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2015-11-01 Unemployment numbers decline in October

​​​​SA unemployment numbers decline in October but expected to grow to 16,8m in 2020

South Africa enjoyed an increase in the number of employed workers in October – good news, following September’s steep decline.

The bad news is that the number of unemployed is expected to increase from 6,2 million at present (including discouraged work-seekers) to an alarming 16,8 million in 2020.

The monthly Adcorp Employment Index finds that employment numbers grew at an annual rate of 2,83% in October, with the number of permanent workers having increased by 1,32% and the number of temporary workers by 6,47%.

Richard Pike, Adcorp’s CEO, says that October’s brighter picture reflects a seasonal ramp-up in staffing levels for the year-end Christmas holiday season.

The October index reflects increased employment at an annual rate of 5,96% in the wholesale and retail trade sectors, while the transport and communication sectors, largely connected with the marketing and distribution of goods and services, expanded employment by 6,92%.

Pike notes that although these increases are modest, they are an indication that retailers and wholesalers expect the year-end shopping season to be better than in 2009, when sharp declines in employment were observed.

Reflecting buoyant commodity markets, mining employment increased by 7,72% and, reflecting a gradual but increasingly firm turnaround in the South African economy, the construction sector increased employment by 4,37%. Among the major sectors, only manufacturing (-6,65%) and financial services (-2,22%) reported declines in employment.

Pike indicates that since 1962, employment in South Africa has declined by 11,6%, compared to the usage of capital equipment, machinery and, especially, since 2001, the information technologies sector, which has increased by 716,5%.

“Especially since 1977, with the appointment of the Wiehahn Commission, and since 1994, with the promulgation of the Labour Relations Act, employment has failed to respond to increases in economic activity in any systematic or significant way.”

He ascribes lagging employment to the declining relative productivity of labour and capital.

“In the first 18 months of incremental expenditure on labour, an employer loses 89,1% of his expenditure by way of reduced labour productivity in the first three months. Thereafter, while labour productivity gradually rises for 12 months, over 18 months, an employer makes a cumulative loss of R0.49 for every rand spent on labour.

“By contrast, over the same 18 month period, an employer makes a cumulative gain of R1,71 for his incremental expenditure on capital equipment and technology.”

He points a finger at labour laws and regulations as the primary culprits.

“Immigration laws prevent high-skilled foreigners from competing with local workers, with the result that local pay rates for professionals and other high-end jobs are artificially high and productivity is correspondingly lower.

“Elaborate dismissal protections ensure that, following their appointment to a job, workers do not have a meaningful sanction against poor performance or low productivity. Minimum wage laws and, more broadly, the collective bargaining system ensure that real wages only go in one direction – up – irrespective of worker productivity.”

Pike concludes that the long-term outlook for employment in South Africa is consequently bleak.

“By our calculations, the number of unemployed will increase from 6,2 million at present (including discouraged work-seekers) to 16,8 million in 2020.”

He explains that that 2020 prediction includes:

― as many as 5,2 million students aged between 15 and 24 who are currently in the secondary and tertiary education systems; and
― an expected 7,4 million students who will replace them over the next five years, net of exits from the labour force.

“In consequence the narrow unemployment rate is projected to rise from 25,3% at present to 45,5% between 2010 and 2020.”

For more information, contact: 

Alex van Essche, Meropa Communications
Tel: 011 506 7300 Cel : 082 321 1167 Email: alexve@meropa.co.za 

Press Release issued on behalf of:
Mandy Jones, Adcorp Holdings, Group Marketing Manager