/ 8 May 2021

Covid kills a decade of employment growth in SA

Uif Labour 3503 Dv
Onslaught on jobs: People queue at the labour department in Jo’burg at the start of the pandemic to apply for Unemployment Insurance Fund payments, but informal sector workers are not covered. (Delwyn Verasamy/M&G)

One in every two jobs lost as a result of Covid-19’s economic onslaught was once held by an informal worker. 

This is according to a recent analysis of the effect of the pandemic on South Africa’s labour market. The research forms part of a Wits School of Governance project on the future of the country’s economy. 

The research — by economists Timothy Köhler, Haroon Bhorat, Robert Hill and Benjamin Stanwix — also found that the lockdown decreased the probability of employment for nonessential workers not permitted to work under the stricter lockdown by 8%. 

And self-employed workers — most of whom are in the informal sector — experienced a nearly three times greater negative effect on employment than the overall average effect.

The report notes that “South Africa’s lockdown was always expected to lead to substantial short- and long-term economic costs”.

Statistics South Africa’s quarterly labour force survey found that in the first months of the hard lockdown, 2.2-million people lost their jobs. The country’s labour market lost about 200-million working hours between the first and second quarters of 2020. This, the  economists’ report notes, is equivalent to more than 4.4-million weekly working hours.

The Covid-19-induced jobs loss essentially erased the last decade of employment growth, the report points out.

The researchers used the StatsSA data to estimate the causal effect of South Africa’s lockdown on employment probability.

According to the report, job losses in the informal sector and among domestic workers together represent about half of total employment losses. 

“These sectors accounted for just under 28% of pre-pandemic employment, showing that they were affected disproportionately.”

Early on in the pandemic, the International Labour Organisation (ILO) warned that lockdowns around the world would hit informal sector workers the hardest. 

An ILO analysis of global employment released at the end of April last year estimated that in the first month of the crisis, informal workers experienced a 60% decline in earnings. The largest declines were in Africa and Latin America.

The ILO noted that lost earnings would result in an increase in the rate of relative poverty for informal workers and their families by almost 34% globally.

Self-employed hardest hit

At the time the ILO called for “urgent and significant” policy responses to protect workers. “With further increases in income inequality among workers, an even greater proportion of informal economy workers will be left behind,” the ILO report read.

In South Africa, the government came under fire because, although it instituted pay protection measures for formal sector workers through the Unemployment Insurance Fund (UIF), did not extend to informal sector workers. And although domestic workers were covered by the scheme, many of them initially missed out because their employers had not registered them with the UIF.

The South African analysis showed that most of those who lost jobs (95.2%) were not union members and that trade union memberships grew over the period, increasing from 3.95-million to 4.2-million.

According to the economists’ analysis, once the lockdown started there was substantial reduction in employment probability overall. But those who were deemed nonessential workers during the period experienced a 14% reduction in employment probability, while essential workers had a reduction of 9.77%.

Self-employed workers were disproportionately affected by the lockdown. The economists found that they experienced a 22.4% reduction of employment probability. More than 86% of self-employed workers work in the informal sector.

Job recovery since the first wave of the pandemic has been slow. According to the latest statistics, the unemployment rate reached 32.5% in the last months of 2020, the highest since the labour force survey began in 2008. There were still almost 1.4-million fewer people employed in the last quarter of 2020 than in the same period in 2019.

The economists note that Covid-19’s full effect on jobs will be understood once more data is released.