How Does the New Minimum Impact Youth Unemployment in South Africa?

Youth unemployment is a major problem in South Africa. This essay will evaluate the effect a new minimum wage will have on the level of unemployment. A definition and description of youth unemployment will be presented, as well as an analysis of the labour as experienced by different races.

A simple definition of youth unemployment is described as able-bodied citizens aged 15-24 not finding employment. Youth aged 15–24 years are the most vulnerable in the South African labour market as the unemployment rate among this age group was 56.

4% in the 2ndquarter of 2019. Among graduates in the age group, the unemployment rate was 32,1% StatsSA 2019). The graduate unemployment rate is lower than the rate among those with lower educational levels.

The factors that influence youth employment and unemployment occur on both the demand and supply side of the labour market. South Africa’s economic growth, focused on productivity and technology-led growth to encourage investment in skills and higher wages, occurred alongside the worsening agriculture and mining industries.

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“lower employment rates of low skilled workers” (Seekings &Nattrass, 2005).
“There is a higher absorption rate in the labour market for those persons with post-secondary qualifications” (Altbeker & Storme, 2013).

Young people, who lack work experience and practical skills relative to older workers, as well as money to meet the high costs of university, find it harder to find work.

“At the household or community level, factors such as the high costs of transport, internet or printing are making work seeking expensive for young people living far from places of work” (Graham et al.

2016)

Labour Market experiences differ between racial groups (Patel et al 2018 51). Although statistics for labour market experiences by the youth of different races could not be found, they were statistics for the races as a whole. The quarterly unemployment survey published by StatsSA on 31 July 2019 reported the following figures. For Africans/Black population in the labour force, the unemployment rate is32.7%, the participation is 58.7% and the absorption rate is 39.5%. For the white portion in the labour force, the unemployment rate was 7.4%, the absorption rate is 62,5% and the participation rate is 67.5%For the Indian and Asian participants in the labour market, the employment rate is 11.2%, the participation rate is 59.1% and the absorption rate is 52.4%The coloured community, the unemployment rate is 22.5%, the participation rate is 62.6% and the absorption rate is 48.5%This shows that the black population struggle the most in the labour market, followed by the Indian/Asian population with coloureds and whites having an easier time finding employment. Which in turn supports the idea that African/Black youths find it harder to find work than their white, Indian and coloured countrymen.

On the 1st of January 2019, South Africa implemented its first minimum wage of R20/hour or R3500/month. A range of factors are taken into consideration by countries in the implementing of minimum wage systems and in setting the wage. These include a country’s history of minimum wages, employment and youth unemployment rates, large youth populations, economic contexts, the capability to monitor compliance, access to appropriate educational and training opportunities as well as programs to make school to work transitions of young people easier. (ILO, 2011). To address the particular needs of youth in the labour market, many countries that have a national minimum wage also have a youth minimum wage (ILO, 2011). The reason for youth minimum wages is to prevent exploitation, improve labour markets, promote work experience, encourage young people to enter the labour market and to set standards for youth in training.

Arguments against a youth wage are related first to issues of fairness and the need to value both older and younger workers equally and when they are performing the same jobs. Secondly, Grimshaw, (2014) and ILO (2014) show that there is the risk that young people may choose work over university which will make them less appealing to employers in the future seeing as the labour market is kinder to university graduates. A third concern is that a lower wage may create lower expectations of young people as was observed in the United States (Coy, 2014) meaning that young workers will not work as hard if they work for low wages. Finally, concerns of negative effects have been mentioned such as exploitation and laying off young workers once the youth wage increase (Grimshaw, 2014).

This can be seen in South Africa as the unemployment rate has increased from 27.6% to 29% and the youth unemployment rate has increased from 55.2 to 56.4 % between Q1 and Q2(StatsSA QLFS2019 Q2 :23) implying more people are losing their jobs after the new minimum wage was set. This shows that the new minimum wage has had a negative impact on the youth and country as a whole in the first 6 months since its introduction.

In conclusion, youth unemployment remains to be a serious long-term issue faced by the government. The most affected by youth unemployment is the African/Black population currently participating in the labour market with the white population having the most comfortable experiences in the labour market.

Implementing the new minimum wage has the potential to create more jobs, instigate greater participation in the economy by the youth and curb the prospects of generational and chronic poverty. However, the increasing unemployment rates for the country as a whole and for the youth, show that the new minimum wage can cause employers to layoff workers, freeze hiring activities and encourage youth to go into work instead of tertiary education, making them less appealing to employers in the future which can aggravate the youth unemployment in the long run.