Covid leaves permanent scar on SA employment
President talks up data since lockdown lifted, but damage is serious
● Commenting on the latest official unemployment figures this week, President Cyril Ramaphosa said he was encouraged that 600,000 more people became employed between the second and third quarters.
“This shows that green shoots have emerged as economic restrictions were lifted and the epidemic brought under control,” said Ramaphosa.
He was gilding the employment lily just a little. The figures from Stats SA show, in effect, that of the 2.2-million jobs that were lost in the hard lockdown second quarter of this year, 539,000 returned in the third quarter, as the lockdown began to be lifted.
That means there were still 1.7-million fewer people in jobs in the third quarter than there were a year before. The bottom line is that just 37 out of every 100 South Africans of working age are employed, down from 42 in the third quarter of last year.
And when it comes to unemployment, the latest headline unemployment rate has reached almost 31%, and the more useful expanded-definition unemployment has risen to 43% — with youth unemployment at a terrifying 74% on this broader definition.
The figures all come with methodological health warnings, given the difficulties of collecting survey data during the lockdown, and they highlight some of the flaws in the way Stats SA has long reported headline unemployment data — specifically the way it excludes “discouraged” workers, who have given up actively looking for work, from the definition of the labour force (which is why the unemployment rate bizarrely dropped in the second quarter but picked up again in the third).
However, the figures still do tell us much about SA’s labour market trends and the way the pandemic has made a bad situation much worse. And they raise critical questions about how many of the job losses will be permanent, what this means for the economy and what impact any of the measures put in place to preserve and boost employment have had or might have.
The World Bank projected early in the lockdown that the Covid-19 crisis would reinforce inequality in SA and erode income in the middle of the income distribution.
The trends in the second quarter data — which covered themost severe stretch of the lockdown, from April to June — were evidence of this.
Analysis of the data by University of Cape Town professor Haroon Bhorat and his team at the Development Policy Research Unit showed that informal and domestic work constituted about 50% of all jobs lost due to the pandemic, with 250,000 domestic workers losing their jobs in the second quarter.
Most of the workers who lost their jobs were semi-skilled or low-skilled; none of them were trade union members. Young African males were twice as likely to have lost jobs than others. And almost all the job losses were in the private sector; hardly anyone in the public sector lost their job.
Economists will be crunching the thirdquarter data for the detailed trends. All sectors increased employment, but some did so more than others, and in all sectors except mining, Stats SA reported employment was still well down on the third quarter of 2019, with the largest losses in trade, manufacturing, community & social services and construction.
Sectors such as domestic work and the informal sector that were hardest hit in the second quarter did pick up jobs again in the third quarter — but in the case of domestic work, only about half of the lost jobs returned.
Other data gathered by Stats SA also shows how unequal the patterns of work and income in the economy have been in the crisis — Covid’s work-from-home trend was largely confined to managerial and professional ranks, with only 17% of employees working at home in the second quarter, falling to 11% in the third quarter.
About 13% of employees still weren’t paid at all in the third quarter, down from 20% in the second quarter, and Stats SA reports those with higher education were much more likely to be on full pay than those with lower levels.
But as Ramaphosa put it this week: “The test of our recovery will not be how high unemployment rises in the midst of the pandemic but how quickly it returns to previous levels and lower.”
So what are the chances that SA restores enough jobs in the remaining quarter of 2020 to dent the 1.7-million job-loss figure?
Stanlib economist Kevin Lings has maintained his forecast that SA will have shed 1.7million jobs from the first quarter of 2020 to the end of the first quarter of 2021, leaving SA’s unemployment level considerably higher than before the Covid crisis.
PWC’s economists expect that about 250,000 more jobs will be recovered in the fourth quarter, many of them in the tourism and hospitality sectors, helped by Ramaphosa’s announcement this week on reopening international travel from all countries.
However, they still estimate net job losses will come in at 1.4-million to 1.5-million by year-end, which economist Lullu Krugel notes is between the base case and the worst case of the scenarios PWC outlined early in the crisis, and could imply the economy contracting by about 9% this year.
Most economists are not assuming SA will return to lockdown, though a “second wave” of infections that could trigger renewed restrictions on economic activity is clearly a big risk to any recovery in employment. For now, too, it is a question of preserving jobs, not just creating new ones.
Even though most of the economy is now theoretically open for business, and there are clear signs of recovery, demand in many sectors is still weak and many businesses could still close.
That is especially so if the Unemployment Insurance Fund Temporary Employer Relief Scheme (UIF Ters) closes prematurely, removing a lifeline that had helped to keep many smaller businesses alive even though they couldn’t pay workers. Many sectors are still limited to 50% capacity so can’t bring back all workers, plus there are workers over the age of 60 or with comorbidities who can’t return to work.
Ramaphosa originally promised that the UIF Ters scheme — which has now paid out almost R53bn — would stay open until the end of the state of disaster.
But the National Coronavirus Command Council took it upon itself to terminate the scheme, in the face of loud protests from business and labour, and Ramaphosa this week extended it only to October 15.
Businesses may also be faced with hard choices with the six months and more than R34bn of debt relief that the banks have extended to customers coming to an end.
And many are reluctant to take on more debt to take advantage of the governmentbacked Loan Guarantee Scheme, under which the banks have now lent almost R17bn — still way below the R100bn the government imagined.
Ramaphosa has pointed to the mass public employment package announced in his economic recovery plan, which aims to create 800,000 short-term “work opportunities” — as well as to the government’s infrastructure programme — as supporting “a recovery in employment in the short and medium term”.
The government’s new Vulindlela initiative is also supposedly going to tackle red tape and enable private sector job creation.
But these will take time, assuming they take off at all, and they do little to address the deep dysfunction in SA’s labour market.
The crisis has clearly demonstrated the need for SA to find new and more effective ways to tackle inequality and joblessness. A failure to do so willmake the damage deeper and more permanent.
PWC estimates that net job losses for 2020 will come in at 1.4-million to 1.5-million by year-end