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What’s up with Jobless Growth?

As most of the developing world seems to be facing a youth bulge in the coming decade combined with already massive amounts of unemployment, the new trend of jobless growth in South Africa is troublesome.

“An inaugural OECD Economic Survey of South Africa, released in July stated that South Africa’s economy needs to grow by 5% a year in order to turn the tide against unemployment which is ‘especially acute for the young.’” In the report the OECD stated that increasing unemployment is one of the major challenges of South Africa.

“According to Adcorp CEO Richard Pike, there is a growing concern that the historical linkage between economic growth and job creation has weakened significantly since 2000. ‘Between 1960 and 2000, every percentage point of economic growth was reliably associated with a 0.62% increase in employment. However, since 2000, apart from extraordinary growth in financial services employment between 2002 and 2006, each percentage point of economic growth was associated with a 0.11% increase in employment.”

Implications from Institute for the Future:

The jobless growth in South Africa can be due to its low economic growth of just around 3%, less than what is needed to create jobs. It can also be a sign of structural changes. Jobless growth has often been seen in the transitional stages of development. As an example, when the automobile replaced the horse and buggy there was a lag time when buggy makers had to be retrained to build cars or move into other industries thereby lowering employment despite economic growth. South African agriculture and mining industries have been shrinking. According to the Economist, “having been the world’s biggest gold producer for more than a century, South Africa has fallen behind China, Australia and America.”

Let's also hope that this is uniquely South African and not a sign of a larger global switch.

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South Africa Node July 2010, pg. 2

More on South Africa’s jobless growth:

Link to “Demise or Resilience.” A fee is required to access full article.