SA is home to a largely unskilled or semiskilled labour force, with the unskilled element growing faster as the high school dropout rate rises. Youth unemployment recently hit a record high of 58.2%.
In addition, about a third (32.3%) of those aged 15 to 24 are neither employed nor in education or training. These are either discouraged young job seekers or are just not economically active. The social and economic risk is obvious, and an urgent labour planning blueprint needs to be worked on to establish a government skills and labour planning strategy.
In 1936, renowned economist John Maynard Keynes introduced the idea of “involuntary unemployment” into what was then classical economic theory. Simply put, involuntary unemployment occurs as a result of waning demand for the type of output the available labour supply could produce. Change in demand for goods and services is the largest contributor to unemployment, causing a mismatch between the wages labour demands and the wages the market is willing to pay.
This is an important issue in the relationship between labour unions and employers, where the union wage demands on behalf of workers have often been cited as the largest contributor to rising retrenchment and a corporate reluctance to hire. Labour planning therefore needs to prioritise monitoring the changes in market dynamics as a tool to inform sector specific skills planning.
It is interesting to observe how strong the mining unions have become in the labour discourse in SA, despite this sector being broadly a sunset industry in the context of the outlook for its continued contribution to the economy. Mining accounts for 2.6% of employment in SA and contributed 8.7% to GDP in the third quarter of 2019. The challenge here is that because mineral resources are finite the marginal cost of labour increases over time, and as such the scale of retrenchments we have seen in the sector could arguably have been predicted reasonably easily.
The opportunity here for employment & labour minister Thulas Nxesi to engage robustly with the mining houses and conduct an audit of the type and scale of jobs that are at risk, and then put together a skills migration strategy that would see vulnerable labour participants move over time into sectors that are considered sunrise industries, such as agriculture, wholesale and retail trade, tourism and services. This is particularly possible for unskilled labour.
The economy has often burdened itself by creating jobs for the labour force it wishes it had, and not the labour it now has. In low-skilled jobs, countries such as Germany, Denmark and Switzerland seem to have got the balance right, specifically how to skills plan for the needs of both corporates and the overall economy. About 47% of the German labour force has gone through some sort of vocational training and received a qualification, with an average job placement success rate of 68% post the training.
The way these countries got it right was by partnering with corporates in the design of the vocational training curriculum. What this does is ensure alignment of the supply and demand side of labour, and inadvertently future-proof the skills need of the economy. Some sectors that can absorb low or semiskilled labour would benefit significantly from being part of the design of the skills training of the labour they will need. Again, this would work well in the earlier proposed labour migration strategy.
• Skenjana (@sifiso_skenjana) is founder and financial economist at AFRA Consultants. He is completing a PhD in finance for development.
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