Introduction section one 6

Bottle necks with respect to young people accessing the labour market

The previous section has highlighted the impact of the economy and education system on youth unemployment. This section focuses more on those barriers or bottle necks that face young people that could be addressed more directly address within the scope of the interventions outlined within this paper.

This paper recognizes that there are a number of factors that could impact on the ability of young people to access work. Critically the data suggests that race, gender, disabilities as well as the urban/rural divide all impact on labour market outcomes. Whilst addressing aspects of this challenge may be beyond the scope of this intervention it is suggested that there are bottle necks that could be addressed that could enable the transition of these different cohorts of young people. For example, research suggests that one of the reasons that young Africans may take a longer time to be absorbed into the labour market than others) is because of their job search skills related to the spatial separation between business centres and the outlying areas where Africans reside as a result of Apartheid planning policies may explain this challenge. Transportation and the affordability thereof could further add to this problem (Banerjee 2008). Recent evidence reinforces this research and also points to the probability of finding employment being strongly linked to family-related characteristics (social networks and belonging to an employed household vs an unemployed household). This is closely related to the ‘insider/outsider’ issues dealt with in more detail in this section. Mlatsheni and Rospabé look at gender issues in the labour market, where they found that only 17-27% of the male/female gap in the likelihood of having wage employment or being self-employed was explained by observable characteristics, suggesting a large element of discrimination. Recent research conducted by the IYF (2015) resonates with these findings but suggest ways in which these attitudes can be addressed through interventions with employers. Similarly young people with disabilities struggle to access the labour market though again programme reports from the Department of Labour suggests ways to overcome these barriers. This is not to suggest that race, gender and disabilities are not critical factors in determining access to labour market, rather it is suggested that in considering other bottle necks there is a need to review these through the lens of these groups, and further that the barriers to enabling access for these groups need to be explicitly addressed within the design of any intervention.
It is also noted that labour law is often referred to as a bottleneck with respect to youth employment. This paper does not focus on the labour legislation per se though it acknowledges that this remains a heated debate. In the following section though there is a discussion about the policies that have been put in place to enable youth employment: many of which serve to address some of the concerns pertaining to existing legislation, for example the wage incentive addresses concerns pertaining to minimum wage for new entrants.

Bottlenecks when seeking employment

Other factors that create bottlenecks to youth employment are provided by Marock and Altman (2008) and the World Bank Study⁸. These Include:

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  Skills mismatch are the lack of adequate general skills (literacy, numeracy), technical skills, or soft skills (behavioural skills), all of which are identified by employers as necessary for productive employment. It is acknowledged that formal education attainment has already been highlighted as a key determinant to youth unemployment and that these qualifications frequently also serve as a proxy for levels of skills. However it is recognised that there is also the concern that a specific obstacle facing young people is that even with formal qualifications they often lack the foundation skills such as mathematics and English, or other capabilities such as communication or personal presentation and work readiness.
  
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  Youth lack job experience. Obtaining a first job is quite a challenge in any context. However, in South Africa it is especially so for historically disadvantaged groups who face the challenge of not having effective labour market networks that can help guide job search behaviour and skills acquisition choices. This issue has since been highlighted in other research documents including: National Treasury which has highlighted that inexperience is a key factor in employment prospects, and suggests that this may explain some of the implicit age discrimination in the labour market (National Treasury 2011).
  
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  Job search constraints, including poor information about where the employers (or the employees), also called “matching” and a lack of tools that allow young people to signal their capacities to potential employers. Educational qualifications, such as a matric, operate as a signal for productivity levels in the absence of experience. Without the ability to signal their productivity levels to a prospective employer, young people have no way of showing their suitability for a job. Only completed matric and further qualifications are considered trustworthy by employers in South Africa, hence levels below matric serve no value (Wittenberg, 2002; Duff and Fryer, 2005; Levinsohn, 2007). Young people also lack job search capabilities and networks that are relevant to the labour market.
  
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  Youth lack mobility and the resources to look for a job. Related to job search constraints, young people often stay close to home – because of a lack of mobility - where jobs may not be that readily available. Further, as indicated previously transport remains a major challenge for young people.
  

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  Social norms, on the labour supply side, where young people may not pursue available jobs due to self-imposed or externally imposed constraints on the types of employment that are appropriate. Recent research by Harambee suggests though that with support young people are able to identify jobs for which they are more likely to qualify. Further whilst reservation wages are often considered a bottle neck to enabling young people to access employment recent studies suggest that these can be mediated and that young women have been particularly open to such feedback⁹.
  

The key points highlighted above are given further expression in research about how young people navigate the labour market. It has been well documented that those who are most successful at finding employment have higher social capital (Kraak, 2013; Nudzor 2010; Schoer et al., 2012; Seekings ed. 2012). The concept of insiders and outsiders, and the implications for job search behaviour, is further nuanced in research from Seekings (2012a) where they suggest that in addition to insiders and outsiders there is also a category referred to as privileged youth. Considering young people in the urban areas, Seekings provides the following definitions in terms of each of these three categories:

Table : Categories of Urban Youth

Privileged	Youth from more affluent minorities
Insiders	Youth from less affluent neighbourhoods, but who share advantages with privileged peers either through social capital or proximity to employment opportunities
Outsiders	Youth from informal settlements, mostly failing to complete secondary schooling and lack close connections with people who are employed

Reference: Adapted from Seekings 2012a
More often than not, the privileged and insiders are more easily able to find employment while their counterparts, ‘outsiders’, constantly struggle: some can only find interim work, jobs that are unrelated to their field of study or interest and many do this work without an intention of continuing in this employment (Mourshed et al., 2012).
This section explores the strategies that are used by different groups of people and the effect that this has on the outcomes realised – that is their chances of securing employment. The three main employment strategies, or channels, that are pursued by young people are: formal channels, direct application channels and networks. These channels are defined below:
Table : Employment Channels

Formal channels	Newspaper advertisements, employment agencies and learnerships
Direct application	Gate of factories, farms, private homes, as well as waiting at the side of the road
Networks	Referrals, making use of friends and family connections

The research suggests that formal channels are more likely to be used by those individuals with higher education/skill levels and possibly some work experience. This provides them both with a basis for developing a CV and applying for a job, and may contribute to an increased confidence with respect to completing a formal application.

The research on the unemployed and their job search behaviours suggests that the majority of unemployed rely on direct methods: it is stated that ‘place to place’ – that is, that young people literally walk from place to place looking for employment (Bhorat et al. 2001; Dinkelman and Pirouz, 2001; Kingdon and Knight, 2001a). However, this method appears to have a very low success rate, and the majority of these young people struggle to gain employment, and remain unemployed.
Yet Schöel explains that, as these young people are not embedded in local networks, they have little choice and are forced to engage in direct methods, explaining why this strategy is made use of - despite the limited success achieved with this approach. The research also indicates that searching strategy is conditioned by household structure: That is, those not searching for work live with those not searching for work, and of concern is that these individuals that are not searching for work are more likely to be from larger households, and in poorer households concentrated in rural former homeland areas. This is explained by the reality that these young people have the lowest number of contacts in the labour market as these individuals live in households where there are other individuals who are also not employed and not searching for work. These individuals therefore have the weakest degree of attachment to the labour market (Dinkelman and Pirouz, 2001).
Conversely, those searching for work generally live with others searching for work, suggesting that if an individual comes from a household where individuals are employed, this person is more likely to find employment. Research suggests that there may be multiple reasons for these young people finding employment other than having been forced to look for work by the household: these young people can ‘learn’ lessons as to how to look for work from other household members who can share their own knowledge and experiences about ways to find employment. Further it means that there is a job search culture in the home and others in the household may have used networks as a job search strategy (Schöel 2006).
Critically these young people have access to contacts in the labour market and can therefore make use of the third channel; that of using networks as a strategy. This third channel is thus reliant on being embedded in a locally defined social network and having a high level of household employment and local contacts, which explains why the young people who rely on social networks find themselves in households where other household members are more likely to be employed as this enables the jobs searcher to rely on friends and family to gain access to the labour market.
These individuals are found to have further levels of success as they are able to make use of a mixed strategy including formal, direct and networks..
The findings highlighted above are considered crucial to understanding the way in which young people navigate the labour market. The relative success of each of these channels is highlighted in the table below which shows the results of four studies into job searching behaviour conducted in the last decade. The figures indicate the percentage of respondents in each survey who successfully used the three main employment channels to find work¹⁰:
Table : Employment channels: various South African surveys (2000–2006) (%)

	KMP (2000)	CAPS (2002/3)	DV (2004)	SAYPS (2006)
Formal	14 %	16%	28%	22%
Direct	20%	16%	27%	14%
Networks	66%	68%	46%	64%

Sources: As extracted from Scheor et al. (2012) Khayelitsha/Mitchell’s Plain (KMP) survey, Cape Area Panel Study (CAPS), Duncan Village East London (DV) survey (Duff and Fryer, 2005), and South African Young People Survey (SAYPS).
The above highlights the importance of networks in accessing employment, and the relatively mixed results experienced in terms of the other channels (noting that Duncan Village results show greater levels of success in formal channels, and relatively lower in networks). This finding was further emphasised by Schöel (2006) who, using econometric analysis, demonstrates that the lack of social capital restricts individuals in their search techniques and that those with contacts in the labour market increase the likelihood of using social networks than using active search techniques (direct and formal).
The importance of networks reinforces the issue highlighted in the introduction to this paper which pointed to the disparity between ‘insiders’ and ‘outsiders’, as discussed above. The extent to which young people have access to networks is largely contingent on the background of the individual and particularly factors such as the number of individuals that work within their household and immediate community, as well as their access to resources.
The research by Seekings (2012a), uses the Cape Area Panel Study data, and suggests that more affluent minorities belonging to the urban privileged category typically first find work whilst at school or college generally in restaurants, guesthouses, weekend craft markets and shops. These individuals describe finding casual work as easy, ‘as long as one is not too selective’. They take the approach of ‘starting low’, doing odd jobs, and then working their way up. Most of these young people secure work through connections, through people they know. These people understand that sending a CV to a company won’t secure a person a job, and that there is a need to speak to the manager on a personal basis. The research suggests that they understand that there is a need to give a personal display of trust and affirmation. For these people, having an education was not as important to their ability to get their first (often casual) job, as was their understanding about how the labour market works: what employer’s value, and how to ‘sell’ their labour or services. Fundamentally, they understand what constitutes a ‘work ethic’, and their expectations are matched in terms of earnings and the work that is required of them.
Urban insiders are less likely than the privileged category to gain much work experience whilst at school, but having left school they move from job to job, trying them out, before settling on what seems like a long-term opportunity. Their first work tends to be for larger firms, as compared to their more privileged peers, and more often in sectors such as retailing and services rather than in manufacturing (Seekings ed. 2012). They too access jobs through connections, but their connections tend to be employees at these firms rather than owners or managers.
These two groups of people have the advantage of knowing people in the labour market - particularly the ‘right’ kind of people. Either they know owners of companies, or people that work within companies where they could find employment. Privileged youth directly know owners/managers of smaller firms while the insiders know a number of employees who already work at larger firms. Existing employees provide recommendations, and pass on useful information on potential vacancies.
Urban outsiders differ quite considerably from the urban privileged and urban insiders as they lack the initial advantage of possessing social capital, which is difficult to acquire without attending the “right” schools and social clubs, or living in a particular neighbourhood. These individuals struggle to find employment; and consequently fewer have held any sort of job. Those who have dropped out of school have expressed the desire to obtain additional training and access to decent jobs, but research suggests that they lack any sense of how to navigate into the labour market. As outsiders, they lack the skills to approach a manager and demonstrate that personal affirmation of trust, which the affluent so easily manage. In the absence of options, these young people resort to sending out CVs and going door to door in hope of someone employing them, despite the evidence that this is an ineffective searching mechanism (Schoer 2006, Duff and Fryer 2004).
Of equal concern for this study is the finding that suggests that many young people (outsiders) do not always engage optimally with the opportunities that actually exist (Bernstein 2012). This is evidenced by the research from both Cape Town and rural KwaZulu–Natal which suggests that some young people will not accept jobs that are perceived to pay too little, or that offer little employment security (Bernstein 2012; Seekings 2012). It was found that, extending the definition of ‘outsiders’ offered by Seekings, specifically young men from rural KwaZulu – Natal, frequently walk away from low-paid jobs despite the mass unemployment surrounding them in their communities. This is supported by qualitative research undertaken, which also shows that some young people would not take low paying jobs, such as a domestic worker, but would rather seek high paying jobs. These studies conclude that the reservation wages set by young people for formal employment is higher than is likely to be earned (White, 2012), and that if the job is not what the young person is looking for, the young people (‘outsiders’) would prefer to wait for the ideal job rather than gaining work experience in a less than ideal position (Bernstein 2012 and Mourshed et al., 2012).
This research is also evidenced by the CAPS data, which reveals that unemployment is not exclusively a result of the inability to find work, but that it also relates to young people selecting to leave employment for a number of factors. This includes reasons such as pressure in the work place, caused by the type of job (such as the pressure to meet sales targets or undertaking heavy physical labour) or because of personal reasons (such as conflict with the manager): it was found that individuals leave expecting to find a role elsewhere, again demonstrating ‘outsiders’ lack of understanding of, and inability to, navigate the labour market.
Related to the above, studies found that rural youth express less of a desire or willingness to take active measures, which would increase their chances of employment, such as studying further, or gaining experience in other areas. Rural youth feel time is better spent staying at home and maintaining close ties with friends and relatives able to support their basic needs as opposed to doing a job that is ‘not worth their time’ (Bernstein (2012), White ed. (2012)).
Based on the above it is suggested that ‘outsiders’ tend to restrict their choices based on their ideal job preference. The research suggests that ‘outsiders’ choices are not based on an understanding of what is needed to navigate the labour market, or an understanding of the importance of gaining work experience in any work that is available. It is suggested that this decision-making process is related to a lack of understanding as to what is possible to attain, and a tendency to overestimate their chances of finding work (and in particular to find work that they feel is more favourable to them). That is, there is a disconnect between what the young person wants and what is available.
The research suggests that this may be because these young people have no (or little) experience of working and often know very few people who have successfully looked for jobs – there are no, or insufficient, ‘models of success’ for them. Young people, and first time work seekers, have to contend with starting off at a disadvantage of not necessarily knowing what employers are looking for. Specifically, they do not know enough about how the job market works.
The findings of the research into ‘outsiders’ work seeking behaviour is seen to be in stark contrast to the behaviour of ‘insiders’, who have more insight into the functioning of the labour market and recognise that as it is a tough space to navigate, there is a need to acquire an advantage in this search, which includes attaining experience in the labour market.
This section illustrates that young people who are ‘outsiders’ therefore are further disadvantaged as they lack an understanding of the way in which they can acquire the characteristics that employers value, such as work experience. They may also not have realised the need to focus on achieving higher grades at school or on attending training.
As indicated previously, over the last decade the labour market has changed in that the ratio of semi- and low-skilled jobs (as compared to skilled jobs) has declined across all sectors, except for the community/social/personal services sector. Research has found that in high productivity jobs¹¹ where more specific characteristics (including higher levels of qualification) mean a smaller pool to choose from, it is more likely that firms invest in more formal recruitment channels which ensure that effective screening methods are used, such as interviewing and testing. This process will also review the level of education that the applicant has and will consider their CV against set criteria.
However, in relation to low productivity jobs (differently termed as low skilled jobs), employers are more interested in those that ‘show potential’ for a specific role. In these cases, it was found that firms are likely to use channels which still produce relatively reliable information about the applicants’ productivity levels but which are less costly: this includes network channels where they rely on referrals made by their own workforce (Rees, 1966 and Schöer & Leibbrandt et al, 2012 and Rankin et al, 2012). This is achieved by use of ‘word of mouth’, and employers indicate that this strategy provides a filtering mechanism because existing employees are likely to tell only those who they deem to have the correct profile about the job (Rankin et al, 2012). This strategy is chosen as it reduces costs, and because there is a mechanism of trust as it is understood that existing employees ‘pre-screen’ candidates which they put forward for the role.
Employers state though that they experience a challenge in determining which person is most suitable for employment. They indicate that as many young people have not worked before, it is difficult for these young people to demonstrate their productivity levels, as the qualifications and results achieved by school-leavers is not considered to be a reliable signal of the relative merits of those applying for jobs. To overcome this asymmetric information problem, the research finds that employers often make use of the screening process followed by friends and family as a signal of productivity levels (Seekings 2012).
It was found that with the economic down turn, social networks have become even more important as a method of employment for unskilled workers. In the early 1990s close to 42% of South African firms “relied on friends and relatives of existing workers” to recruit new blue collar workers (Standing et al., 1996: 338). Between 1998 and 2002, this has doubled on average to 85% for unskilled workers in large and small firms based on data from metropolitan surveys by the World Bank.¹² These calculations suggest that network channels are by far the dominant method (84%). Direct and formal only represent 10.5% (the remaining percentages are unaccounted for).
Further insights into the manner in which firms recruit, particularly individuals with higher education, is offered by Budlender citing Pauw et al (2006a) reporting on the findings of a survey of twenty large firms operating in South Africa (referred to in Pauw et al, 2006b). The study focused on firms in which the number of employees varied between 2 000 and 40 000, and the sample covered a range of different sectors. The study found that all but one of the firms employed a ‘pipeline’ strategy in terms of which they recruited youth for entry-level jobs, with the hope that they would then move up. However, most of these firms said that they were not able to fill middle- and senior-level vacancies from among existing employees. They also noted that the ‘pipeline’ strategy runs the risk that youth move on to other employers after the first company has borne the costs of recruitment and training. Nearly two-thirds of the firms had bursary schemes that were linked to recruitment, and saw this as a low-risk effort. Some of the larger firms organised recruitment drives on campuses but most felt these were not worth the substantial expense involved. When such drives were organised, they generally focused on historically advantaged institutions on the basis that the quality of the graduates was better, the desired courses were offered, and these institutions had increasing numbers of black students.
Firms reported particular difficulties in finding black recruits for engineering, science and information technology jobs. They also reported higher turnover than for other recruits when they found such employees. More generally, the research report notes that many engineering graduates may not want to do ‘front-end’ engineering work, but instead will want to do office-based work.
The research explored the firms’ attitudes to, and experience of, learnerships. Generally, it seemed that the learnership system had not encouraged firms to employ more people than they would have otherwise, but instead was seen as a ‘windfall gain’ as they received financial support from government for these trainee employees. Firms reported that one reason that they did not take on more learners than they were likely to employ subsequently (so as to provide training for the labour market more generally) was that they found it unpleasant when the time came to refuse them a job. Learnerships were generally utilised for blue-collar jobs rather than those likely to be filled by graduates, although the researchers observe that learnerships could be used for teaching soft skills to graduates. Learnerships were also rarely offered at middle management level.
The findings from the employers resonate with what was found with respect to the ways in which young people found work: primarily through networks, with those young people who have greater levels of education finding employment through direct methods. These issues, coupled with the greater emphasis being increasingly placed on the need for specific skills and higher levels of education, need to be borne in mind in the formulation of relevant interventions.