Labour Demand Trends and
the Determinants of
Unemployment in South Africa
2010 CCMA COMMISSIONERS INDABA
“Against all Odds”
Ritz Hotel
2 – 4 December 2010
Understanding the post-apartheid Labour Market:
Key Messages




The key drivers of employment trends since 1995 in the
South African labour market
Assessing Sectoral and Skills Trends in Employment
Have the institutions of human capital changed labour
market outcomes?
Do institutions and regulations matter?
Six Key Labour Market Challenges
1.
2.
3.
4.
5.
6.
Race, Gender and Age continue to influence access to
employment and earnings
Employment Generation of the type since 1994
sectorally uneven
The Skills Mismatch between Labour Demand and
Supply Continues Unabated
The Institutional and Regulatory Environment Remains
Critical
The Spatial Dimension to Employment Creation is
Critical
The Quality of Higher Education Remains a Significant
Constraint
Challenge 1: Race, Gender and Age continue to dominate labour
market outcomes:
Pr (Employment) Results 1995,2001, 2009
0.4
0.3
0.2
0.1
0
1995
-0.1
-0.2
-0.3
2001
2009
Coloured
Asian
White
female
25-34
35-44
44-54
55-65
Challenge 1: Race, Gender and Age continue to dominate labour market
outcomes:
Earnings Function Estimates 1995, 2001, 2007
1
0.8
0.6
1995
2001
2009
0.4
0.2
0
Coloured
-0.2
-0.4
Asian
White
Female
Challenge 2: Employment Generation of the type since 1994,
sectorally uneven
Employment Growth by Sector, 1994-2009 (‘000s)
4000
3500
3000
2500
2000
1500
1000
500
0
-500
-1000
Challenge 2: Employment Generation of the type since 1994,
sectorally uneven
Financial & Business Services Revisited
0
200
400
600
800
1,000
“labour recruitment and provision of staff;
activities of employment agencies and recruiting
organisations;
hiring out of workers (labour broking activities);
Investigation and security activities;
financial_intermediation
auxilliary_intermediation
renting_of_equip__person_
r_d
pension_and_insurance
real_estate
computerr
others
Outline
Challenge 2: Employment Generation of the type since 1994, sectorally
uneven
0
200
400
600
800
Wholesale & Retail Trade Revisited…..
motor)wholesale&commission
motor_trade
nonmtorR
hotel_restaurants
Outline
Challenge 3: The Skills Mismatch between Labour Demand and
Supply Continues Unabated :
Aggregate Employment, by Education Level (% Change)
8.00%
6.00%
4.00%
2.00%
0.00%
-2.00%
-4.00%
.22
.21
1.5
.19
.2
2
2.5
3
ratioskuskemp
.23
3.5
.24
4
Challenge 3: The Skills Mismatch between Labour Demand and Supply
Continues Unabated
Skilled-Unskilled Relative Wages and Employment, 2001-2007
2000
2002
ratioskuskmw
2004
year
2006
ratioskuskemp
2008
Challenge 4: The Institutional and Regulatory Environment Remains Critical:
.2
.4
Union
.6
.8
Union Wage Gap Estimates Across the Earnings Distribution, 2001 and 2007
0
.2
.4
Quantile
2001
.6
.8
2007
1
0
20
40
60
80
Challenge 4: The Institutional and Regulatory Environment Remains Critical:
Employment Rigidity: Cross Country Percentile Distribution and South Africa,
2010
0
20
40
60
80
Percentile
Empl Rigidity UMI
Empl Rigidity Global
SA UMI Distribution
SA Global Distribution
100
Challenge 5: The Spatial Dimension to Employment Creation is Critical
0
.5
1
1.5
2
2.5
Mean Transport Expenditure % of Household Expenditure, By Mode of
Transport
African
Coloured
Indian
Private
White
Public
Total
Challenge 6: The Quality of Higher Education Remains a Significant Constraint :
Probability of finding employment: Results from a Sample of HEI Attendees
Dependent variable:
Probability of
employment
Individual characteristics
Graduated
0,5368
African
0,5692
Coloured
0,1188
Indian/Asian
0,0235
Female
0,5437
HBI
0,6376
Technikon
0,5657
Degree qualification
0,5288
Africans from HBIs
0,4241
Africans from HWIs
0,1451
Coloureds from HBIs
0,0602
Coloureds from HWIs
0,0587
Indians/Asians from
0,0148
HWIs
Other from HBIs
0,1533
Humanities
0,2921
Education
0,0931
Commerce
0,1962
Other field
0,1195
Mathematics scores in
Matriculation
2,3807
Used social network
0,2966
26-35
0,3663
36-45
0,0803
46-55
0,0171
Marginal effects
x-bar
I
II
0,0037
-0,2811**
-0,0713
0,0639
-0,1681**
0,0007
-0,2865**
-0,0607
0,0903
-0,1650**
0,0423
0,0719*
--0,0708*
0,0330
0,0366
---------
-----------
-----0,0265
0,2145**
---0,0190
0,2168**
0,0520
0,0642
0,0251**
0,0540
0,0724
0,0243**
0,0232
0,0688**
0,1991**
0,1854**
0,0253
0,0678**
0,2018**
0,1882**
Notes: 1. *Significant at the 1% level. **Significant at the 5% level. ***Significant at the 10% level.
2. Provincial controls were included but are not shown in the table.
III
0,0084
-------0,1658**
--0,0594*
0,0307
-0,2248**
-0,2647**
0,0324
-0,0505
0,1003
0,1164
-0,0274
0,2127**
0,0554
0,0641
0,0260**
0,0199
0,0672**
0,01995**
0,1845**
IV
-0,0002
-0,2666**
-0,0741
0,0826
-0,1568
0,0454**
0,0636*
0,0221
--------------------0,0275**
0,0318
0,0878**
0,2487**
0,2295**
Recommendations: Four Microeconomic Policy
Options

Three New Options for Growing the Informal Sector





Public and Private Employment Services: Reducing
Information Asymmetries in the Labour Market
New Measures to Support the Unemployed




Public Sector Procurement
Short-Term Insurance
FDIs and the Informal Sector Loan Book
Conditional Cash Transfers and the Training Layoff Scheme
A Transport Voucher Scheme to reduce transaction costs of spatial
disparities
A wage subsidy cum employment generation for young, African female
workers
Labour Regulation at the Margin


Fix the Institutions of the Labour Market (LCs; LACs)
Probation and Pre-Dismissal Procedures of the LRA
Conclusions

Are we Going through a new policy revolution?






Trying some new ideas?




Training Layoffs to stay?
Skills Under a New Regime
DoL’s Renewed Focus
Old Macroeconomic Debates are back in the arena (Inflation
Targeting, Exchange Rate, Fiscal Policy and Pump-priming…….)
A New (Old-Style) Industrial Policy?
The insertion of the informal economy into all facets of industrial
policy
A re-fashioned UI Scheme?
Political Economy Issues and revisiting the social compact?
Lest we Forget:


Understating the relevance of Financial & Business services in
employment and output growth?
Growth Path and Labour market Outcomes are inextricably linked