Employer characteristics and youth employment outcomes in the formal sector in South Africa

August 2018
by Stewart Ngandu and Carolyn Chisadza

“Rising levels of frustration and impatience suggest that time is of the essence: failure to act will threaten democratic gains. In particular, South Africa must find ways to urgently reduce alarming levels of youth unemployment and to provide young people with broader opportunities.” (National Planning Commission 2012: 30)

According to South Africa’s National Development Plan Vision 2030 (NDP), serious inroads need to be made to reduce poverty and encourage economic growth. One of the main challenges involves reducing the unemployment rates in South Africa, particularly among youth.

Evidence indicates that youth unemployment is a costly burden to society that contributes to lower productivity, which has the potential of having a negative impact on growth. In turn, low economic growth can result in loss of jobs in the labour market, perpetuating the unemployment problem.

With youth unemployment rates averaging 51.39 per cent in South Africa in 2013–16, and with the presence of a youth bulge in the current demographic structure, policymakers are justified in paying special attention to the sluggish recovery in youth employment rates.

The slow rise in the share of employed youth is a concern for policymakers, as youth unemployment means:

• There is a proportion of young workers that could contribute to the productivity of the country but are either failing to find employment (Levinsohn 2008) or are discouraged jobseekers, which can result in intergenerational poverty and social exclusion.

• Young people are not gaining the skills and experience necessary to improve the productivity of the country.

• There is a high risk of social conflict, such as juvenile delinquency, which can incur high social costs to the country. 

           • Unemployed youth represent a social welfare challenge to the country.

The above reasons make this study relevant, as it aims to explore, with the aid of company tax data, the characteristics of employers that are more likely to employ young people. Based on this analysis, the study then identifies possible policy interventions which may be helpful in addressing youth unemployment. The ultimate aim of the study is to obtain insights as to where efforts to intensify youth absorption into employment should be focused, and in so doing to create avenues where youth employment can benefit economic growth in South Africa.

Download SA-TIED Working Paper 22