Labour economist at Adcorp Loane Sharp.
Labour economist at Adcorp Loane Sharp.

LOANE Sharp is a labour economist at Adcorp.

SUMMIT TV: Unemployment figures for the fourth quarter of 2012 were released on Tuesday, showing a rather surprising decline to 24.9% against an expected rise to 26%. We saw a decline, but it’s not good news.

LOANE SHARP: Not at all, in fact, the economy shed 68,000 jobs. It’s really an artefact of the statistics that the unemployment rate declined. The number of unemployed did drop, but the number of employed people dropped substantially more. I think more and more people are asking questions about the employment figures that Statistics SA puts out — there’s the question of believability and credibility; there is a notable political rhythm in these figures. They don’t match other indicators we have about the economy. I think the best assessment for the fourth quarter is that employment was flat.

STV: Do you think Stats SA figures are not credible?

LS: I don’t think they are. There is a huge amount that Stats SA doesn’t count. If you look at the South African Revenue Service figures on taxpayers, the UIF figures on unemployment insurance, if we look at a wide range of over 30 different variables, Stats SA is consistently undercounting by 30% the amount of unemployment in the country. I think there is a huge question mark over the Stats SA data, and it’s only in circumstances like this, where Stats SA figures do not correspond to what anyone understands, that it makes news. In general, the Stats SA figures don’t attract much weight or attention.

STV: So it’s safe to say that unemployment is probably still on the rise — but even more concerning is the number of people that have given up hope, which is also on the rise.

LS: The percentage of people that have been out of work for more than a year is over 60%, so this indicates an endemic degree of unemployment that is not connected only to the difficult economic times we are having — it’s of a structural nature in the economy. I think if we look at what the causes are, more and more people are looking at the labour laws and regulations as pivotal in the unemployment problem.

STV: Do you think this should be relaxed, and what can government do? Government has a close relationship with the trade unions.

LS: Government’s relationship with Cosatu is becoming increasingly strained, precisely over this issue. Every time government wants to introduce a new measure in the labour market, Cosatu objects. Things like the youth wage subsidy Cosatu rejected, things like performance appraisals for teachers Cosatu rejects. Valid and important policy goals are being thrown out because Cosatu objects. I think this is making government’s relationship with Cosatu much more problematic.

STV: There’s also a seemingly problematic relationship between government and business.

LS: Yes, you couldn’t get a more hostile environment for business.

STV: Bad news for the employment outlook?

LS: I think so. There will probably be a slight cyclical recovery in the labour-intensive sectors of the economy, which is retail and financial services. Although that is looking a bit dicey at the moment in the retail sector. I think in general we will have a small cyclical recovery, but the economy needs to grow between 3% and 4% before we even have jobs for the people coming out of the schooling system. We are not looking at the 7% or 8% economic growth rates needed to make a serious impact on unemployment.

STV: What can an individual do if government is seemingly not helping? What can you do to find a job?

LS: I think this is the perfect environment in which to consider self-employment options. The number of people in self-employment is growing substantially and individuals that are retrenched in this difficult climate should take their packages and invest them in small businesses. The kinds of small businesses that are growing that any person on the street can become involved in might be micro-brewing, beauty and personal care, child minding. There are plenty of services that are required.

STV: So it’s basically about finding your own way?

LS: Unfortunately that is the case, but that is the direction the economy is taking in general. Informal employment is growing and the formal sector has been shrinking for a long time.

STV: Is it true to say that it is not just this country?

LS: The scale at which the formal sector is growing is unique to this country. Just 15 years ago the informal sector was about 1.2-million people, where today that’s 5-million people. A huge chunk of economic activity is occurring in informal sectors.

STV: The minimum wage for farm workers — would you agree with a minimum wage?

LS: All I can tell you is what the consequences will be — then government must decide if raising the minimum wage will have acceptable consequences. If we look at agricultural employment in 1994 that was 2-million, where today agricultural employment is just 660,000. We’ve had a sharp decline in agricultural employment in the context of difficult regulations and minimum wages already. I think the minimum wage of R105 per day for farm workers is going to destroy the agricultural sector, certainly in the Western Cape, which depends heavily on seasonal workers.

STV: Is this going to push farmers to mechanisation, or are they going to close shop?

LS: The amount of mechanisation going on across the board in the economy is extraordinary. It now takes nearly 40% fewer workers to produce a given level of output than it did 20 years ago. The economy in total is responding to South Africa’s restrictive labour environment and unreliable labour force by mechanising and I think that will continue.

STV: What is the answer? Can one really justify paying a worker R30 a day?

LS: A simple illustration of the problem is between 2001 and 2011: around 3.5-million Zimbabweans come to South Africa seeking work — how can the economy find work for Zimbabweans on that scale, but we can’t find work for South Africans on a similar scale? I think that’s because Zimbabweans do not have dismissal protection, so farmers hire and fire them at will. Also, they don’t work at the minimum wage — they work for around 40% less. In other words, if we remove dismissal protection and minimum wages applicable to South Africans, all of those that wanted to work would be able to.

STV: If farmers can pay substantially less, is that fair and ethical?

LS: The question of why a person earns the wage they earn is related to the skills they possess — so to talk about someone earning only R69 a day is really talking about someone that has no skills at all. It may look like an ethical dilemma but, in fact, it’s simple economics where if the person doesn’t have skills, they will not command a higher wage. The solution is to equip them with better skills in our totally dysfunctional educational system.