Unravelling the impact of the global financial crisis on the South African labour market

Type Working Paper
Title Unravelling the impact of the global financial crisis on the South African labour market
Volume 48
Publication (Day/Month/Year) 2010
Publisher International Labour Organization
City Geneva
Country/State Switzerland
URL http://www.ilo.int/wcmsp5/groups/public/---ed_emp/documents/publication/wcms_122402.pdf
The global financial crisis of 2008-2009 has deeply impacted South Africa due to its financial and trade links with the rest of the world. As a consequence, Africa’s largest economy fell into recession half way through 2008. Although almost 900,000 jobs have since been lost, the results presented in this paper show that the contraction did not initially translate into a surge in official unemployment. Rather, the main effect of the downturn in South Africa has been a rise in the number of discouraged individuals, from 1.08 million in the second quarter of 2008 to 1.63 million in the third quarter of 2009. Drawing on the micro estimates, discouragement has increased more for vulnerable segments of the population, namely, uneducated black South Africans (especially males). At the same time, employment in the informal sector has fallen over the crisis period, which contradicts the general assumption that this sector absorbs laid-off workers. Later in 2009, employers in the formal sector did start to shed workers at a much higher rate, which has pushed up the unemployment rate to 24.5 per cent in 2009Q3. This paper makes an important contribution to better understanding the impact of the crisis in South Africa, which also has implications for other emerging economies. In particular, the findings highlight the need to look at changes to all labour force states, not just unemployment, and to analyse the role of socio-economic characteristics in driving vulnerability in the labour market using micro-data. Though the economy has now registered positive growth in the third quarter of 2009, South African policymakers are still confronted with the challenge of formulating and implementing policies that encourage job search and self-employment among the lowskilled. Over the longer term, education and training for the low-skilled and an appropriate industrial policy should remain key priorities for the Government of South Africa.

Related studies