Growth, Employment and Unemployment in South Africa

The high rate of unemployment in South Africa stands out in an otherwise vastly improved set of macroeconomic fundamentals compared to the situation in the early 1990s. One might be tempted to argue that by this single indicator alone, government policies such as GEAR have been a failure. This paper explains why jumping to such a conclusion would be a mistake and focuses on the relationship between economic growth and employment and shows how estimates of the employment coefficient have changed over time. This paper finds that the main reason for the persistently high and rising rates of unemployment in South Africa over this period was the very large increase in the labour force and not a deficient growth or employment performance of the economy.