Research firm Trade & Industrial Policy Strategies (TIPS) has published a new report on employment trends in the local economy and the types of jobs that South Africans hold.
The official Quarterly Labour Force Survey (QLFS) figures from StatsSA for Q2 2020 showed that 2.2 million people lost their jobs in South Africa between the first and second quarter of the year.
Because many people without paying work stopped looking for employment during the lockdown period, Stats SA reported the unemployment rate actually falling to 23.3% during the period – a 6.8 percentage point decline from the 30.1% recorded in the previous quarter – however, this was not a full reflection of the job losses experienced under lockdown.
Using the broader definition of unemployment, which includes people who want paid employment but have given up looking for it, South Africa’s unemployment rate increased by 2.3 percentage points to 42% in the quarter.
TIPS said that the employment ratio better underscores the scale of job losses due to the pandemic.
“From 2010 to 2019 South Africa’s employment ratio remained around 40%, but in the second quarter of 2020 it fell to a record low of 36%,” it said.
“That is, just over a third of the country’s adult population said they were employed in the second quarter of 2020.”
TIPS said that the pandemic-related job losses aggravated already low employment levels in the country. According to the World Bank (2019), the global employment ratio was 58% in 2019, down from 62% in the early 1990s.
“Lower-middle-income countries reported a 54% employment ratio, while upper-middle-income countries, which include South Africa, reported an employment ratio of 60%,” it said.
StatsSA’s data shows that the effects of the Covid-19 shock were particularly severe on lower-level workers in high-risk occupations. That means it has deepened the pre-existing inequalities in South Africa’s labour market, TIPS said.
Private vs public sector
TIPS said that the public sector contributes around a quarter of all formal employment in the country.
It shrank far less than the private sector during the pandemic, in part because a high percentage of its employees are essential workers, and in part because the national public service did not dismiss workers even if they were unable to work as a result of the disaster regulations.
The QLFS found that employment in the public sector declined by only 7% (168,000 positions) in the second quarter, compared to a two million or a 15% decline in the private sector.
By comparison, private sector employment reached a record low in the second quarter, as many companies closed in response to the lockdown.
“Within the formal private sector, management, professional and associate professional employment fell by only 5% from the first to the second quarter.
“By contrast, other occupations saw a net loss of 16%. That is, lower level workers saw at least one in six jobs disappear during the worst of the downturn,” TIPS said.
It noted that jobs that can be done from home are concentrated in professional and associate professional occupations, explaining their relatively limited jobs losses.
In addition, a survey of employers by TIPS found that even when employers did not dismiss workers, they often reduced their pay substantially, by between 30% and 50%.
Self-employed and informal workers
In the second quarter, 17% (2.4 million) of the workforce were classified as ‘self-employed’. This includes employers, own-account workers and those helping in a household business without pay.
Less than 42% of the self-employed were classified as employers – i.e. those who operated enterprises with one or more employees. In addition, over 50%, or 1.3 million, of the self-employed were own-account workers who had no paid employees.
By comparison, paid employees constituted 83% of the workforce, with over 10 million jobs.
In proportional terms, the deepest employment losses between the first and second quarters of 2020 were own-account workers, predominantly in the informal sector, TIPS said.
“QLFS data estimates that 20% (334,000) of own-account workers lost their jobs in quarter two. The vast majority of own-account workers operate informal businesses in retail, business and community services.”
TIPS said that the earnings of these workers are often very low, at R3,033 in 2018 according to the latest Statistics South Africa Labour Markey Dynamics data.
These low earnings are likely not sufficient for workers to save against the risk of job or income loss, it said.
“They are, however, not eligible for the Temporary Employer-Employee Relief Scheme (TERS) because employers and the self-employed are not registered with the Unemployment Insurance Fund (UIF).
“They could receive the Covid-19 grant, but at R350 a month that is substantially below the poverty line of R585.”
A 2017 StatsSA report shows that the number of persons who ran informal businesses declined from 2.3 million in 2001 to 1.1 million in 2009, before showing an increase in 2013 and 2017 to 1.5 million and 1.8 million, respectively.
More than 90% of persons who ran informal businesses did so without a licence or permit, and the majority of those who had licences or permits (40.2%) obtained them from a municipality/provincial authority.
- Seven in every 10 persons running non-VAT registered businesses used their own money to start the business.
- Unemployment was the main reason why most people started their businesses, accounting for more than 60% of the business owners.
- More than nine in every ten businesses had no business debt, credit facility, mortgage loan or asset finance.
- In 2017, 88.5% of employees in informal businesses were paid employees.
It is mandatory for any business to register for VAT if the income earned in any consecutive twelve-month period exceeded or is likely to exceed R1 million.
Any business may choose to register voluntarily if the income earned, in the past twelve-month period, exceeded R50,000.