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March 10, 2021

South Africa: 7.23 million people were unemployed in the final quarter of 2020

South Africa: 7.23 million people were unemployed in the final quarter of 2020

Between 1998 and 2008 the South African economy experienced growth at an average rate of 4% per annum, but the country, like many others, was not spared from the effects of the 2008 global recession. The 11-year growth period came to an abrupt end, leaving the country to suffer from rising levels of unemployment. “Aggregate unemployment declined during the period of growth between 2003 and 2008, from a peak of 31.5% in 2003 to a low of 21.5% in 2008; it has been on the increase since, standing at 27.9% in 2017,” Jacqueline Mosomi and Martin Wittenberg write in their IZA World of Labor article.

The trend continued last year: in the final quarter of 2020, 7.23 million people were unemployed (up from 6.53 million) and the unemployment rate rose from 30.8% to a staggering 32.5%. These figures mean that one in three people were not employed, and according to most economists, structural unemployment is to blame. The reason is that the skills jobseekers bring to the labor market do not match the skills required by employers.

Mosomi and Wittenberg also highlight that the low employment rate has also meant that young people have struggled to find jobs for years: “There is also a clear problem related to youth unemployment that has remained prevalent for years. Education policies have raised the average human capital of new entrants to the labor market, but not to the extent it has alleviated the shortage of high-skilled workers.” “It is unlikely that the current labor market environment will substantially reduce unemployment in the next decade,” they conclude.

Nevertheless, a more granular understanding of unemployment numbers and rates might be the key to creating policies to reverse the current trends. Finding out the type of people who are out of work as well as how long they have been out of work for, and when, can separate those who have been unemployed for sustained periods from those who are only experiencing unemployment temporarily. A deeper understanding of these groups can then help with the creation of labor market policy recommendations which can work to bring the employment rate in South Africa closer to its pre-2008 crisis levels.

Read Jacqueline Mosomi and Martin Wittenberg’s article The labor market in South Africa, 2000–2017.