Growth, Employment and Unemployment in South Africa

The high rate of unemployment in South Africa stands out in an otherwise vastly improved set of macroeconomic fundamentals compared with the situation in the early 1990s. One might be tempted to argue that by this single indicator alone, the government's macroeconomic policies have been a failure. This paper explains why jumping to such a conclusion would be a mistake. Annual time series data on total formal sector employment is constructed dating back to 1946. The relationship between economic growth and formal sector employment is then measured and changes in the employment coefficient over time are described. The employment coefficient was found to be relatively stable, with a long‐term average value of 0.5. It returned to this value after a short‐lived collapse in the mid‐1990s. It is concluded that the main reason for the persistently high and rising rates of unemployment in South Africa since the mid 1990s was the very large increase in the labour force and not a historically deficient growth or employment performance of the economy.