How SA lost a decade of jobs in four months
How four months wiped out 10 years of jobs growth, and created millions of new grant recipients
Vladimir Lenin is famously quoted as saying: "There are decades where nothing happens and weeks where decades happen."
Looking back, it’s clear that a decade’s worth of change has happened in just four months in SA. In an ironically symmetrical fashion, the country seems to have lost a decade’s worth of jobs in less than half a year, while expanding its grants system by the equivalent of a decade over the same period.
Between 2009 and 2019, SA created 2.4-million jobs. Early indications are that in the past four months, we have lost as many as 2.8-million.
Over that same decade the number of grant recipients grew from 14-million to 18-million. If the 4-million recipients of the new, R350 Covid-19 social relief of distress grant (SRD) keep their grants beyond October, we will have achieved a decade’s worth of expansion (an additional 4-million grant recipients) in four months.
But as we think about the future, the key uncertainties are beginning to coalesce around three important questions:
- Who gets jobs?
- Who gets grants? and
- What happens to growth?
If there is one thing all South Africans agree on, it’s that more jobs are a good thing. Across the political spectrum everyone realises that jobs are preferable to grants, and they typically come as a package deal with economic growth.
When it comes to economic growth we already know the situation is dire: the economy slowed by 16.4% in the second quarter of 2020 compared with the first quarter of 2020. In the unlikely event that trend continues for the next three quarters, the pace of growth will have essentially slowed by 51% (the annualised figure much touted in the media).
Such a decline is unprecedented outside of civil wars and coups.
But what about jobs?
Three months ago we released the results of the first wave of our National Income Dynamics Study: Coronavirus Rapid Mobile survey (Nids-Cram). This is a nationally representative telephonic survey in which more than 7,000 South Africans are asked about their employment, income, hunger, grant receipt, and a host of demographic background questions.
Using over 50 call-centre agents and conducting 20-minute interviews with each participant, we were able to collect vital information on how they were faring. Because they were sampled from an existing survey that was broadly nationally representative, we can extrapolate our findings to the country at large.
Wave 1 showed that about 2.8-million South Africans lost their jobs between February and April 2020, and a further 1.4-million were furloughed (that is, they did not work and earned no income, but thought they had jobs to which they’d be able to return).
We have now conducted our second wave of the survey, re-interviewing the same individuals two months later and asking if any of these key outcomes had changed between April and June. We got 5,700 responses (an 81% response rate), which we could use to calculate the change in jobs from level 5 of lockdown (April) to level 3 (June).
It is difficult to describe the situation as anything other than a jobs bloodbath. Of the 2.8-million jobs lost between February and April, essentially none had returned by the end of June. The number of those without work in April was the same in June.
While that may change under level 1 of the lockdown (something we will track in Nids-Cram wave 3), the fact that we see practically no change is extremely worrying.
There is some good news emerging from wave 2: of the 1.4-million furloughed workers, 750,000 (54%) were re-employed and earning an income in June. Less positively, 550,000 (39%) had become unemployed, while 100,000 (7%) remain furloughed — the same as the number pre-Covid.
That only half of those who thought they had a job to return to actually did does not bode well for the "bounce-back" hypothesis, in which jobs that were lost return quickly.
To put some of these numbers in perspective, earlier this year statistician-general Risenga Maluleke reported that the SA economy created 2.4-million additional jobs between 2009 and 2019. If the job losses we see in Nids-Cram are accurate and long-lasting, we will have lost the equivalent of 10 years of job growth in just four months.
The overall national picture shows a 16% drop in net employment between February and June this year. But as with everything in SA, the average is uniquely misleading.
In a paper generated from the Nids-Cram results, Ronak Jain and her co-authors show that employment losses for manual labourers were twice as high (-30%) as the national average, while those for the tertiary educated were half (-8%) the national average.
Between February and June the poor were 10 times more likely to lose their jobs (-31%) compared with the rich (-3%).
So many of these results were predictable, given the way the lockdown was implemented and the way in which SA’s labour market works.
It is a mistake to think that the distinction is only between the "employed" and the "not employed". There is an important subcategory of the employed, those we might call the "precariat", who are without formal contracts, qualifications and in-demand skills. To that list we should now add "the ability to work from home", as that seems to have been critical to retaining employment during lockdown.
In their paper, Vimal Ranchhod and Reza Daniels show that only 24% of South Africans said they were able to work from home "sometimes" or "mostly" in June, with job losses tracking the ability to work from home quite closely.
The highest rates of reported ability to work from home were seen among white respondents (79%), and those with post-matric qualifications (40%); the lowest rates were for black Africans (16%), those with matric or less (15%) and those living on farms and in traditional areas (11%-19%).
If one looks at employment in June, it was highest for white respondents (79%) and those with post-matric qualifications (65%), and lowest for black Africans (45%) and those living in traditional areas (38%).
It would be incorrect to jump on "ability to work from home" as if it were the deciding factor — it isn’t. Each of these perspectives — race, qualifications, occupation, employment protection and so on — tells a common story from a different angle.
That story is one of two countries: a centre and a periphery. The story isn’t new in SA. But the scary thing now is that the already small "centre" is contracting and the already large periphery is expanding.
So, what of the three questions that will dictate SA’s future in the decade to come?
Who gets jobs?
In six months’ time, will we see a "bounce-back" to some previous level of employment, even if quite a bit lower? Or will there be a further shrinking of the centre and widening of the periphery?
The latter would amount to a fundamental restructuring of who has jobs and who doesn’t. Given the sheer scale of job losses to date, and no evidence of any bounce-back between April and June, it also looks to be the increasingly likely option.
Businesses are choosing not to rehire those they retrenched, reflecting their pessimism about SA’s future as well as their unwillingness (or inability) to absorb the costs of re-employing staff. On a cynical view, businesses may be using the crisis to pivot away from labour they see as costly, risky and possibly unnecessary.
If that is the case, then Covid-19 and the lockdown will not only have revealed our inequalities like never before, but actually made them far worse, accelerating a disjuncture that has been long in the making.
Who gets grants?
The issue here is about social welfare and the introduction of the R350 a month SRD grant, which has brought previously uncovered individuals into the grants system.
The SRD is available for those with no other income and no other grant. Though this was introduced as a temporary relief mechanism, there are serious discussions under way about extending it (along with the top-ups to the other grants) beyond the end of October, when they are meant to expire.
One of the success stories of Covid-19 is that the government successfully created a new grant distribution system that included vulnerable and uncovered South Africans — and did so in a way that was both pro-poor and relatively effective.
Between April and June rates of weekly hunger declined by 27% for adults and children alike, almost certainly driven in part by the rollout of the new grants and the top-ups of the old ones.
Given that millions of South Africans are without work and relying solely on these grants, it is difficult to imagine they would not be extended until at least the end of the year, if not longer.
Yet that introduces new complexities, as what was introduced as temporary can very quickly become permanent. Put differently, the longer the door stays open, the harder it will be to shut. Treasury officials are acutely aware of this.
In a weirdly similar fashion to the labour market, what we are seeing with grants is simply the rapid acceleration of the pre-Covid trend, which was the steady expansion, over time, of social welfare to cover more people.
In a paper on social grants, Tim Köhler and Haroon Bhorat show that the number of grant recipients in the country increased by about 4-million between 2009 and 2019 (from 14-million to 18-million recipients). What took 10 years has been accomplished in four months: the weighted results from Nids-Cram wave 2 show that by July/August 4.3-million additional people had received the Covid-19 SRD grant. (Administrative data from the SA Social Security Agency shows an almost identical number of recipients: 4.4-million.)
The key difference between the pre-and post-Covid trend is the inclusion of young unemployed men. Previously, government grants were allocated to those who could not work or who somehow needed the state to act as "provider": the elderly (old age pension of R1,860 a month); women with children (child support grant of R440 a month); those with disabilities (disability grant of R1,860 a month); and a few others.
Covid-19 has pushed us into the realm long predicted as the end point of "grant logic". That logic says that whether or not governments can create jobs, it has a moral responsibility to prevent destitution at all costs. The right to a minimum amount of food or income is bound up in an understanding that all people have worth and their basic dignity must be protected, irrespective of the cost or the consequences.
Grant logic also recognises that deferring this responsibility to some future point when jobs can be found is both unacceptable and disingenuous.
SA writer and scholar Jonny Steinberg made this point most eloquently in 2013: "If we are honest with ourselves, we have long ago given up trying to employ everyone, or even to halve unemployment ... SA started bleeding jobs in the mid-1970s, along with much of the rest of the world. We have been bleeding jobs ever since ...
"It hasn’t mattered who has been in power or whether our political system has been a racial dictatorship or a democracy, or whether our labour law has been rigid or flexible — we cannot employ everybody. We can’t even come close. To think that we can is to indulge in millenarian thinking, as if Jesus will come and remake the world, as if there is a thing called magic.
"Deep down, we know this. For while we talk about creating jobs, we have been doing something else — we have been handing out grants. Some say it is a stopgap measure, just to tide us over until jobs are found. Others say that it is creating a culture of idleness from which there will be no return. But if we are honest, it is what we do now and what we will keep doing forever ...
"If we accept that welfare is permanent, we must go the whole hog; we must start giving grants to the one category of poor people entirely excluded from them — young men."
That is exactly where we are today. And now that the genie is out the bottle, it may be political suicide to try to put it back.
Every month that grants are paid to those who did not previously receive them further solidifies new relationships and expectations between those citizens and the state.
Every month that someone does not go hungry because they receive R350 from the government is another month they move towards becoming single-issue voters: "Keep the grants."
By its criteria for eligibility, the Covid-19 grant excludes anyone who receives any other kind of government grant. Thus, in almost all cases these are "first-time grant recipients".
It turns out that about 40% are probably also "first-time income recipients" in the sense that they have never been employed before.
This is only possible to ascertain using a panel survey such as Nids-Cram, which has followed the same people over time.
What our data shows is that of the 4.3-million Covid-19 grant recipients, about half (2.2-million) were not employed at any time in 2020 — including before the crisis.
In fact, about 40% (1.7-million) were also not employed in 2017, when last they were surveyed in Nids. For the first time, potentially in their lives, they have access to a very modest income source that is theirs. It is exceedingly unlikely they will give this up without a fight.
The conceptual shift gaining ground every day is not only that a new grant is here, but that a new grant should be here. The semantic shift from "Covid relief" to "unemployment relief" might not sound like much, but it will become politically consequential as we approach elections.
The ANC is fast approaching a double-bind: remove the grants and face the anger of your voter base, or keep the grants and find the money from new debt, new taxes or tackling corruption. Any of those options will anger an important constituency: the ratings agencies, the tax base or corrupt politicians.
What happens to growth?
Economic growth is important for both of the two preceding questions: it heavily influences how many new jobs are created, as well as how much tax revenue is raised and can then be redistributed as grants.
What we know so far is that the lockdown and the pandemic have been disastrous. The International Monetary Fund, the Reserve Bank and the National Treasury all estimate that the economy will shrink by about 7.3% in 2020.
President Cyril Ramaphosa seems to be aware of this, and all indications are that we will not lock down again in the coming months, irrespective of a second wave of infections and irrespective of the death toll. The collateral damage is simply too great.
Children have already lost 40% of the academic year, and some estimates are that we will only get back to our pre-pandemic learning trend in 2031.
Mental health across SA has deteriorated significantly, with twice as many people screening positive for depressive symptoms in June 2020 (24%) compared with 2017 (12%). Those who experienced hunger "almost every day or every day" were twice as likely (44%) to screen positive.
One of the unhelpful developments during the pandemic has been the false dichotomy between saving lives and saving everything else.
Discovery Health estimates that the lockdown might have saved 16,000 lives in 2020 — but at what cost? When are we allowed to have the conversation about whether the costs that were incurred were justified to save this number of lives? To even bring it up risks accusations of being callous and insensitive.
Of course, hindsight is 20:20 and no-one knew whether the death toll would be 10 times higher than it is at present. We didn’t know if HIV and TB would increase Covid-19 death rates or introduce some other complications. With so many unknowns, policymakers were placed in the most difficult situations of their lives. But now we do know — and we have known for some time.
Is this not just water under the bridge? What good is it now to assess whether the lockdown was fit for purpose, accomplished its goal or was the right length?
The answer is twofold. First, unless there is an adequate recognition of the devastation caused by the lockdown, it’s possible it will again be seen as a viable policy tool to limit infections. It shouldn’t be. It is the "nuclear" option and should be avoided at all costs.
Second, it’s a mistake to think that the lockdown is over; it is still with us in innumerable ways — in bureaucratic operating procedures (such as occupancy rates in stores and queues) and psychologically (many people are still terrified of this virus).
What most people don’t realise is that about 450,000 South Africans die every year of something. About 14,000 people in SA die every year from road accidents alone. At the time of writing 16,000 people in SA had died of Covid, with projections indicating it will be fewer than 20,000 for the whole year.
This is not to trivialise the coronavirus or the deaths that it has caused. It is meant to place these deaths in perspective, with the aim of informing an evidence-based plan for the best policy responses to the social and economic crises that are on our doorstep.
What it means:
All indications are that we will not lock down again in the coming months. The collateral damage is simply too great
So where to from here? First, the lockdown was meant to buy time to prepare the health-care system, not to prevent infections or deaths. Given the extraordinary collateral damage, it should be ended immediately — in all its forms — and not reinstated in future.
Second, the grant top-ups and the new Covid-19 grant should be extended for a further six months to prevent hunger and destitution, and maintain political stability.
In all likelihood, this will make them a permanent feature of SA society. That won’t be a bad thing. With millions of job losses and a fragile economy with no indication of a bounce-back, SA more than ever needs glue to hold it together. That glue is the grants system.
While the grants system may seem costly, it is less so when one considers the alternatives. It is also the right thing to do.
*Spaull is the principal investigator of the Nids-Cram study and an economist at Stellenbosch University. The views expressed here are those of the author, and are not necessarily those of the other Nids-Cram researchers
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