Ann Bernstein calls for a new approach to the jobs crisis

The government has to shift its industrial policy from a focus on capital-intensive industries towards labour-intensive ones if it is to make any inroads into the unemployment catastrophe.

This was one of a raft of proposals made by Centre for Development and Enterprise executive director Ann Bernstein in an address on Thursday to the Cape Town Press Club on the findings of a report recently released by the centre.

She compared the highly capital-intensive automotive industry which benefits from government subsidies with labour-intensive industries such as tourism, clothing, toy and electronic assembly, and business process outsourcing which should be the focus.

With about 10,4-million people unemployed, SA has one of the highest unemployment rates in the world. Bernstein stressed the need for a new approach to the jobs crisis because the current approach was not working. About 52,5% of people aged 15 to 34 are unemployed. Barriers to creating more jobs had to be removed.

“The status quo is untenable. It is unsustainable and deeply damaging for the country,” she said.

The main cause of unemployment was low growth due to governance problems such as state capture, poor education, apartheid's spatial legacy  and many bad policy choices that resulted in a highly concentrated, uncompetitive economy characterised by useless state-owned enterprise monopolies that created barriers to entry for business.

Labour laws also increased the costs of hiring workers.

“Government policy choices have produced an economy that needs less and less unskilled labour, and yet this is the one resource which SA has in abundance,” Bernstein said. Instead, it had opted for a high wage, high skill economy.

Among legislative constraints on employment were the cost of dismissing employees and the wage-setting machinery that pushed up wages even in the presence of vast unemployment.

Labour-market reform was needed urgently such as allowing exemptions from collective bargaining agreements which were killing small businesses and preventing new ones from starting.

“Essentially we have to de-risk employment decisions for employers,” Bernstein said.

She dismissed as implausible the oft-cited strategy of relying on small entrepreneurs to drive growth and the view that high wages with the associated higher consumption would drive growth.

Among the essential reforms needed to stimulate growth were expanding the country’s electricity generating capacity, putting government finances on a sustainable footing, improving the basic education and skills system, opening the door to skilled immigrants and a change in competition policy.

Bernstein emphasised that formal jobs were the best route to inclusion and should be encouraged.

As all these reforms would take a long time to achieve, public-sector work programmes should be expanded.

ensorl@businesslive.co.za