The Archive

Articles

Accessible, evidence-based analysis on growth and inclusive development in South Africa.

The Budget’s fiscal stance: The non-cyclical element may be a cause for concern

It is estimated that less than half of the present main budget deficit of 5.7% is explained by cyclical factors. The remainder reflects a non-cyclical, structural component of the deficit. The increase in the structural budget deficit since 2008 may constrain the ability of government to sustain its present revenue and expenditure policies. An in-depth understanding of the structural component of the fiscal position as opposed to its cyclical element is important for sustainable long-term government financing and planning.

16 APR 2013

The Budget: both the fiscal stance and ‘structural stance’ are sound

Many economists have argued that the government’s fiscal stance in the recent budget is verging on the risky. This article argues that the fiscal stance is both correct and prudent. In addition, the article puts the budget in a broader developmental context, highlighting its contribution to long-term growth and development and to tackling poverty and inequality.

25 MAR 2013

Reducing unemployment: Waiting for high growth? Waiting for Godot?

In trying to reduce unemployment in South Africa, the pursuit of higher economic growth is the single most agreed-upon policy strategy. The consensus on this ‘obvious solution’ may blind us to the fact that economic growth, though important, may only be half of the solution. Attempts to fine-tune and turbo-boost the formal-economy ‘engine of growth’ to absorb more labour are fundamentally constrained. Economic policy makers must look at other options for generating employment and self-employment for unemployed people.

12 MAR 2013

The unemployed in South Africa: Why are so many not counted?

The official rate of unemployment includes only the unemployed who are actively searching for work. However, findings from new data challenge this practice. The ‘searching unemployed’ are no more likely to find employment than the ‘non-searching unemployed’. This casts doubt on the idea that non-searchers are not committed to finding work. Furthermore, many people find jobs through social networks – but this job-finding strategy is not adequately recognised as ‘searching for work’ in official statistical surveys. StatsSA should reconsider how they count the ‘officially’ unemployed.

26 FEB 2013

The original criticisms of the Adcorp Employment Index (February 2012)

Adcorp’s estimated unemployment rate is so low that it disposes of the unemployment crisis. But Adcorp uses a crude currency-demand method to estimate the size of the unrecorded economy, despite researchers’ strong criticism of this method. To estimate informal sector employment, Adcorp mixes up definitions of informal employment and the unrecorded economy and guesses at the labour intensity of the unrecorded economy. They also guess at the number of illegal immigrants. Moreover, Adcorp’s estimates have no statistical precision. Its figures are neither reliable nor credible.

20 FEB 2013

Adcorp’s employment and unemployment figures are not taken seriously by researchers – yet they can do much harm

Adcorp’s unemployment figures are derived from weak research and is repeated too often by gullible journalists. Based on a flawed methodology and dubious assumptions, the Adcorp figures imply that only about a million people are unemployed and that the total unemployment rate is 5%. At the same time, Adcorp has published an inflated figure for graduate unemployment (600 000) – a grave inconsistency. Whilst serious researchers will not touch Adcorp data, it can harm decision-making by policymakers and potential university students and their parents.

12 FEB 2013

How will a job-search subsidy create jobs?

A job-search subsidy has been proposed as a measure to help people find employment. At least three criteria need to be met to create new jobs for those who receive the subsidy. First, it needs to be used only to search for jobs or to remove the financial constraints that prevent people from searching for jobs; second, firms need to recruit through the channels which subsidy holders actually use to seek employment; and third, the relative cost of labour needs to fall.

05 FEB 2013

Reducing inequality to promote growth: a proposed policy package

Any growth strategy for South Africa should include elements that address inequality explicitly. This article identifies reforms that are likely to support growth in the long term and proposes a policy framework to ensure a more equitable distribution of the dividends of economic growth. These relate to high-quality education for the poor, progressive taxation, a social safety net, anti-monopoly policies and labour market reforms to promote the employment of low-skilled people.

30 JAN 2013

Minimum wages and compliance in South African agriculture

Average wages in agriculture have risen substantially in all provinces since the introduction of minimum wages in 2003 - the gap between the actual and the minimum wage has declined significantly. Compliance has been highest in the Western Cape and Gauteng, where average agricultural wages were close to or above the minimum wage even before it was introduced and wages have continued to rise thereafter. Although enforcement appears to have had a limited impact due in part to limited penalties, more effective inspection would be an important way to improve compliance.

22 JAN 2013

Who creates jobs, who destroys jobs? Small firms, large firms and labour market rigidity

Firm-level data for the period 2005 to 2011 indicate that job creation and destruction rates in South Africa are only slightly lower than among OECD countries. Around 10% of existing jobs are destroyed each year, while the number of new jobs is around 9.5% of existing employment. Larger firms have higher rates of net job creation than small firms. The relatively high reallocation of employment across firms suggests lower rigidities in the South African labour market than is sometimes believed.

15 JAN 2013

The National Development Plan and exports as a catalyst to generate employment growth: Can it work?

Small and medium-sized firms hold the potential to absorb most of the unemployed in South Africa. In this the NDP may be correct. However, the NDP may not be correct in arguing that exports can be the main catalyst of the growth the country needs to address poverty and employment. Several factors hinder such a strategy. A more domestically-focused policy aimed at production (and services) for local consumption might bear more fruit.

20 NOV 2012

Is Marikana a forerunner of national labour market instability and disruption?

The tragic events at Marikana raise the question whether the events and subsequent developments are indicative of a fundamental change in labour market relations and wage bargaining relationships in South Africa - and whether such patterns of behaviour are likely to spread beyond the mining sector. We identify five contributing factors that are specific to the mining sector. These relate to labour relations, public services and migrant labour. Since these factors do not characterise the rest of the economy, we conclude that a spreading of Marikana-type bargaining is unlikely.

19 NOV 2012

The unemployment debate is too fragmented to address the problem

The debate on unemployment is fragmented into at least three sub-discourses, i.e. those of macroeconomists, labour economists and poverty analysts. This results in inconclusive analyses and narrow, flawed proposals to address the problem. This fragmentation feeds into the policy field. Sustainable and consistent remedies for unemployment and poverty will require an integrated analysis that covers the formal sector, the informal economy and survivalist activities – and especially linkages and barriers between these segments.

18 NOV 2012

Industrial policy and unemployment: Can South Africa do better in labour-demanding manufacturing?

In spite of policy statements prioritising labour-absorbing growth, de facto policy support has favoured heavy industry and been damaging for employment. Industrial policy should be less concerned with ‘beneficiation’ and technological upgrading and more concerned with promoting economy-wide efficiency. In the context of massive unemployment, this means tilting the playing field towards labour-absorbing growth to mobilise the huge potential of an under-employed and poorly-skilled workforce.

17 NOV 2012

How structural inequality limits employment and self-employment in poor areas (or: Why South Africa’s informal sector is so small)

Given South Africa’s high levels of unemployment, the relatively small size of the micro-enterprise sector is a conundrum. This article argues that structural inequality is the reason for this – in particular, inequality in the structure of the economy, the legacies of spatial inequality and the continued inequalities in human development. Their combined effect is to limit the scope for poor people to escape poverty via self-employment. This explains the limited extent and small range of informal employment.

16 NOV 2012