Combating Youth
Unemployment in KZN
25 July
Contents
1. Introduction
2. The scale of the problem of youth unemployment
3. Diagnosing youth unemployment
4. Strategic interventions
5. Conclusion
2
Introduction
• The hopes of creating a more prosperous, more inclusive society and
economy rest on the shoulders of the country’s youth. Youth
unemployment, however, tends to perpetuate a cycle of social and
economic exclusion which often leads to the germination of civil unrest
and criminal activity.
• As such, combating youth unemployment with the use of policy tools and
through strategic interventions, is a major focus of government.
• This presentation is a reflection of the work the Department of Economic
Development and Tourism is currently undertaking on the revision of the
Youth Economic Empowerment Strategy.
3
The Scale of the Problem of Youth
Unemployment
4
Youth Unemployment in SA
• The principal determinant of poverty within South Africa is undoubtedly
unemployment or put differently, a lack of employment.
• Only 41% of the country’s working age population are employed. Such a
low employment rate severely hampers the ability of individuals to access
economic resources.
• The official rate of unemployment in the country is 25% while the
expanded rate is 36%
• The Youth (aged 15-34) constitute a disproportionate share of the
unemployed – 72% of the total unemployed.
• The rate of unemployment for working age people below the age of 25 is
as high as 49% on the strict definition of unemployment.
5
Youth Unemployment in SA
• A recent study conducted by the ILO found South Africa to have the
lowest youth labour absorption (employment rate) of any country with
recorded statistics. Only 12.5% of working-age South Africans younger
than 25 were employed, compared to 40% for most developing country
youth.
• Labour force participation is similarly low at 24.4%, indicating that not
only are youth struggling to find work, but a large portion do not even
actively seek work.
• South Africa is a regional outlier with a much higher rate of youth
unemployment (around four times higher) than the Sub-Saharan average.
• South Africa’s youth unemployment rates are only comparable with those
of the North African Countries.
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Youth Unemployment in SA
In describing the impact of youth unemployment in North Africa, the ILO
unwittingly serves a chilling warning to South Africa.
“The collective frustration of a generation of youth that was granted the
opportunity to gain an education but not given the same opportunity to gain
decent employment was certainly a contributing factor behind mobilising
youth in support of the political protest movements in Bahrain, Egypt,
Libyan Arab Jamahiriya, Syrian Arab Republic and Tunisia. Consequently,
promoting opportunities for decent employment for youth remains firmly
fixed among the priority of the interim governments.” (ILO, 2011:5)
7
Youth Unemployment in KZN – Age
distribution
75+
70-74
Male
Female
65-69
KwaZulu-Natal
60-64
South Africa
55-59
50-54
45-49
40-44
35-39
30-34
25-29
20-24
15-19
10-14
05-09
00-04
8.0%
6.0%
4.0%
2.0%
0.0%
2.0%
4.0%
6.0%
Source: IHS Global Insight Regional eXplorer version 593
8.0%
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Youth Unemployment in KZN
• KwaZulu-Natal, as indicated in the figure has a younger population
distribution than South Africa as a whole.
• The provincial age distribution could be said to be bottom heavy, as KZN
enjoys a greater share of the population in the first 6 age brackets than
the country as a whole.
• Based on the 15-34 years old definition of youth, 37.2% of KZN’s
population can be considered to be ‘youth’ as compared to only 28% at a
national level.
• This relative ‘youth’ of KZN’s population implies that KZN is even more
vulnerable to factors affecting the youth, than the country as a whole is.
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Youth Unemployment in KZN
Strict Unemployment Rate
70%
60%
50%
40%
Unemployment rate KZN
Unemployment rate SA
30%
20%
10%
0%
04: Age
15-19
05: Age
20-24
06: Age
25-29
07: Age
30-34
08: Age
35-39
09: Age
40-44
10: Age
45-49
11: Age
50-54
12: Age
55-59
13: Age
60-64
14: Age
65+
10
Youth Unemployment KZN
• KwaZulu-Natal has a lower strict youth unemployment rate than the
country as a whole, but this is based on the strict definition, the expanded
definition presents a different picture
Region
Strict Rate of Unemployment
Broad Rate of Unemployment
15-24
15-34
15-24
15-34
KZN
42.1%
28.9%
66.8%
48.4%
SA
49.2%
34.0%
64.5%
47.4%
• A higher expanded youth unemployment rate for the province suggests a
relatively high level of discouragement among young work-seekers
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Discouraged Work-seeking in KZN
15-24
15-34
KZN
23.3%
17.2%
South Africa
20.1%
14.6%
• High levels of discouragement among the youth point to challenges
relating to the cost of job search and to the negative impact of young
people having minimal previous work experience.
• Youth economic empowerment strategies must be targeted not simply at
the searching unemployed youth but also at the discouraged wok-seekers
as this group makes up a large portion of the broad youth labour force in
the province.
12
Youth Employment
13
Youth Employment
• Wholesale and Retail Trade sector is the sector in which the most youth
(29%) are employed in the province.
• Interestingly this sector accounts for only 24% of total employment in the
province. The Wholesale and Retail Trade sector can thus be regarded as
a relatively youth intensive sector.
• Conversely the youth are not particularly well represented in the
Community, Social and Personal Services sector (15%) when compared to
the total employment representation in this sector (20%).
• This may in part be due to this sector requiring tertiary qualifications
(especially for teachers; and medical professionals), which the youth are
yet to attain.
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Diagnosing the Problem
15
Structural factors
• The national planning commission identifies two main causes for high
youth unemployment
– Labour market rigidities negatively biasing against the employment of youth
– Poor skills acquisition and sub-standard educational outcomes
Low labour productivity and high risk vis-à-vis high wages
16
An un-conducive labour market
• “Relatively high starting salaries in some sectors and the disincentive to
hire inexperienced workers are at least part of the explanation for high
youth unemployment”. (National Planning Commission, 2011:13)
• Young people have often never worked before and hence don’t have the
requisite experience which acts as a positive signal to employers of their
productivity.
• They are, therefore, assumed to be less productive and a more risky
employment prospect than a 36 year old which has already had a few
jobs.
• Employers would be willing to take a risk in hiring younger workers if the
cost of doing so were lower than it is for hiring more experienced workers.
• This however is not the case and the youth come to be considered as high
cost, high risk employees
17
Skills gap
• The Diagnostic Overview points to a disjuncture between the needs of a
modernising economy and the skills acquired by young people at learning
institutions.
• Employers’ requirements have increased as the economy has developed
and matured, and a Matric qualification has changed from being a key
differentiator or a high-end signal of superior productivity to now being a
minimum qualification requirement.
• However only 44% of the working age population have a matric
qualification.
• The National Planning Commission believe that; “lack of job readiness is a
strong disincentive to hiring young people, and when people cannot get
stable employment before they reach the age of 24, the chance of them
ever getting a permanent, stable job falls dramatically”.
18
Youth Labour
High Risk and High Cost
• The National Planning Commission conclude that “the inability to support
young people to make the school-to-work transition is probably the
biggest challenge of the labour market” (National Planning Commission,
2011:13).
• It is in this regard that the issue of youth unemployment comes full circle
– poor educational outcomes and a low level of skills among the youth
necessitates that employers undertake risks and endure additional costs
in hiring young people, but rigid labour legislation acts as a disincentive
for employers to take such risks and blocks their ability to counter such
costs.
19
Dynamic Factors – Global
Recession
• The unemployment rate for 15-24 year olds dropped from 55.9% to 46.6%
during the 2002-2008 period.
• However the global recession in 2009 took a heavy toll on the Youth and
in 2010 the unemployment rate for this age group was back up to 51.3%.
• In fact, the National Planning Commission attributes almost all the job
losses in 2009/2010 to those aged younger than 30. National Treasury
reports that employment of 15-24 year olds has declined by 22% since
2008.
• This trend is not unique to SA - the ILO find that Youth are most
vulnerable in times of recession because they tend to be the “first out and
last in”.
• Indeed, global youth unemployment rose by almost 1% in 2010, and has
since been very sticky in returning to post-recession levels.
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Implications for Youth
Development
• South Africa/KwaZulu-Natal has a long history of severe youth
unemployment.
• This is in no small part due to the skewed legacy of development which
saw restrictions on labour mobility and poor educational outcomes for the
youth.
• Significant inroads into reducing youth unemployment were made in the
2002-2008 period, aided by strong economic growth rates.
• The global recession, however, has been a major setback for youth
employment and its impact has remained pervasive.
• In a new context of relatively subdued growth prospects, Government;
the Private sector and civil society need to think of innovative ways to
improve labour market outcomes for the youth.
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The KZN Youth Economic
Empowerment Strategy
Initial (Draft) Work:
22
GOAL 2: To Enhance Employment
opportunities for the Youth
To provide youth with
work experience
opportunities
To facilitate easier entry
for the youth into the
labour market
Develop sector specific
employment
opportunities for youth
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Strategic Objective 1:
Work Experience
It is important to provide the youth with opportunities to gain work
experience. By providing the youth with these opportunities, the cycle of
insufficient experience causing unemployment and unemployment causing
insufficient experience can be broken.
1.
2.
3.
4.
Implement school holiday work experience programmes with the
private sector
Introduce a Youth Corps Initiative – ‘Green Army’
Provide incentives for business to extend more franchise opportunities
to youth
Establish mentorship programmes for young businessmen
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Strategic Objective 2:
Easier labour market entry
It is the role of both national and provincial government to make the
transition of the youth from studying to working as seamless and easy as
possible. In this regard government should look to remove the constraints
and impediments to labour market entry for the youth.
1.
2.
3.
Support the review of labour legislation to ensure that ‘insiders’ are not
favoured to the extent of shutting youth out of the labour market
Assess the impact of the introduction of a Youth Wage Subsidy
Establish dedicated job search centres for youth which aim to ensure
that job search costs are not prohibitive to youth finding work
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Strategic Objective 2 cont..
4.
5.
6.
7.
Undertake an audit of companies skills needs and facilitate the
matching of the supply and demand of skills
Facilitate job readiness and interview training
Entrepreneurship Training
Provide assistances in the formulation of bankable business plans
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Strategic Objective 3:
Develop sector opportunities
This strategy objective focuses on sectors in which the youth can claim to
have a comparative advantage, and aims to develop these sectors in such a
way as to fully exploit the potential for youth employment creation in them.
1.
2.
3.
4.
Exploit low-hanging fruit of ICT sector including the roll-out of
broadband. And support dot.com entrepreneurs
Develop opportunities for youth in the green economy
Provide support for youth entrepreneurship in the tourism sector
Facilitate the re-involvement of youth in the agricultural sector
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Thank You
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