Public Works as a Response to Labour Market Failure in South Africa

Unemployment has been rising in South Africa for the last three decades, leading to official unemployment rates of 26.4% (37% if the broad definition is used). This implies a jobless total of 7 million, with more than 40% of the rural population unemployed, and the development of a growing pool of workers who are excluded from the labour market. The South African economy is facing labour market failure, with labour supply increasingly outstripping demand. If the economy continues on its current growth path this problem of labour market failure will intensify and the employment situation will continue to deteriorate. The severe levels of unemployment resulting from this market failure are a particular problem in South Africa given the role unemployment plays in exacerbating poverty and inequality in an already highly unequal and segmented society, and the uneven incidence of unemployment among racial groups. Public works programming offers a response to both poverty and unemployment, while also addressing the linked national priority issue of asset creation. This paper discusses the option of state intervention through public works, reviewing the South African response in the context of global public works experience. The paper examines both project based public works programming, which forms the dominant policy response in South Africa, and the option of large-scale labour intensification of state expenditure, and examines the employment creation and cost implications of each, drawing on a case study from KwaZulu Natal. The paper concludes that public works interventions in South Africa to date have been relatively limited in scope and impact, and that the potential exists for far greater job creation and poverty alleviation through both the labour intensification of public spending, and the rationalization of the project based approach.