SA labour market recovering from Covid-19 but unskilled, less educated people are left behind

For more than three decades the South African economy has had a very high rate of joblessness. The country’s economy has been unable to create enough jobs for its growing army of workers.

This is partly because of the stagnant economic growth rate of only 1.7% during the 2010s (it was even lower at 0.9% in 2015-2019).

Another factor that limited the economy’s capacity to create jobs at a rapid enough pace to absorb new job seekers and previously employed people was the impact of restrictions imposed during the coronavirus (Covid-19) pandemic. Compared with the global financial crisis of 2008/2009 the impact was much greater. Then about 600,000 jobs were lost in South Africa. During the Covid-19 restrictions there were a staggering 1.5-million job losses.

We examined the labour market during the lockdown period. We compared the 2020 first quarter and 2022 second quarter data of the quarterly labour force survey data released by Stats SA. The 2020 first quarter was the last survey before the pandemic hit the country. The 2022 second quarter survey took place just before all the remaining lockdown restrictions were abolished.

To complement the findings of this study, the most recently released 2023 third quarter survey data was analysed to find out whether the most vulnerable groups had recovered and whether their labour market outcomes had returned to the pre-Covid levels.

The employment number (as per 2023 third quarter data) had recovered to its pre-pandemic levels. But this hadn’t been enough to keep up with the increase in the new working-age population joining the labour force. This finding is once again consistent with the performance of the labour market over the past 30 years. That is, job creation is not rapid enough to absorb all the job seekers.

Most of the gains from the recovery had gone to semi-skilled and skilled workers, leaving out the unskilled and those without 12 years of schooling, who make up more than 40% of the labour force. These were people who took a big hit from the pandemic-related job losses. (For those without the school leaving qualification, in absolute terms, there was still an increase of unemployment of over 200,000 after the lockdown restrictions were lifted.)

This is a repetition of the pattern over the past 30 years — that South Africa’s unskilled and less educated (without grade 12) are left behind in terms of job opportunities.

Lockdown

Employment dropped by 822,000 (from 16.42 million to 15.59 million) compared to the 2020 first quarter (just before the start of the lockdown) and 2022 second quarter (the end of lockdown) period. The unemployment rate increased from 30.1% to 33.9%.

The demographic groups that suffered the most job losses included Africans aged 25-44 years without grade 12 and those previously involved in unskilled occupations. These include craft and related trades, elementary occupations and domestic workers.

During the same 2.25-year period, the number of unemployed rose by almost a million — from 7.07 million to 7.99 million. The 2022 second quarter total unemployment number of 7.99 million was the highest ever in the South African labour market. The unemployment rate increased from 30.1% to 33.9% (this rate was at its peak level of 35.2% during the fourth quarter of 2021).

African males aged 15-44 years, who did not have post-secondary school qualifications and had no prior work experience, suffered the greatest increase of unemployment.

After lockdown

We uncovered two encouraging findings in the latest 2023 third quarter data.

First, employment increased to 16.78 million, which was higher than the 2020 first quarter (just before Covid-19) level of 16.42 million.

However, the employment growth was lower than the increase in the labour force (from 23.48 to 24.63 million — a rise of 1.15 million) during the same period.

The second encouraging finding was that the unemployment rate showed a gradual downward trend, dropping from the all-time high of 35.2% in the last quarter of 2021 to 31.9% in the third quarter of 2023. Nonetheless, the latter rate was still higher than the unemployment rate recorded before 2020 (below 30%).

In addition, 31.9% is still much higher than the key labour market goal of the New Growth Path. This was launched in November 2010 and aimed at enhancing economic growth, employment creation and equity. The goal was to reduce the unemployment rate to 6% by 2030.

Given the dire and chaotic state of the economy during the lockdown, this 6% goal was unofficially and temporarily “put aside” without any official announcement. The goal, nevertheless, remains in place. But it’s a tall order.

South Africa’s unemployment rate would need to drop by about 3.7 percentage points per annum between 2023 and 2030 before the country would be able to achieve it.

It is obvious that this rapid decline is unlikely to happen in the next seven years.

One worrying finding was that only a slight drop of total unemployment took place. The number remained very high in 2023 third quarter at 7.85 million. This is not far from the all-time high of 7.99 million in 2022 second quarter.

This implies that, despite job creation taking place again after the lifting of the lockdown restrictions, it was not great enough to absorb the more rapidly increasing labour force entrants. Thus unemployment increased.

This is what happened to the country’s labour market before Covid-19.

Lastly, between 2020 first quarter and 2023 third quarter, employment increased marginally by nearly 400,000. Most of the increase went to female Africans aged 45-54 years in the urban areas of two provinces: the Western Cape and KwaZulu-Natal. They had the grade 12 secondary school leaving qualification (or more) and were involved in either high-skilled or semi-skilled occupations, in the finance and community, social and personal services industry categories.

This finding aligns with structural change in the country’s economy: highly educated and high skilled workers are of greater demand in the labour market.

The road ahead

The findings show that the South African labour market has moved on from its worst ever state, and that various aspects have gradually improved.

However, two worrying — yet expected — findings are that unemployment levels remained high, while most of the job gains post-Covid went to highly skilled and highly educated people.

The long-term challenge is how relatively less skilled and less educated people (some of whom suffered job losses during the lockdown period) can find work again (through greater promotion of informal entrepreneurial activities, for example). Otherwise they could end up as chronic unemployed who may not be employable in the long-term.

• Derek Yu: Professor, Economics, University of the Western Cape

This article is based on a journal article which the writers co-authored with Jade Botha, an economics master’s graduate at the University of the Western Cape.

This article was first published by The Conversation.