Loss of 1.4m jobs proves ‘recovery’ is more myth than fact

The latest Quarterly Labour Force Survey (QLFS) released by Stats SA paints a gloomy picture. The number of unemployed people in South Africa for the fourth quarter of 2020 now exceeds 7.2 million. The official unemployment rate is 32.5%, the highest since the QLFS began in 2008. 

While the figures are startling, they are not a true representation of the depth of the crisis we all know the country is grappling with. A closer look reveals an even gloomier picture. 

The unemployment rate, according to the expanded definition of unemployment, now stands at 42.6%. This definition includes workers who have had their hope of finding a job smashed and have given up even trying to look for work. The number of these “discouraged work seekers” increased by 234,000 from the third quarter of 2020 (up by 8.7%) to more than 2.9 million. Including them in the unemployment rate means fewer than six out of 10 people who are able to work in South Africa have a job.

Some may point to signs of hope in the statistics, inklings of a recovery. But they would have to be eternal optimists and focus resolutely on only certain aspects of the statistics. 

It is true that the number of employed people grew to 15 million, an increase of 330,000 compared with the third quarter of 2020. This could be taken as a hopeful sign that people are finding work or getting their jobs back after lockdowns. However, compared with a year ago, the total number of people in employment has decreased by a staggering 1.4 million — from 16.4 million to 15 million. 

This shows that any kind of recovery is still a very long way off — especially considering that in the fourth quarter of 2019, South Africa was already considered to be in a recession and the jobs crisis was only worsening (not a good yardstick to measure against). A recovery to recession-level unemployment would hardly be anything to celebrate, but even this is out of reach.

Low-paid workers bear the brunt

Most of these job losses appear to have disproportionately affected low-paid workers in insecure employment. 

The year-on-year decrease of 1.4 million jobs was concentrated in finance (256,000 jobs lost), community and social services (241,000) and manufacturing (230,000).

Many in these industries are low-paid and precarious workers. For instance, labour-broker and temporarily employed workers make up a large proportion of those employed in the financial sector, while in community and social services a large number are in low-paid temporary government schemes, such as the Expanded Public Works Programme.

This disproportionate effect on low-paid workers is also evident when looking at year-on-year decreases in terms of occupation. The 1.4 million jobs lost over the past year were concentrated in the following occupations: 369,000 in elementary occupations, 262,000 in sales and services, 247,000 in craft and related trade, 117,000 in plant and machine operators and 116,000 in domestic work. 

In contrast, there were 18,000 job losses for professionals and 49,000 for technicians.

Additional analysis by Stats SA, focusing on employment patterns in relation to Covid-19 and lockdowns, also demonstrates the impact of the crisis on those with different levels of education. 

In the fourth quarter of 2020, those with higher levels of education had better chances of continuing to receive a full salary than those with lower levels. About nine in every 10 employed graduates continued to receive full salaries, compared with eight in 10 of those with less than a matric.

Government responses

It is clear that the pandemic is partly to blame for the crisis of unemployment, but is also true that the loss of 1.4 million jobs in the past year is an exacerbation of a jobs crisis that already existed. The unemployment crisis is long standing: besides the legacy of apartheid, this is the product of neoliberal macroeconomic policies fixated on export-led growth and attracting foreign direct investment.

The government’s implementation of budget cuts alongside the increased liberalisation of the South African economy and other austerity measures will only deepen the unemployment crisis. Even more retrenchments can be expected, especially in light of the R160-billion cut from the public sector wage bill over the next three years. This will also mean reduced demand in the economy and with that even higher levels of unemployment and increased strain on the social fabric.

Unfortunately, the 2021 Budget only indicates that things are set to get worse. Although Finance Minister Tito Mboweni repeatedly assured that he hasn’t tabled an austerity budget this time, the data indicate otherwise. The paltry increases in social grants — well below inflation — have drawn the ire of grant recipients, politicians and commentators (even the DA). 

Essential services have also been cut. Spending on public health will decrease by 12.5% over the next three years, when accounting for inflation. It makes one wonder how the more than 40,000 vacancies in the public health sector will be filled. Basic education will receive a cut of about 7.4% in real terms over the coming period. In the Budget Review (p.59), Treasury itself notes the consequences of this cut:

“Low compensation growth of 0.8% over the MTEF [Medium Term Expenditure Framework] period, combined with early retirements, will reduce the number of available teachers.”

This intensifying unemployment crisis underpins many social ills, including incomparably high levels of inequality. It is a virus that undermines the social fabric and contributes to increased levels of crime, violence, xenophobia and other social tensions. 

To address this deepening crisis requires direct government intervention. The time for indirect approaches that prioritise liberalisation, austerity and a shrinking state are over. These are the very measures that have resulted in the depth of the crisis.

Instead, an expansion of state interventions and targeted growth of the public sector are required. This means the immediate implementation of a dignified basic income grant coupled with a government employment guarantee programme geared towards providing basic goods and services to the public. 

The need for increased intervention by the government has been gaining traction among economists the world over. Some go so far as to raise the idea of the government acting as an employer of last resort. To this end, the government should address the unemployment crisis directly by employing everyone willing and able to work and paying them a living wage. What is clear is that it is time for indirect trickle-down measures aimed at “growth” and targeting “foreign direct investment” to end. DM/MC

Dominic Brown and Greg Dor have contributed to this article in their capacities as members of the Economic Justice Programme at the Alternative Information & Development Centre.