Young People Navigating the Labour Market Issues facing young people in accessing the labour market

Issues young people face in accessing the labour market

Youth unemployment is severe, as highlighted in the figures provided in the section above, and whilst it is true that labour absorbing growth is central to addressing the challenges of unemployment, whether for adults or young people, there are specific barriers that young people face when trying to access employment, and these challenges are especially profound in South Africa. This section gives context to the data presented on young people not in employment, education or training by highlighting the challenges which young people face in accessing the labour market.

Altman and Marock (2008) note that the first and most important explanation for high levels of youth unemployment is slow economic growth in a context of high structural unemployment. While economic growth in South Africa accelerated in the 1990s and 2000s, it was simply not fast enough to absorb labour at the pace needed. However, it must be noted that, during this period, the pace of employment creation was fast in relation to the pace of growth, especially between 2007 and 2008: again during this period, the employment growth rate amongst youth aged 20 and older was at least as fast as the national average employment growth rate, if not faster. This growth was abruptly brought to an end by the global economic crisis. South Africa shed a disproportionate number of jobs relative to what would be expected for its GDP growth in 2009/10.
Although the economy has since started to create employment, it has not yet reached the level it was and youth, and in particular less skilled youth, were disproportionately affected by the downturn: it was found that especially hard hit were those that are African (Branson and Wittenberg, 2007) and those that had not passed Grade 12. One explanation that was offered for this is that young people are more susceptible to unemployment during a slowdown in the economy as they are less likely to be hired and more likely to be laid off (both in terms of the first-in-last out principle and due to lower retrenchment costs). This finding was reinforced by Rankin et al in their paper ‘Young People and Jobs during the Financial Crisis’ (Unpublished): they show that the challenge faced by young people during the financial crisis is the growing skills bias in the South African labour market. Industries that have traditionally absorbed most unskilled entrants to the labour market now have a lower ratio of semi- and low-skilled jobs. The impact of the growing prioritisation of skills affects young people most adversely, because semi- and low-skilled jobs are natural entry points into work. Rankin et al highlights the increasing demand for skilled and highly skilled individuals and indicates that at the same time, the proportion of those in the 15-34 year age group with a matric or higher level of education has also increased.
Within the context of the shrinking economy and the shrinking job market, Marock and Altman (2008) provide some other explanations for high unemployment among young people:

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  Youth lack the skills that underpin employability. The economy tends to favour older, more experienced workers where the number of jobs created is not sufficient to employ younger labour market entrants. Young people often lack foundation skills such as mathematics and English, or other capabilities such as communication or personal presentation and work readiness. Overall therefore, it is also often assumed that the economy is skills biased, and is not generating jobs for entrants.
  
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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.
  
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  Youth lack mobility and the resources to look for a job. They therefore stay close to home where jobs may not be that readily available. They lack job search capabilities and networks that are relevant to the labour market.
  
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  Youth with neither a matric nor experience lack a signalling mechanism. 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)
  

In a cohort study, Branson and Wittenberg (2007) further show that younger cohorts seem to be leaving the school system much more rapidly than cohorts even a few years older than themselves. The age which African men and women are becoming economically active is lower (Branson and Wittenberg, 2007). The crucial question in this case is whether the transition out of the schooling system is at the cost of lower education attainment. It seems not – young Africans are obtaining the same amount of schooling as before, but at a quicker rate. What is of concern is that they are not being absorbed into work at a faster rate (Branson and Wittenberg, 2007). The increasing availability of jobs is not enough to absorb the increased flow of young people into the labour market.

The above is consistent with the finding that young Africans may take a longer time to be absorbed into the labour market as their job searching appears to be less effective compared to whites, which is possibly due to the spatial separation between business centres and the outlying areas where Africans reside as a result of Apartheid planning policies, and the ‘insider/outsider’ issues dealt with in more detail below. Transportation and the affordability thereof could further add to this problem (Banerjee 2008).
Inexperience is a key factor in employment prospects, and may explain some of the implicit age discrimination in the labour market (National Treasury 2011). Employment fell by more than 20% (320 000) between December 2008 and December 2010 for 18 to 24 year olds in sharp comparison to an overall decline of 6.4% (National Treasury 2011).
Taking these challenges further, Budlender² cites Mlatsheni and Rospabé who attempt to explain the high overall rate of youth unemployment and characteristics by taking firstly a macroeconomic viewpoint, and then secondly a micro-economic approach. Macroeconomic literature generally sees the main determinants of youth unemployment as being a lack of demand from the economy – the level and growth of economic activity has been unable to cope with the supply of new entrants to the labour market. The other determinants contributing to youth unemployment are youth wages and skills level.
At a microeconomic level, the reason cited for youth unemployment is related to ‘human capital’. In terms of experience youth generally would have less human capital than older people. Interestingly, in terms of education and formal qualifications, youth often have more capital because of greater opportunities: this is consistent with the data provided in the previous section and is particularly marked in South Africa where the (black) majority of the older generation did not have access to education and training. Given these different sets of characteristics, it is suggested that companies place greater value on people possessing experience as ‘human capital’ as opposed to formal education and training. This reinforces other research, which suggests that while a Matric certificate is a good signalling mechanism for productivity levels, it may not be enough to show value for a particular job – and that experience, or a higher qualification counts for more.
Mlatsheni and Rospabé also look at gender, 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 evidence reinforces this research and points to the probability of finding employment being strongly linked to education levels (having post matric qualifications), location (urban vs. rural youth) and family-related characteristics (social networks and belonging to an employed household vs an unemployed household).
It is suggested that while some differences can be explained by discrimination there are also other factors. For example, in rural areas, the phenomenon of young men walking away from low-paying jobs often occurs. For young women, they face a different situation, particularly young single mothers who are confronted with the daily consumption requirements of their children – they feel the responsibility of having to work to provide for their child, whilst for young men, it is not always clear that any kind of job is better than nothing (White ed., 2012)
In looking at where young people who are employed find work, it was found that approximately 80% of employed young people are employees (that is wage earners) and work in formal sector jobs in the private sector (Rankin et al, 2012). Thus conversely it was found that very few young people pursued self-employment as an option. This is confirmed by other data, which shows that in 2010 there were 1.1% young people classified as self-employed, as compared with 8.8% in the 35-65 year age group (ibid).
This low level of participation in self-employment is explained in multiple ways: young people lack the savings and start-up capital and it is hard for young people to access finance without any backing and with no employment track record. Further, they lack the experience and skills gained through work experience and often do not feel confident to attempt a business on their own. In addition research suggests that a young person, entering the labour market, might need to earn an income from early on, yet most start-up businesses take a while before they start to generate profit. Young people also indicate that they would prefer the guarantee of a regular income as compared to the uncertainty related to a new business venture that may initially require sacrifice in terms of income, particularly in the early phases (Rankin et al 2012).
These reasons are considered critical to understand, with one-quarter of the labour force out of work, it is imperative that the extent to which self-employment can be considered a viable option to address unemployment. As Marock and Altman note, the levels of unemployment, and the challenges that large numbers of young people face in making the transition into the labour market, create a range of pressures on society and on business – and represent both a social issue that needs to be addressed, and a set of issues that partners need to engage around for a multiplicity of reasons discussed below

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These issues resonate with those from a recent study that was conducted on behalf of the World Bank.³ The study suggests that the following factors that may be constraints to youth employment:

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  Lack of labour demand in markets where economic activity is too slow for job growth or where there is a demand for labour but employers choose not to hire the available labour pool.
  

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  Constraints to self-employment, namely the money, know-how, and social networks that are the bases for successful small firm start-up and survival.
  

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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.
  

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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.
  

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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.
  

The study suggests that the types of constraints require particular interventions, and these are outlined in Section 7.

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