You might not be as unemployed as you think you are, says Stats SA

It’s harder than you might think to be unemployed in South Africa – even though the unemployment rate has recently reached a record high of 26.7%.

According to the latest Quarterly Labour Force Survey, there are 36.4-million people between the ages of 15 and 64 in South Africa. The number of people regarded as part of the workforce is 21.4-million people. The rest (15-million) are at school and other education and training institutions.

Some 15.7-million (of the 21.4-million) are considered employed; 5.7-million are unemployed.

The unemployment number is determined by Statistics South Africa, which has people out in the field surveying 30 000 households every three months, with an in-depth questionnaire at hand. If one of their surveyors lands up at your door, a series of questions could determine that you are employed, even though you might think you are not. For example Stats SA would ask you whether you had worked in the past week for money or any payment in kind, even if it was only for one hour. Yes? As far as the Quarterly Labour Force Survey is concerned, you are employed.

If, in the past week, you helped out in a family business – say you minded your mother’s spaza shop while she stepped out – for even just an hour and with no compensation of any kind, again Stats SA would consider you to be employed.

If, when Stats SA conducts the survey, which is guided by the principles of the International Labour Organisation (ILO), you said you were prepared to start a job in the next week, but had not searched for work in the past four weeks – you would be considered a discouraged work-seeker, a category of people who are not actively looking for work but who would be prepared to start a job.

Stats SA says there are 2.3-million discouraged work-seekers at the moment. It does not include the discouraged when arriving at the narrow figure of 26.7% unemployed.

The expanded unemployment rate includes these discouraged work seekers. When the 2.3-million are added, the unemployment rate rises to 36.3%.

Excluded from even the expanded unemployment definition are a further 12.6-million people who are not economically active. These people, who include the chronically ill and stay-at-home mothers, would not take up a job in the next week if offered one.

Neva Makgetla, programme manager for trade and industry at nonprofit economic research institute Trade and Industrial Policy Strategies (Tips), says: “People seem to think the unemployment rates are the same as joblessness.”

She said the absorption rate was a far better indication of joblessness. Stats SA reported the absorption rate, the proportion of the working-age population that is employed, at 43% for the first quarter of 2016.

In 2014, South Africa had the 10th lowest absorption rate in the world, she says. “But the problem in trying to understand all these statistics is that, because of apartheid, our problems are totally different,” she adds.

In measuring unemployment, it helps to understand whether the labour market is responding to citizens’ demand for income-generating work, but even the ILO has noted that unemployment rates alone do not reveal the full picture of the state of labour markets. “In a country like this, with very high joblessness, the unemployment number is problematic because people give up,” says Makgetla.

South Africa’s lowest unemployment rate was 21.5% in 2008, compared with 7% in other upper middle income countries that year.

With such persistently high unemployment, people would give up seeking work. This would make the unemployment rate fall – even if the absorption rate did not increase. Conversely, rapid job creation may increase the absorption rate, and boost the number of people actively looking for work, pushing up the unemployment rate, Makgetla explains.

The duration of unemployment also matters, in particular in countries where well-developed social security systems provide another source of income, according to the ILO.

In South Africa, about three million households depended on social grants as their primary source of income in 2014, mostly because none of these households could find a paying job, Makgetla says.

Stats SA’s statistician general, Pali Lehohla, noted that not all countries conducted quarterly labour force surveys – these surveys had been biannual until 2008. The advantage of a quarterly survey means seasonality in the labour markets can be captured. This would include, for instance, a worker who picks grapes only during the harvest season.

Lehohla points out that the unemployment rate was one of many numbers the data provided and the detail of this can be examined to gain insights into joblessness.

For example, of those 15.7-million people who do have jobs, most – about 13.2-million – work at least 40 hours a week. Some 300 000 workers fall into the lowest category of working under 15 hours a week. On the other hand, 8.5-million work between 40 and 45 hours a week, and 4.7-million work more than 45 hours a week.

Makgetla says it’s unlikely that South Africa can achieve high levels of economic development as long as it suffers unusually high joblessness, associated with slower economic growth, adding that high joblessness is a central cause of poverty and inequality.

In turn, inequality reduces investor confidence because it is a root cause of social conflict and contestation over economic policies.

Analyst casts doubt on job figures

The latest unemployment numbers, which reached a record high of 26.7%, could be unreliable because of the new master sample Statistics South Africa is using, according to a policy brief issued last week by Neva Makgetla, the programme manager of trade and industry at the nonprofit organisation Trade and Industrial Policy Strategies. “Year on year, employment reportedly rose by 204 000, or 1.3%, which is essentially in line with previous years and with expected GDP [gross domestic product] growth,” she wrote.

“The data likely reflect an effective correction to overestimates of job creation in the previous four quarters rather than a sharp contraction in the real world.”

Although Makgetla and other labour economists have questioned the figures, which they believe could have been increased because of changes in the master sample and which Statistics SA says has increased in size “to improve precision”, the statistician general, Pali Lehohla, denied the possibility.

“That claim is false and runs against sampling theory, and especially within stratum sample rotation. Changes in the areas from which people would be sampled should not play a role when observing population in the same strata,” he said.

The master sample is designed to be representative at provincial level and within provinces at metro and nonmetro levels. In the metros, the sample is further broken up by geographical type. And it is further divided into urban, tribal and farms, implying that the sample is representative of the different geography types in the metro.

“Stats SA said themselves, in their January publication, that they were worried that the new sampling frame might introduce some inconsistency,” Makgetla said.

She noted that, though Stats SA is a world-class institution, and has run a parallel survey process to crosscheck recent results, they did not crosscheck the data with other economic trends or consider whether their employment finding makes sense.

Makgetla said that Stats SA doesn’t check these numbers against what is going on in the economy. “It doesn’t make sense to have a crash in employment now,” she said, noting it is hard to tell what is going on in the face of statistical problems.

“For virtually every quarter in 2015, the QLFS [quarterly labour force survey] found higher growth than in the previous four years, despite slower economic growth. In the first three quarters, in particular the figures for 2015, it diverged strongly from the averages for the previous five years. It seems likely that the reported jobs crash reflects a more realistic estimate of employment levels following four quarters of exaggerated figures.”

It seems unlikely that this kind of jobs bloodbath could have occurred without a significantly more harmful effect on people, Makgetla said. – Lisa Steyn

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