decision to maintain growth in expenditure despite the slowdown in revenues. In the 2009 fiscal year, revenues dropped by 9 per cent but nonetheless, the Treasury maintained expenditure growth at 9 per cent (Treasury 2010) and as a result, the budget deficit reached almost 8 per cent of the GDP.
The adoption of a countercyclical strategy contrasted with the experience in the last severe downturn. In the late 1990s, the Treasury had cut expenditure, which probably aggravated the slowdown as well as causing significant difficulties for the major public services.
Table 12: Change in national expenditure and revenues in real terms (a), 1998 to 2009
Note: (a) Expenditure and revenues are deflated using CPI. Since the CPI series has changed twice over the period, the figures should be treated as estimates. Source: Data for expenditure and revenue for 1999 to 2008 from Treasury, Budget Reviews, relevant years, Table