Realising South Africa's employment potential

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In this Subject: Economics

Source: OECD Economic Surveys, Volume 2008, Number 15, July 2008 , pp. 126-166(41)

Publisher: OECD - Organisation for Economic Co-operation and Development

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Abstract:

Unemployment in South Africa is extremely high and very unevenly distributed, being concentrated among young less-skilled blacks. The sharp increase in unemployment in the 1990s was driven by a surge in the supply of less-skilled labour, accompanied by a failure of labour demand to keep pace. Growth of the working-age population and the release of pent-up pressures for labour force participation in the majority black population explain the big increase in the supply of less-skilled labour, while negative demand shocks in labour-intensive sectors were an important factor in the slow growth of demand. The combination of these factors means that market-clearing would have required a substantial fall in real wages in the decade after 1994, especially for less-skilled workers. Although some decline in real wages does appear to have taken place, this was insufficient to prevent the jump in unemployment - union power and other features of the labour market prevented a much larger downward move in real wages.

Document Type: Review article

Publication date: 2008-07-01