The Sectoral Employment Intensity of Growth in South Africa

1 September 2016
Publication Type: Working Paper
JEL Code: E24, J21, J23, O17, O55

Concerns have been expressed recently about the inability of the South African economy to provide adequate employment for the increasing number of job seekers. The rate of unemployment remains stubbornly high in spite of vastly improved macroeconomic fundamentals since the 1990s. This paper investigates how the sectoral employment intensity of output growth in the eight non-agricultural sectors of the South African economy has evolved in the period 2000:01-2012:04, with a view to identifying key growth sectors that are employment intensive. Empirical findings of the study suggest that total non-agricultural employment and GDP do not move together in the long run, implying that jobless growth occurred in South Africa during the period under review. This supports the view that South Africa has become less labour-intensive and more capital-intensive, and that this in turn has facilitated a structural adjustment that has led to the weakening employment-growth relationship. Results of a sectoral division confirm a long-run relationship between employment and growth in the finance and business services, manufacturing, transport and utilities sectors. In particular, the results suggest that sectors within the tertiary sector are the best performing sectors in terms of employment intensity of output growth, reflecting the changing structure of the economy and the nature of employment shifting away from the primary towards the tertiary sector. Investment in the tertiary sector is necessary to foster new employment opportunities and can assist in improving the overall employment intensity in South Africa.

Series title: Working paper 631
1 September 2016