Unemployment in South Africa is Probably Lower Than Estimated, Says ILO Study
GENEVA (ILO News) - A comprehensive review of South Africa's labour-market and economic developments Endnote suggests that the country's rate of unemployment, which is often cited as being the highest in the world, is probably much lower than previous estimates indicate.
According to research published by the International Labour Office in Geneva, the actual rate of unemployment in South Africa may be as much as one-third lower than stated figures. The review, which covers all the major industrial sectors in the country, also concludes that South Africa's labour market "is highly flexible by international standards."
The ILO study says that while unemployment is "serious in South Africa ... it is only one dimension of the labour market crisis facing the country". Poverty and inequality, the authors underline, "are problems that have to be addressed with at least as much force as unemployment."
Prepared at the request of the South African Government, the results of the study were recently presented to the Cabinet and to President Nelson Mandela. The ILO research highlights the major labour market challenges that must be met in order to ensure economic growth and social stability, including overcoming income inequality, reducing unemployment and boosting industrial productivity.
Guy Standing, an economist and the chief coordinator of the ILO report, cautions against the tendency to overestimate unemployment rates, which, he warns "could fuel labour market interventions that focus largely or exclusively on reducing unemployment at the risk of worsening the problems of poverty and income inequality." According to Standing, the results shows "that many of the poorest in South Africa are nominally employed," and that "sensible redistribution is the key to overcoming the political, social and economic legacy of apartheid."
The report attributes the uncertainty over the extent of unemployment to inadequate and sometimes outdated statistics. Much labour-market data are based on census and household surveys conducted prior to 1995 and are likely to "have contained an undercount of various forms of economic and social activity," due, in part, to the political regime that prevailed in the country.
Analysis of available data shows that the level of employment has been underestimated, as has the level of employment growth since 1994, when the South African economy began to grow, by about 4 per cent annually. However serious the actual rate of unemployment may be, the ILO report says that the frequently cited figure of 33% is probably exaggerated and that 20% is probably closer to reality. Other agencies have cited unemployment rates for South Africa which range as high as 46%.
The study concludes that income distribution in South Africa, "remains among the most unequal in the world." It notes that "poverty and inequality have four outstanding characteristics - race, gender, region and type of area." While the wealthiest South Africans continue to be white urban dwellers and the poorest tend to be black, rural dwellers, inter-racial inequalities have stabilised in recent years, whereas intra-racial inequalities are widening. Rural women are a particularly vulnerable group of poor workers.
The report also cites comparatively poor labour productivity in South Africa by international standards, but says that the problem is often attributable to outdated management and organisational structures and not necessarily high wages. High non-wage labour costs are also cited as contributing factors. Working weeks in South Africa are long by international standards - over 48 hours a week on average - and most firms operate on only one shift.
Among the report's recommendations is reduced work hours and increased shiftwork, which should be encouraged by higher overtime rates, not just by regulations. Though the report cites data suggesting that shiftwork is on the increase, it says that "South African industry has a long way to go to attain the level of shiftworking found in South-east Asian economies." Foreign firms operating in South Africa "were twice as likely" as domestic firms "to be operating three (or four shifts) per day ... And they were more than twice as likely to be operating 15 or more shifts a week."
The report cites a lack of training, rigid job structures and outmoded job-grading and wages systems as posing problems for many South African firms. It emphasizes the need for "voice mechanisms" to facilitate collective bargaining and to evolve industrial policies that can reduce poverty, eliminate the wide income gaps and strengthen the economic foundation of a new, multi-racial South Africa.
The report warns that the productivity problems combined with the unjustified reputation of South Africa as allegedly being plagued by "the world's highest unemployment" risks undermining international confidence and obscuring the main labour market problems, which stem from pervasive wage and income inequality and inadequate mechanisms for industrial relations, including tripartite negotiations and collective bargaining. The report also concludes that there are good reasons for believing that the South African economy will exhibit strong growth, as long as macro-economic policy does not become too deflationary and that the policy emphasis in the country works to strengthen investor, worker and consumer confidence.
Restructuring the labour market: The South African challenge. An ILO Country Review by Guy Standing, John Sender and John Weeks. ISBN 92-2-109513-4. International Labour Office. Geneva, 1996.