#YouthReport2018: Generation jobless and the high inequality economy

Lappeman’s 'Millennial terminology' point taken, we were ready for Professor Haroon Bhorat’s powerful presentation.

Titled, ‘Youth: An economic perspective,’ it put the numbers we think we know about growing up in SA under the spotlight.

Bhorat said it’s a challenge to focus on youth here, as South Africa is “a bit of Australia and a lot of Bangladesh,” so he focused on strands common across the economic spectrum rather than drawing on LSMs.

He shared the five biggest stories affecting South African youth today:

1. The first is population trends, and being careful of what the numbers say;
2. Next is to look beyond age to the specific context of SA children;
3. This is followed by the specific challenges faced by children in schooling and education;
4. Then “it’s about the economy, stupid"; and
5. Last, the fourth industrial revolution and clawing back from fears that 'the robots are coming'.

Bhorat began with a look at demographic transitions, from Africa to South Africa. He said the demographic story of sub-Saharan Africa suggests the rise of the African worker.

African economic myths and misconceptions

But, looking at total populations and working-age population projections for the world and sub-Saharan Africa from the years 2015 to 2100, based on Bhorat’s own calculations using the UN’s World Population Database, he says it’s actually a battle similar to that we face with those who talk about Africa as a country.

It’s the African countries with the largest populations, like Tanzania and Ghana that will drive that rise – it won’t necessarily apply to all 54 countries on the continent, nor to South Africa.

Another misconception addressed by Bhorat is that the working age population isn’t actually growing dramatically. We have a stable, fairly low growth rate in SA, but we are a youthful population, with 26.8m, or 46% of our citizens, under the age of 24.

This is why Bhorat prefers to steer clear of LSMs and rather uses income quintiles for this type of work.

He says to also note three reality checks on growing up in SA:

1. They’re mostly poor.
2. Nuclear families are not the norm.
3. They’re better educated, yet…

Taking a deeper dive raises the disturbing figure that 64% of children in South Africa live in the poorer income quintile households, according to the Child Gauge Report of 2017.

Harsh reality: We're hardwiring disadvantages into SA youth

This leads to the topic of the South African Social Security Agency’s (Sassa) child support grants – 1999 Child Support stats and 2017 Sassa stats show the recipients have grown from 22,000 in 1999 to more than 12m in 2017. The age limit is 18, and the amount of R410 per child per month is obviously not enough, but it’s what is fiscally possible.

Bhorat said, “The consequences of living in a poor household are clear, hardwiring disadvantages into the child’s health, which impacts on learning and grade progression, with long-term consequences.”

‘Inequality starts before birth.’ - David Harrison, CEO @DGMurrayTrust #YouthReport2018 #UUISM #InstantGrass pic.twitter.com/NC6iLWoI5h

— UCT Unilever (@UCTunilever) August 31, 2018

On his third reality check, that we’re ‘better educated, yet…’, Bhorat quoted an IRR report from May this year, that 70% of schools have no functioning library. You may respond, ‘So what, it’s the digital age’, but the same report shows 60% of schools don’t have a computer lab, either.

This report is so heavy. Even the slightest #privilege blinds us to what's really going on in SA. Our privileged norm is not average South Africans' norm and it's crucial that players in education, business and entrepreneurship understand that. #UCTUnilever #YouthReport2018 pic.twitter.com/Uq042ztziv

— Bongi MaMvuyana Simelane (@BongiMvuyana) August 30, 2018

From learning to earning: Impact of learning deficits on the economy

Shifting focus from demography to economic opportunity, Bhorat added that the Southern African SACMEQ III comparison study of standardised test scores for reading and maths tend to be higher in Tanzania, the Seychelles, Mauritius, Swaziland and Kenya than here in South Africa.

Those are the basic skills needed to develop human capital. As a result, we have learning deficits in the arts and sciences that tend to increase over time and shape the economic growth opportunities and outcomes for the country.

In addition, stats from the CDE in 2017 show that for every ten learners put through the SA education system, only three will end up in higher education – the other seven supposedly end up in the technical vocational education and training (TVET) sector.

Stats SA’s Vulnerable Group Indicators Report of 2016 lists the top three reasons for those high drop-out rates are poor academic performance, disability and not having the money for school fees.

This only snowballs if those scholars get into the tertiary education system, as research shows the triangle of higher education systems is the wrong way around – there are too many in university and too few in TVET. It’s a schooling pipeline challenge that results in generation jobless.

We have the highest unemployment rate by far in the world at roughly a quarter, and inequality of household income is the grand figure. The main determinant is the fact that we have so many zero earners.

So young work seekers confront terrible odds, as CDE 2017 shows there’s a daily increase in youth unemployment of 380.

What are NEETs?

Not in
Employment
Education or
Training.

*Also not self-employed. #YouthReport2018 #InstantGrass #UUISM pic.twitter.com/BG3xaN5wSL

— UCT Unilever (@UCTunilever) September 5, 2018

Explaining the genesis of this growth trap, Bhorat added that we are only creating 63 jobs for every 100 seekers, so we need to look at what’s going wrong in the economy. In a nutshell, Bhorat said what lies behind that unemployment number is that for the past 25 years, South Africa’s annual GDP has only been growing at 1% a year – there’s a definite lack of formal growth opportunities.

So it’s a high inequality economy, with the majority of the youth unemployed, and therefore not contributing to the economy – and that’s the bulk of the so-called “millennial market” our brands keep targeting.

Impact of the Fourth Industrial Revolution, job automation on the missing middle

Depending on your age, you’ll fill in the blank accordingly: “Turn over a plastic toy and you’ll see a sticker saying ‘Made in…?’ The response for the older set shifted from Japan to Taiwan and China, but it’s increasingly Bangladesh and Vietnam.

Bhorat explained this against his own calculations of the South African Reserve Bank’s 2017 data on which sectors are creating jobs and which skills are actually in demand today as showing the shift in low-wage manufacturing and much-needed growth of the SME and informal sector instead toward massive growth of the services industries.

The jobs being created in S.A. are disproportionately for the skilled. In becoming a services based economy we're becoming a skills-biased economy and eroding opportunities for those who are not very skilled. #UCTUnilever #YouthReport2018 #JobSeekers #JobSeekersSA

— Bongi MaMvuyana Simelane (@BongiMvuyana) August 30, 2018

Wanting to do shopping in a mall also negates the impact of the informal sector, which has a low barrier to entry and can boost the country’s entrepreneurs.

We need that ‘dirty development’. We can’t just remove the informal traders in poor areas, replace them with shopping malls and call that development.

Looking further into the future of the country’s young people, Bhorat said technology and automation is increasingly replacing jobs ‘in the middle’.

Similarly, the #FeesMustFall movement was about the middle, not the bottom of the market, and it’s a mix of high-school graduates and dropouts that still can’t find jobs.

Hence the ‘missing middle’, which sees a fall in annual average growth rate of real wages in South Africa.

Bhorat recommends reading up on the future of work and concluded that currently, in recruitment we see an increased demand for soft skills and an ability to work with technology.

In order to see a future that’s neither a case of continuing with the status quo nor merely entrenching that missing middle, he says we need to fix the schooling system, add employment incentives and create more low-wage jobs in order for the new normal to be more positive than what we see at the tail-end of 2018.

Watch for more coverage of the UCT Unilever Institute of Strategic Marketing’s Youth Report 2018, and follow them on Twitter for the latest updates.