I don't like lifting stories wholesale but this is a very important story. I've editied down a bit. It comes from the Business Report.
South Africa has more people receiving money from social grants than there are people with jobs, according to Mike Schussler, the chief executive of Economists.co.za. There were 13.8 million grant recipients and only 12.8 million people who worked. Grants and other expenditure, had to be funded by 5 million taxpayers. "Unless more people get jobs there won't be enough taxpayers to pay the social grants of the future."
The problem lies with the government, according to Schussler. By increasing its work force and setting the pace in wage increases, the government is making it unaffordable for the private sector to employ more people.
Schussler said employment in the private sector had been crowded out because the public sector paid a premium for labour. Wages in the government sector rose 53 percent since 2006, while the private sector paid 49 percent more than that over that period. And he pointed out that, during this period, inflation rose 30 percent. "So real increases were 19 percent in the private sector and 23 percent for government employees."
In addition, the government is increasing the size of its workforce. Since 2006, employment in the private sector contracted by about 2.9 percent, while jobs in the government sector grew by 13.6 percent. As a result, 20 percent of the work force is employed by the government, and 24 percent by the broader public sector.
Government wages now absorb more than 12 percent of gross domestic product (GDP) - one of the highest ratios in the world. Schussler said it was higher than the figure for the UK and the US and way above that of Japan, which was a little more than 6 percent. It is also higher than Greece, Italy, and Spain, as well as Ghana, Kenya, and Nigeria. In the past it was only about 5 percent. This situation creates a negative environment for job creation.The number of discouraged job seekers grew by 25 percent over the past 10 years, "twice as fast as the population, which has grown 12.7 percent". Discouraged job seekers are those who have given up looking for work. He said the formal sector added just 2 percent a year to the employment numbers, or less than a quarter of a percentage point each year.
Schussler said, if South Africa's employment rate were about 64 percent of the adult population, in line with the rate in many other African countries, 20 million people would be employed - 7 million more than at present.
Schussler said lower interest rates did not always improve job creation, nor did a weaker rand. He said an increase in capital formation (building economic infrastructure) "may assist in the medium term".
He also suggested cutting red tape, for instance opening the skies to competition from foreign airlines which would bring more tourists to the country. And he advocated a focus on the services industries, which provided 70 percent of jobs.
But, he said, in the long term the real remedy was education.
"People can't get decent jobs without getting decent education," Schussler said.