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The myth of graduate unemployment

Wednesday, March 11th, 2015

The South African labour market is plagued by high unemployment. More than a third of all people who want to work, cannot find work. Only 43% of all people aged 15 to 64 are working. The equivalent rate for the member countries of the Organization for Economic Cooperation and Development (OECD) is about 65%. For South Africa to attain this level, another eight million people in South Africa have to start working. What is more, only about 31% of all adults in South Africa are employed in the formal sector – the other 12% that have jobs, work in the informal sector or as domestic workers, gardeners or farm workers.

In this context, it is important to understand the state of affairs correctly, so that the correct solutions for the problem can be implemented. If the problem is diagnosed incorrectly, the unrealistic solutions will fail when applied in practice.

Total population

The diagram shows the broad composition of the South African labour market in the third quarter of 2014. It should be noted that the 35,5 million people that are officially of “working age” comprise only two-thirds of the total population, because South Africa’s population is relatively young. Of the 35,5 million, only 15,1 million have any kind of job – which is how the employment rate of 43% is determined. However, that does not mean that the remaining 57% of people of working age are all unemployed.

People can only be unemployed if they wish to work. If someone chooses not to work, it is not a problem for them if they do not have work. For instance, it surely is not a problem that 6,3 million students (including school learners of 15 and older) do not have jobs. The real problem lies with the 8,4 million people who would like to work but cannot find a job. Of the 8,4 million, 3,3 million are no longer actively looking for a job, because they have lost all hope of finding employment.

An important reason for this state of affairs is that the growth areas of the South African economy are mostly sectors in which an employee must have some academic or technical education after school level to be successful. The economic sectors that have grown the most over the past two decades are financial services and telecommunications, with other service sectors not far behind. The combined tertiary sector of the economy accounts for about 70% of the value generated annually in the country.

South African population of 20 and older by level of education

English graduate unemployment graph

As the graph shows, only 13% of the adult South African population have any tertiary education, while only an additional 28% have a matric certificate. Although these percentages are growing steadily, it is clear that there is still a large imbalance between the type of employees that the growth sectors of the economy need and the nature of the potential employees that are available.

The myth of graduate unemployment 

A perception does exist that there is an unusually high number of unemployed graduates in South Africa. This notion has often been expressed in the public discourse over the past few years by people such as Jimmy Manyi and even President Jacob Zuma. At a conference of the Progressive Professionals Forum in September 2014, the president said he wanted to ensure that university curricula were changed to reduce the “alarming number of unemployed graduates”.

However, the notion that there are abnormal numbers of unemployed graduates in South Africa is a myth that is not supported by the available data. It is based on anecdotal evidence. Some graduates are indeed occasionally unemployed, even for months or years on end, but this is without a doubt the exception rather than the rule.

In 2012 Professor Servaas van der Berg and Hendrik van Broekhuizen of the University of Stellenbosch published a study[1] that analysed labour market data from 1995 to 2012 to determine if there really was a problem. They concluded:

The analysis conducted … has shown no evidence of a high level or a markedly upward trend in graduate (i.e. degreed) unemployment. Levels of unemployment are low even by the standards of prosperous economic times in the countries of Western Europe … the main conclusion of this study is that there is no graduate unemployment crisis.

This really ought to have put an end to the debate, but unfortunately academic publications are often neither widely distributed nor read.

As further evidence for the conclusion that there is no graduate unemployment crisis in South Africa, the 2011 census data have also subsequently been released. The census data is collected and compiled differently from the ordinary Quarterly Labour Force Survey carried out by Statistics South Africa. The two datasets can therefore not be compared directly. The census figures can nevertheless shed further light on the issue.

When considering the age group of 23 and 64 as a whole in the census data (15 to 22 are excluded to eliminate learners and students to a large extent), 22,3% were unemployed, 30% were not economically active and 47,7% were employed. The number of unemployed people was 5,7 million out of a total of 25,6 million people.

Only 1,9 million people aged 23 to 64 had degrees. Of this group, only about 103 000 or 5,4% were unemployed. Of the remaining 1,8 million, 1,6 million had jobs, primarily in the formal sector, and 0,2 million were not economically active (they preferred not to work).

Given that only about one hundred thousand graduates out of a total of nearly two million do not have jobs, an unemployment crisis among graduates can hardly be said to exist, yet that is what policymakers, even the president, would have us believe. This kind of misinformation is dangerous, because it could lead to young people in South Africa thinking that it is not a good idea to acquire further skills after leaving school.

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