r

[Year]
North-West University

NWUuser

[TYPE THE DOCUMENT TITLE]

[Type the abstract of the document here. The abstract is typically a short summary of the contents of the document. Type the abstract of the document here. The abstract is typically a short summary of the contents of the document.]

Every society, developed or developing, understands that its productive youth stock is by far its most valuable asset to have insofar as its sustainability is of concern. This concise, yet undeniable assertion is firmly affirmed by the significance that the so-called baby boomers (born after World War 2 era in the US) had two decades after the war wherein the US ushered into a period of undisturbed economic bliss (2013). Or as seen in recent Spain where the burdensome threat of unemployment (46.1%) faced by the youth which continues to spell a potential economic setback (BBVA, 2011:2). The Arab Spring the MENA regions equivalent of the Soweto Uprising also lent weight to the notion of the importance and influences that the youth of a country have on the socioeconomic fibre of society (Drine, 2013). 1. Introduction With a mere nineteen years into democracy, South Africa has for over a decade been grappling with a high unemployment rate, at an average of 25%, even more alarming, 51.5% for the youth as of December of 2012 (SAIRR, 2013:215 & 218). As was alluded to earlier the importance and influence of the youth cannot be stressed enough and a turn-around strategy that will veer South Africa in a better light is imperative to ward off this grim reality going forward. The objective of this paper is to systematically define the severity of unemployment amongst the youth of South Africa, provide fundamental causes for this problem and suggest most appropriate and relevant policy interventions as provided in the NDP document and other alternative strategies which could be exploited by policy-makers and the society at large. Furthermore, a thorough vetting of the proposed solutions will be done so as to ensure compatibility with the followed macroeconomic policies as well as a look at how South Africa compares with the other countries and what our policy-makers can learn from them. In closing, by way of a concise conclusion, solutions that make for a better fit i.e. typically those with less costly trade-offs and compromises but substantial returns - Will be given as suggested recommendations.

2. Contextualising Information: Putting things into perspective (in the grand scheme of things) Stats SA (2001:16) defines the unemployed youth as the people within the age range of 15 to 24 which are economically active but did not work in the seven days prior to census night, those who wanted to work and were able to do so a week of census night or those who had taken the initiative to find work or had opted for self-employment in the period of a month - technically called strict definition. As things stand, the increase in unemployment rate between 1994 and 2012 has been 24.5% which is just shy of the current rate of 24.9% with 85.9% of that figure constituted by the

Africans and 70.7% being the youth (SAIRR, 2013:215). These figures lend weight to the view that youth unemployment is a problem worthy of attention and as was alluded to in the thesis statement, it is imperative to fully understand the roots of the problem at hand. The following section delves deeper to anatomise the causes behind youth unemployment.

3. Causes of youth unemployment: Broad perspective It is the view shared by many researchers that youth unemployment is a multifaceted socioeconomic challenge whose causes can be ascribed to a score of factors including, but not limited to, economic growth and development, level of skills and education, and the dynamics of demand and supply of (skilled) labour amongst others (Harker, 1991:14-18, Keely, 2007 and Bhorat et, al: 2001). In the case of South Africa, in addition, the alarmingly high wealth disparities inherited from the Apartheid government, and social exclusion and marginalisation en masse deepen the severity of youth unemployment and add to more polarised income differentials (Bhorat et al, 2001:2,21 -23). There is resonance in both Barker (2003: v & vi) and Turnham (1971:11) in their findings that there is a close relationship between changes in the labour market and the progress within the socioecono-political setting and thus it should be afforded some attention, and lastly the impact of both globalisation and trade unions on the local labour market.

3.1Inequality and Poverty: The dreadful Apartheid legacy The Gini coefficient for SA stood roughly at 57.8 as of 2012 which emphasises the wealth polarity which similarly translates to inequality in quality of education, skills acquisition, levels of poverty, occupational inequalities, and access to credit facilities in terms of entrepreneurship (BTI, 2012:2 & Barker, 2003: 278-280). Bhorat et al. (2001:3) argues that the institutionalisation of apartheid after 1948 was systematically spread over three areas, namely: the macro level, whose sole target was to create the marginalised homelands and industrial decentralisation. The meso level, aimed at separating race groups and the micro level meant to bring separation between individuals of different race groups through separate amenities (e.g. recreational public places, sports fields, etc.), prohibition of interracial marriages, etc. This institutionalisation was a precursor to the current high level of youth unemployment since it translates into the majority (blacks) being disadvantaged at almost any avenue that could be used to pursue a sustainable livelihood and it also explains why an estimated one third of all youth live in poverty (Trialogue, 2007). 3.2 The Supply and demand of labour (The dynamics of the labour market)

There is a grave mismatch between the supply of and the demand for labour in SA as can be seen in a decline in the labour absorption rate (SAIRR, 2013:216 & Barker, 2003:4). This by far seem to be a more serious problem as Turnham (1971:64) and Barker (2003:4) adds that this can be attributed to a number of candidate factors such a high population growth that SA experienced in the past, increasing capital intensity (thus replacement of labour-intensive jobs by capital-intensive ones) and increasing labour costs. One can further find causes of youth unemployment by exploiting the demand side of the labour market. As Barker (2003: 77-79) notes, derived demand for labour (demand whose extent is dictated by the demand of a service added by an employee) is indirectly affected by factors such as fiscal or monetary, domestic of even foreign policy conditions since they impact on the demand for goods and services. In the case of direct impact, Barker (2003:82) holds that two factors in particular, the cost and the productivity of labour, influence the demand for labour. The low demand for labour is a result of low GDP growth and high unmatched supply (declining marginal return on labour). 3.3 Keynesian explanations and the problem of skills set (Human capital) According to the classical Keynesian theory, as Fourie & Burger (2011:484) illustrate (see figure 1.1), unemployment, due to the inherent unstable nature of the market economy, is an inevitable unpleasant heirloom. Given the frequency of these disturbances and their severity particularly in the context of a developing country like SA, the problem of price and wage rigidity is usually prevalent and on that score, a marked lack of sought-after skilled young people explains the severity of youth unemployment. The huge skills gap reflects the ailing educational system which calls for an urgent action (NDP, 2010:295) (also see figure 1.2 diagnostic overview pg. 8/32). The root cause of this grim reality lies with what the OECD (quoted by Keely, 2007:29) defines as poor human capital, i.e. the knowledge, skills, competencies and attributes embodied in individuals that facilitate the creation of personal, social and economic well-being. Thus it follows that the vulnerability and proneness of the economy to downturns (as evidenced in the 1997/8 Asian crises, 2000 dot com bubble burst and the recent 2008 subprime mortgage crisis in the US) coupled with dwindling human and social capital is a significant candidate factor to disturbingly high youth unemployment. 3.4 Other contributing causes Other ills of society that are entangling the youth of SA are endemic drug abuse, teenage pregnancy, high incarceration rates and HIV/AIDS (World youth report, 2003:99,116 & 148) 4. Policy intervention proposals

The problem under discussion is too intricate and complex to be squared up by one policy or strategy and for this reason a couple of apt policy suggestion will be carefully vetted. 4.1 The NDP policy intervention strategies. 4.1.1 Education, skills and innovation capacity The NDP document proposes a myriad of strategic objectives aimed at an equal score of challenges. Improving on education, training and innovation comes out pivotal in addressing the depleting quality of the skills base, poverty, inequality and shrunk economic output (<3%). Concisely, the NDP (2010:296 - 327) proposes a reform and restructuring of the education, training and innovative institutions by 2030 as follows: Standardise the guidelines, norms and standards for early childhood development programmes, and also Invest in training early childhood development practitioners, upgrading their qualifications and developing clear career paths. At primary level, address curriculum, incentives, inclusivity and language issues, and try to retain learners by producing more and better qualified teachers. Introduce incentives to capture more top achieving candidates into the profession (teaching). At the post-school and transition phase, emphasis should be placed on creating the institutions for science, technology and innovation to develop intellectual capital and bolster economic growth. Provide for flexibility and innovation throughout the system by ascertaining funding for research-focused and entrepreneurship-oriented programmes. More importantly, generate more skilled labour that will appeal to the labour market and thereby improve the absorption rate of new graduates into industry. Develop and support a coordinated system for providing a diverse range of further education and training opportunities, through a range of state and private networks and partnerships funded programmes. 4.1.2 Economic growth, Policy considerations and institutions. Warding off poverty and inequality while ensuring faster inclusive growth is imperative for raising levels of employment in general and a couple of strategies as proposed in the NDP(2010:110 - ) are as follows: Promote and Improve efficiency of exports (curb the resource curse by processing and exporting value-added products) see figure 1.3 Improve the perception of ease of doing business to enhance FDI inflow, invest in a competitive infrastructure and lower costs to encourage private investment.

Improve on performance of the labour market thus reducing conflict and ease access to young, unskilled work seekers. Strengthening the capacity of the government to implement its macro-economic policy to ascertain stability and cushion off external shocks. Work towards a more diversified economy reinvent agro-process, tourism, alternative energy and manufacturing industries. Strengthen the CCMA, the bargaining councils and the labour court. Improve employment equity and workplace opportunity to iron out inequality remnants of the past and unfair oversight of qualified and skilled labour. Inject support and funding to the mom and pop enterprises and expanding firms to accelerate job creation.

4.2 Other avenues 4.2.1 The youth wage subsidy 4.2.2 The global perspective 4.2.3 Miscellaneous A renowned economist Chris Hart holds a rather unconventional view to what he points out as a reason for the high youth unemployment in SA, i.e. taxation policies, and not labour laws (GrantMakokera & Rantao, 2012). Lower effective taxes, according to Hart, can attract investment, bolster the creation jobs (SMEs), and ultimately raise sales and GDP. 4.3 Criticism and shortfalls

The OECD, an intergovernmental think-tank, counts 26m young people in the rich world as NEETS: not in employment, education or training (The Economist, 2013)