EUSTACE DAVIE: How jobseeker exemptions could create 3-million jobs in three years

Unemployment is the single greatest problem facing SA. It lies at the centre of SA’s economic stagnation, social instability and deepening poverty. Millions are excluded from work not by a lack of opportunity, but by laws that make low-paid or entry-level jobs unlawful. If a job does not meet every legal requirement, particularly the statutory minimum wage, it may not be offered, even where both parties are willing. 

The Job Seekers Exemption Certificate (JSEC) is the simplest, most practical, and least costly means of enabling millions of unemployed South Africans find work. If implemented in full, its success is not speculative; it is a matter of economic logic. 

The JSEC would allow anyone unemployed for six months or more, with all new entrants to the job market, to work on freely agreed terms — that means no minimum wage laws or rigid sectoral rules would apply. The job must be lawful and safe, but the terms would be set by the jobseeker and the employer, not by government edict. 

No subsidy. No special programme. Just legal permission to work when no-one else will hire you. 

SA has 8.2-million unemployed people, and about three-quarters have been out of work for more than a year. Add another 3.5-million discouraged work-seekers, many of whom would try again if the rules changed. That gives us about 8.9-million potential JSEC candidates. 

Each year 700,000 more people enter the labour market, mostly school-leavers. Over three years that adds 2.1-million, bringing the total eligible group to about 11-million people. If the JSEC were implemented, how many of those 11-million people would be hired? 

When the cost of hiring falls employers hire more people. That is not theory; it is common sense. It happens with bread, petrol and labour alike. Economists call this responsiveness labour demand elasticity — how much hiring rises when barriers fall. 

In countries that have studied the phenomenon, such as in the Organisation for Economic Co-operation and Development countries, the elasticity of demand for low-skilled labour usually ranges from minus 0.4 to minus 0.8. That means a 10% drop in the cost or risk of hiring leads to a 4%-8% increase in jobs. But we don’t need to use complicated equations.

We can simply apply realistic estimates. If just 15% of the JSEC pool were to find work that would mean 1.65-million jobs. If 25% were hired, that would mean 2.75-million jobs. If employers absorbed 40%, which is possible in high-employment sectors such as agriculture, domestic work, construction and small-scale services, the total would exceed 4.4-million new jobs. 

Even after adjusting for some job displacement, a net gain of 3-million new jobs in three years is a conservative and well-supported estimate. The jobs created would not be made up or paid for by the government. They already exist in the real world, but current laws make them illegal or too costly to offer. They would appear in apprenticeships, retail, deliveries, security, home maintenance, cleaning, caregiving, taxi services, agriculture and hundreds of micro enterprises. 

These are the very jobs that often provide a first payslip, basic experience and a path to better jobs later. They are entry points for long term unemployed and new entrants to a labour market currently sealed off by regulation. 

The figures above do not include the new businesses, tasks and labour-intensive services that would arise spontaneously once it becomes lawful to hire people for small, low-paid or entry-level jobs. Many of these jobs do not exist today because they are illegal under current law. The JSEC would not only absorb existing jobseekers; it would unlock whole categories of economic activity, especially in townships, rural areas and informal sectors, creating work that would never have existed otherwise. 

This makes the estimates presented here conservative by design. The real number of jobs created are likely to be much higher. Government employment schemes are too small, too expensive, and too slow. Tax incentives rarely reach the informal economy. Learnerships are few and selective. 

The JSEC is different. It is immediate, voluntary and vast in scale. It could put millions of people to work at no cost to the state, replacing regulation with freedom, and paperwork with productivity. 

• Davie is president of the Free Market Foundation and author of ‘Jobs for the Jobless’ and ‘Unchain the Child’.