South Africa: No Second-Guessing Value of Informal Job Creation
Monday, November 27, 2006
The informal sector — officially defined as businesses that are not registered in any way — currently accounts for some 2,9-million jobs. Official statistics on the size of its contribution to total employment have fluctuated wildly over the past decade, from 11% in 1996 to a peak of 29% in 2001, then down to 19% in 2004 before climbing to 23% this year. THE government appears to be changing its attitude to the so-called “second economy”.
Speaking earlier this year about the Accelerated and Shared Growth Initiative for South Africa (Asgi-SA), the Deputy President, Phumzile Mlambo-Ngcuka, said that “the goal of addressing and ultimately eliminating the second economy cuts through all our strategies”.
Earlier this month, however, she said the government expected to be some 2-million jobs short of its target of halving unemployment by 2014 but that she was confident “we can pick those up in the second economy”.
The government hoped “the creation of informal jobs will plug the gap” of 2-million between its jobs target and those created in the “first” or formal economy.
The second economy, in other words, is here to stay.
The informal sector — officially defined as businesses that are not registered in any way — currently accounts for some 2,9-million jobs. Official statistics on the size of its contribution to total employment have fluctuated wildly over the past decade, from 11% in 1996 to a peak of 29% in 2001, then down to 19% in 2004 before climbing to 23% this year.
Without these jobs, most of which pay very little and many of which are often described as little more than “survivalist enterprises”, unemployment would be much higher than it is. Moreover, they account for a hefty share of total job increases.
At current rates of economic growth, the formal economy can make only a limited contribution to total net new job creation — and Mlambo-Ngcuka’s statement is a necessary recognition of this sad reality.
How many new jobs are being generated overall is not clear. Mlambo-Ngcuka speaks of a current rate of job creation of more than 500000 a year, but that holds true for only the last two years. Many of these were presumably temporary jobs on the expanded public works programme. Prior to that we had two years of decline.
Looking over the whole four-year period from March 2002 to March 2006, the number of people in employment grew only 834000. Many of these new jobs were informal jobs generated within the second economy.
Even so, growth in employment in both the formal and the informal sectors has not prevented an increase in the number of “discouraged workers” — those out of work and available for work, but making no effort to find work. Their number has grown from 2,2-million in 2000 to 3,7-million this year.
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