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Former Treasury deputy director-general Andrew Donaldson has called for government to scale up public employment programmes and to make them a permanent rather than a temporary part of the policy toolkit.
His call for government to go big on public employment is an important one at a time when policy debate is preoccupied with calls for a basic income grant (BIG). It is a time too when the government has sidestepped the BIG by extending the special R350 a month Covid social relief of distress (SRD) grant.
The SRD grant targets much the same young, unemployed cohort that public employment programmes tend to target. Donaldson has urged that the government looks carefully at the balance between providing more income relief to households in the form of social grants and providing more income through public employment programmes.
The government is spending R364bn a year on social grants, including R44bn this year on the SRD. It is spending a mere fraction of that on employment programmes. More robust debate is needed on what the government should be doing about SA’s unemployment crisis in the short and longer term.
At 35,3%, SA’s unemployment rate is at record levels. A weak growth outlook can only make that worse. Economists at PWC have estimated that the unemployment rate would rise to almost 37% by the end of this decade even if SA manages to grow at an average annual 2%, which is more than it is now expected to do.
There can be no question that the only durable way to create the millions of jobs that SA desperately needs is through a much higher rate of investment, especially private investment, that would sustain higher economic growth and employment. All the evidence is that when SA’s economy has grown fast it has created jobs fast too. But that can happen only if SA becomes a much more competitive environment that is attractive to investors.
The government knows what it needs to do to make that happen — fix electricity and transport and implement other structural reforms. It has made a start but the pace is excruciatingly slow. And the reforms will take time to influence growth and jobs in any substantial way.
It should ideally be finding ways to make it attractive for the private sector employers who account for the majority of jobs in the economy to hire more people and invest in labour-intensive businesses. The employment tax incentive was designed to encourage employers to hire youngsters and it was expanded during Covid. But it has not been as successful as it should have been and it merits a fresh look.
There are also some impressive private sector programmes such as Harambee and the Youth Employment Scheme which prepare youngsters for the world of work and ease their way into internships that can provide them with some experience, as well as incentivising private employers to hire them. They need to be encouraged to do even more.
Public employment can play an important role too, especially if it is used to provide benefits that society needs — be it firefighting, street cleaning, home-based healthcare or helping to look after or educate children.
The government has long put money into public works and community works programmes which have provided temporary jobs and experience for youngsters. But as Donaldson points out, it has only been with the Presidential Employment Stimulus introduced in 2020 that the government has really provided public employment at any scale, with a particular emphasis so far on putting recent matriculants into classrooms as teachers’ assistants. Donaldson wants to see these programmes scaled up and made more permanent.
Other economists wonder why, for example, the government is trying to rein in the wage bill for teachers and other public servants while upping the spending on teachers’ assistants. One might be tempted to ask too whether it should not simply be accelerating structural reforms, which cost the fiscus nothing.
But in a context of weak growth and constrained public finances, one in which SA has more than 18-million social grant recipients and a further 10-million SRD grant recipients — but only 14.5-million people in employment — it is worth looking at all options for getting more people into the labour market.
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Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.