South African Employment Report highlights the need for reskilling the labour force

South African Employment Report highlights the need for reskilling the labour force

The latest official unemployment rate in South Africa is recorded as 32.9%, painting a worrying scenario, with youth aged between 15 and 34 years continuing to have the highest unemployment rate (45.5%), with little hope for better jobs. Approximately 3.6 million out of 10.3 million young people aged 15-24 years were not in employment, education or training.

The 2024 UASA South African Employment Report (SAER) and 2nd UASA/BMR Employment Index (EI) elaborate on the various economic challenges South Africa faces and the upside opportunities to grow and improve the labour market. The analysis focuses on current labour market issues underlying the challenges of low job creation and high unemployment levels in South Africa.

When it comes to the employment dynamics of any labour market, it is important to recognise that labour demand is never static – it is continuously changing. Jobs which are in high demand or supply at present will not necessarily be in high demand or supply in future. Furthermore, employment and unemployment magnitudes are continuously changing, driven by a host of macro-, meso- and microeconomic factors.

The UASA/BMR Employment Index (EI) was developed to track the employment performance of the South African economy over time. This index provides views in terms of an overall employment index as well as various sub-indices. The overall UASA/BMR EI is a function of five employment sub-indices, namely:

  • Employment growth, as a labour demand indicator.
  • Production elasticity of employment, as an indicator of the strength of the relationship between GDP growth and employment creation.
  • Growth in unemployment (expanded definition), as an indicator of the growth in the number of economically active people who are jobless.
  • The quality of labour supply (as proxied by highest educational status), as an indicator of growth in the value of human capital locked in the economic active population.
  • Compensation growth, as an indicator of employment-related income growth.

The South African Employment Index (EI) recorded some, although sub-optimal, improvements during the period Q1 2008 to Q4 2018. A host of factors, including load shedding, low economic growth, corruption, sovereign investment grade downgrades and COVID-19, negatively impacted the employment performance of South Africa since Q1 2019, with some improvement during the period Q3 2021 to Q4 2022, whereafter it deteriorated again. It is expected that the overall employment index will decline even further during 2024.

The report also discusses the influence of 4IR on the future of the South African labour market, particularly in the realms of digitalisation, artificial intelligence, and machine learning. Research has shown consistently that the number of employment opportunities is strongly positively correlated with technological advancements while each industrial revolution brought about a huge additional spurt in employment worldwide. It has been estimated that more than 85% of employment growth over the past 80 years can be explained by the evolution of technology which has been responsible for creating new jobs. It was pointed out that employees are generally not equipped to fully adapt to the job changes brought about by the 4IR, and that this hampers the potential for efficiencies, product development, market penetration, sales, businesses, and the broader economy in the country. It is expected that over the longer term, 4IR will negatively impact not only lower-level skilled jobs in South Africa but also higher-skilled jobs such as accounting, finance, law, management, and entertainment. The World Economic Forum (2023) stated that close to half of the world’s working population will need to adapt their core skills over the next five years to adapt to technological changes, highlighting the need for reskilling the labour force.

Among other key factors, the economic outlook and technological changes underscore the necessity of reskilling the labour force. The BMR’s research outcomes reveal that South Africa continues to grapple with numerous acute labour market challenges, including:

  • Low job creation rates result from, among other things, slow economic growth, a lack of elasticity in the relationship between employment and economic growth, and low skill levels among those who are actively seeking employment.
  • The labour market’s limited capacity to absorb the unemployed is due to low economic growth rates, low elasticity levels between employment and economic growth, potential employers’ preference for capital over labour, an inflexible labour market, and the low skill levels of the population actively seeking work.
  • Low growth in real compensation results from low levels of entrepreneurship, the economy’s incapacity to absorb the unemployed, and poor job creation, all of which contribute to high rates of inequality and poverty.
  • A large number of positions that non-tertiary qualified workers would typically fill are instead occupied by those with a tertiary-level education, resulting in a less-than-ideal level of non-tertiary qualified worker absorption into the labour market. This is because there is a mismatch between the labour supply and demand regarding skill quality and skill mix.

Several labour policy initiatives to resolve these labour market issues have not always yielded the best results because these initiatives fail to closely follow various labour market policies that many other developing countries have successfully adopted. The government’s role in fostering sustainable economic growth and employment creation cannot be overstated, nor can it be separated from the importance of infrastructure development and maintenance and the effective delivery of high-quality services. It is crucial for all stakeholders to understand and actively support the local economy to promote economic growth and, as a result, promote job creation.

Click here to download the full report.

Leave a Reply

Your email address will not be published. Required fields are marked *