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Does Economic Growth Lead Employment in South Africa?

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  • Temitope L A

Abstract

This paper adopts the Toda-Yamamoto technique of causality in order to examine the direction of causality between employment and economic growth. This is to investigate whether the increase in the Gross Domestic Product (GDP) translates into increased employment or not and vice versa, in South Africa, using quarterly data from 2000Q1 to 2012Q3. South Africa has been experiencing high and increased growth for the past decade, yet the rate of employment is not significantly high. Meanwhile, the objective of the government, since the first democratic election in 1994, was to increase economic growth along with a reduction in the unemployment rate (BMR, 2011). Although the economy has been experiencing significant success of increased economic growth, it performed poorly in the area of increased employment (BMR, 2011). This study thus seeks to answer the following questions: (1) does it mean that the increase in growth does not translate to the creation of more jobs and (2) is increased economic growth not as a result of increase in employment in South Africa? The results obtained shows that causality does not run from employment to economic growth in South Africa, as the null hypothesis was not rejected at all significant levels. However, Keynes General Theory holds for South Africa, where the empirical result showed that economic growth leads employment. These results support the criticism of ‘jobless growth’ against South Africa (Kumo, 2012). The paper suggests some policy recommendations for the improvement of employment.

Suggested Citation

  • Temitope L A, 2013. "Does Economic Growth Lead Employment in South Africa?," Journal of Economics and Behavioral Studies, AMH International, vol. 5(6), pages 336-345.
    • Handle: RePEc:rnd:arjebs:v:5:y:2013:i:6:p:336-345
    DOI: 10.22610/jebs.v5i6.409
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    References listed on IDEAS

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    2. Omoshoro-Jones, Oyeyinka Sunday, 2021. "Asymmetry in Okun’s Law Revisited: New evidence on cyclical unemployment–cyclical output trade-off in the Free State Province using NARDL model," MPRA Paper 107126, University Library of Munich, Germany.
    3. Chipeta Chama & Meyer Daniel Francois & Muzindutsi Paul-Francois, 2017. "The Effect of Exchange Rate Movements and Economic Growth on Job Creation," Studia Universitatis Babeș-Bolyai Oeconomica, Sciendo, vol. 62(2), pages 20-41, August.
    4. Ademola Obafemi YOUNG, 2019. "Why Has Growth Not Trickled Down to the Poor? A Study of Nigeria," Review of European Studies, Canadian Center of Science and Education, vol. 11(1), pages 156-156, December.
    5. Peter Ansu Mensah & Monica Ansu Mensah, 2021. "Mapping evidence of individuals’ sustainable consumption behaviour and energy or transport use in Africa: A scoping review," International Journal of Research in Business and Social Science (2147-4478), Center for the Strategic Studies in Business and Finance, vol. 10(6), pages 369-382, September.
    6. Brian Tavonga Mazorodze & Noureen Siddiq, 2018. "On the Unemployment Output Relation in South Africa: A Non-Linear ARDL Approach," Journal of Economics and Behavioral Studies, AMH International, vol. 10(5), pages 167-178.

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