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Youths in the South African labour market since the transition: A study of changes between 1995 and 2011

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  • Derek Yu

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    (Department of Economics, Universities of Stellenbosch and the Western Cape)

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Abstract

The persistently high unemployment rate has always been one of the most pressing socio-economic problems of the South African economy. There is a general consensus that unemployment is structural, as there is a mismatch between the skills demanded by employers for the available jobs and the skills supplied by the labour force seeking work. As there is an increase of demand for highly-skilled workers with the adoption of capital-intensive and technologically more advanced production processes, most of the unemployed are unskilled and not well educated. The unemployment rate is much higher amongst youths than in amongst the older workforce. Also, youths are less likely to find employment and employed youths are relatively more likely to be retrenched during recessions due to their lack of experience. The announcement by the Finance Minister in the February 2011 Budget Speech that a youth wage subsidy will be implemented in 2012 was based on the hope that the subsidy program would boost the labour demand for youths, and decrease youth unemployment. Hence, this paper first analyses the demographic and education characteristics of the youth labour force, employed and unemployed, using the 1995-2011 labour survey data released by Statistics South Africa. The paper then investigates the main causes of youth unemployment, such as skills mismatch, quality of education, lack of experience, expectations of the youths, and the impact of wage rigidities. The paper then discusses how the wage subsidy program works, as well as its potential merits and drawbacks. It is concluded that while a wage subsidy might be effective in facilitating the entry of young workers into the job market, it is not sufficient to increase and maintain youth employment. Various other issues need to be addressed, such as reducing and preventing early drop out from schools; improving the quality of education in former Black schools; more attention to critical subjects like Mathematics and Science to prevent skills mismatch; more emphasis on practical, skills-oriented, vocational training at higher education levels; curtailing restrictive labour legislation that results in wage rigidity, productivity stagnation or decline, and increase in indirect costs, which eventually discourage employers to employ youth workers; and more rapid economic growth that is employment elastic.

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File URL: http://www.ekon.sun.ac.za/wpapers/2012/wp182012/wp-18-2012.pdf
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Paper provided by Stellenbosch University, Department of Economics in its series Working Papers with number 18/2012.

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Date of creation: 2012
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Handle: RePEc:sza:wpaper:wpapers171

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Keywords: Youth; employment; unemployment; wage subsidy;

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  1. Servaas van der Berg, 2007. "Apartheid's Enduring Legacy: Inequalities in Education-super- 1," Journal of African Economies, Centre for the Study of African Economies (CSAE), Centre for the Study of African Economies (CSAE), vol. 16(5), pages 849-880, November.
  2. Rulof Burger & Ingrid Woolard, 2005. "The State of the Labour Market in South Africa after the First Decade of Democracy," SALDRU/CSSR Working Papers, Southern Africa Labour and Development Research Unit, University of Cape Town 133, Southern Africa Labour and Development Research Unit, University of Cape Town.
  3. Rulof Burger & Rachel Jafta, 2006. "Returns to Race: Labour Market Discrimination in Post-Apartheid South Africa," Working Papers 04/2006, Stellenbosch University, Department of Economics.
  4. Neil A. Rankin & Gareth Roberts, 2011. "Youth Unemployment, Firm Size And Reservation Wages In South Africa," South African Journal of Economics, Economic Society of South Africa, Economic Society of South Africa, vol. 79(2), pages 128-145, 06.
  5. Geeta Kingdon & John Knight, 2005. "Unemployment in South Africa, 1995-2003: Causes, Problems and Policies," Economics Series Working Papers GPRG-WPS-010, University of Oxford, Department of Economics.
  6. David Lam & Murray Leibbrandt & Cecil Mlatsheni, 2008. "Education and Youth Unemployment in South Africa," SALDRU Working Papers, Southern Africa Labour and Development Research Unit, University of Cape Town 22, Southern Africa Labour and Development Research Unit, University of Cape Town.
  7. Rees, Albert, 1986. "An Essay on Youth Joblessness," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 24(2), pages 613-28, June.
  8. Justine Burns & Lawrence Edwards & Karl Pauw, 2010. "Wage Subsidies to Combat Unemployment and Poverty: Assessing South Africa’s Options," SALDRU Working Papers, Southern Africa Labour and Development Research Unit, University of Cape Town 45, Southern Africa Labour and Development Research Unit, University of Cape Town.
  9. K. Pauw & M. Oosthuizen & C. Van der westhuizen, 2008. "Graduate Unemployment In The Face Of Skills Shortages: A Labour Market Paradox," South African Journal of Economics, Economic Society of South Africa, Economic Society of South Africa, vol. 76(1), pages 45-57, 03.
  10. van der Berg, Servaas, 2008. "How effective are poor schools? Poverty and educational outcomes in South Africa," Center for European, Governance and Economic Development Research Discussion Papers 69, University of Goettingen, Department of Economics.
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