Most countries needn’t track permanent marginalisation because they avoid its primary feedstock ― chronically high youth unemployment.
However, as our policymakers have entrenched the world’s worst youth unemployment crisis, to align policies with priorities we must track the number of young adults becoming permanently marginalised.
Being unemployed and lacking work experience at age 20 is a global norm, but this combination is normal in South Africa for those turning 30. South Africans in their mid-to-late 20s who have never been gainfully employed are at the back of a 10-million person queue. They are behind the unemployed who have experience and younger, easier-to-upskill job seekers.
The most recent unemployment rate for South Africans aged 15-24 was just under 60%, while the rate for those aged 25-34 was nearly 40%. Following international conventions, Stats SA counts as employed paid domestic workers working a few hours per week and street vendors earning under R100 a day. Conversely, being gainfully employed implies skill building and an adequate income.
Gainful employment should include gaining from investments in employees. This is central to the virtuous cycles necessary to transition from a majority-poor country to one where middle-class status is the norm and the affluent outnumber the poor.
If a job’s skill requirements can be learnt by a 16-year-old within a week, that job leads nowhere. Yet our glut of low-skilled labour is so extreme that a job offering less than the minimum wage of R29 per hour can attract a multitude of applicants even if it doesn’t develop skills. These circumstances condition the millions of 20-somethings who fail to find employment to steadily ratchet down their expectations.
Humans are highly adaptable and realistic. By their late 20s — and from the back of the unemployment queue — those who have never been gainfully employed begin to target survival-level goals. That is, they accept that they have been permanently marginalised.
Our regulatory environment is so detrimental to business competitiveness that only a sliver of our young adults add value to exports on commercial terms. The National Treasury issued its edict regarding local production and content in 2011; SA’s per capita income has stagnated ever since.
Localisation and BEE regulations preclude SA taking this era’s high volume upliftment escalator — value-added exporting. Instead, our political and business leaders focus on attracting capital to upgrade energy and transport infrastructure to grow commodity exports. This should improve SA’s GDP growth and creditworthiness, but as commodity exporting is capital intensive not labour intensive, it can’t directly mitigate our unemployment crisis.
We presume trickle-down employment through higher domestic consumption. Yet our economy’s potential is steadily diminished as an additional quarter-million young South Africans will be permanently marginalised each year for at least another decade. They are at the back of a long queue that will keep growing until the economy can absorb each year’s school-leavers.
Increases in a nation’s spending are typically propelled by those in their 20s and 30s benefiting financially from their rising productivity. About half of those in our 10-million queue of the unemployed are in their 20s or early 30s and confront permanent marginalisation.
Our financial services companies have sold more than 10-million funeral policies. This indicates that intergenerational wealth transfers, a hallmark of successful economic development, are meagre. A large majority of our households are entrenched in poverty, over-indebtedness or both.
Anti-development “trickle-up” effects are induced as low-income borrowers timeously repay expensive consumer loans, subsidising bank shareholders for their losses due to excessive lending to this sector. Low-income borrowers who pay on time would be ascending towards middle class if only the job market was stronger and they borrowed less at lower rates. The latter would, eventually, greatly support the former.
By relying solely on these fixes and higher commodity exports, we might slow the rate at which young South Africans become permanently marginalised. But it would take decades and our economy would end up smaller, less dynamic and less inclusive than if we also pursued global integration instead of localisation.
• Hagedorn (@shawnhagedorn) is an independent strategy adviser.
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