Home

>

Determining the Causes of the Rising South African Unemployment Rate: An Age, Period and Generational Analysis

This paper takes advantage of the wealth of cross-sectional household surveys conducted after South Africa’s political transition, in order to gain insights into the causes of the acceleration in the already high unemployment rate. A synthetic panel dataset is constructed to decompose unemployment and other labour market outcomes into cyclical, generational and life-cycle effects. This dynamic view isolates which groups are at risk across the period and allows a more nuanced understanding of the longrun and shortrun impacts. Our results indicate that the higher unemployment rates faced by the young are predominantly due to the disadvantage of entering the labour market more recently, rather than being attributable to their age. We furthermore isolate what has driven this longrun increase in labour market participation. In particular, higher educational attainment and household formation decisions across generations fuel labour supply among the more recent entrants. We find some correspondence between the cyclical variation in unemployment and the business cycle. This suggests that jobless growth is not a relevant feature of the South African labour market. This paper confirms many of the causes of unemployment that are postulated in the literature. The dynamic nature of this study has furthermore allowed the separation of short-run and long-run aspects of unemployment. The decomposition approach adopted here has uncovered the linkages between the schooling system and the labour market across all generations, but, in particular, has isolated why the youngest generations have exhibited such distinct risks. The surge in labour supply amongst most recent generations (those aged 20 in 1995) can be explained by rapid exit rates from the education system resulting from overage enrolment policies enacted in the post-apartheid period. This has pushed individuals into the labour market prematurely and without the adequate skills to be absorbed into the workplace. The importance of the generational aspects of unemployment relative to life cycle and business cycle impacts suggests that policies should address the structural issues affecting each of these birth cohorts, rather than focussing on age groups per se.

Working Paper 158
1 December 2009
RELATED JOURNAL:

J.Stud.econ.econometrics, 2014,38(1)
SHARE THIS Working Paper PUBLICATION:
22 September 2012
Publication Type: Working Paper

Related South Africa’s Cities and Growth Spatial Challenges and Policy Interventions Content

Request for Proposals: The role of cities as drivers of growth and employment
Background Urbanization in South Africa is expected to reach 80% by...
Call for Work
South Africa’s future will be decided in our cities
Discussion Document 14 South Africa’s cities face multiple, overlap...
Dieter von Fintel, Justin Visagie, Ivan Turok, Takwanisa Machemedze, Claus Rabe, Sebastian Galiani, Edward Glaeser
Discussion Document
Monitoring South Africa’s metropolitan economies: A survey of the data landscape
Discussion Document 13 Disparities in data across different metropo...
Dieter von Fintel
Discussion Document
Cities, productivity and Jobs in SA: Problems and potential
Discussion Document 12 Cities contribute to national prosperity bec...
Ivan Turok, Justin Visagie
Discussion Document
Place-based economic policies: international lessons for South Africa
Discussion Document 11 Place-based policies are designed to support...
Harris Selod, Claus Rabe
Discussion Document
What luminosity data can and cannot reveal about South Africa’s urban economies
Discussion Document 10 As novel types of data are becoming availabl...
Takwanisa Machemedze
Discussion Document
Crime: A policy-oriented survey
Discussion Document 9 South Africa has a reputation for having high...
Sebastian Galiani
Discussion Document
Virtual CDE Workshop on SA Cities and Growth
Urban economics has provided powerful insights into how the charact...
Workshop

Search Resources

Ground Floor Brookside Building
11 Imam Haron Road
Claremont, 7700
Cape Town

PostNet Suite # 109
Private Bag X1005
Claremont 7735
Cape Town

Get Social