Rising Unemployment in a Growing Economy: A Business Cycle, Generational and Life Cycle Perspective of Post-Transition South Africa’s Labour Market

This paper performs age-period-cohort decompositions of post-apartheid South African labour market outcomes in a period where unemployment worryingly rose, despite robust economic growth. We disentangle short-term from long-run factors, concluding that the first post-transition decade led to higher equilibrium unemployment. Claims of jobless growth over the business cycle are invalidated, with unemployment following a counter-cyclical pattern. Rather, generational components highlight long-run wage rigidities, decreases in labour demand within poorly educated groups and a gradual increase in participation amongst the most recent birth cohorts, reflecting higher education levels and changes in household formation. A disproportionate surge in entry amongst the very youngest (who were affected by post-transition education reforms) explains why unemployment rose in spite of an economic upswing in this period, and raises the concern of labour market scarring for this group.