Liberalise the labour market to tackle youth unemployment

A recently released StatsSA report on youth employment underscores the need for vastly better education, skills and training outcomes among black South Africans.

More than that, it vindicates the call for a radical liberalisation of the labour market far beyond what the National Development Plan (NDP) proposes.

According to the report, the proportion of skilled employment among black youth aged between 25 and 34 regressed between 1994 and 2014. During the same period, the overall proportion of skilled employment among the black population rose from 15.1% to 17.9%. Compared to the increase in the proportion of skilled employment among all other race groups, this 2.8% growth is negligible.

Launching the report, the Statistician-General was right to conclude that black youths between the ages of 25 and 34 "lost out in acquiring skills through the 20-year period and that is the crux of the issue of youth unemployment".

He hit the nail on the head. The ANC government has failed to equip a whole generation of black South Africans with both the basic education and access to advanced skills they need to enter the labour market. It is probably the government's single greatest failure.

No wonder the Deputy Minister in the Presidency responsible for youth development, Buti Manamela, has his red knickers in a twist.

After the report was released, Manamela, who moonlights as the National Secretary of the Young Communist League, reproached me for drawing attention to the DA's Youth Employment Plan. The DA's plan, he countered, is "a rehash of existing government plan [sic] coated in neo-liberal gibberish".

Such ideological posturing is to be expected from someone who, along with his fellow travellers in the SACP and Cosatu, opposed and delayed the introduction of the Employment Incentive Act.

If the youth wage subsidy (for which the Act provides) had been implemented when the DA first called for it, then perhaps our youth unemployment rate wouldn't be sitting at 36% and climbing. Maybe unemployed youth wouldn't account for 75% of jobless South Africans.

Awkwardly, as second-in-command of planning, monitoring and evaluation in the Presidency, Manamela must now drive the implementation of the youth wage subsidy and other NDP proposals whose legitimacy he rejects.

Manamela and other leftists in the Cabinet like Economic Development Minister, Ebrahim Patel, are far more comfortable with the half-baked socialist ideas contained in the ineffectual Youth Employment Accord of 2013. Yet none of the Accord's harebrained schemes - least of all the ominously named "youth co-operatives" and "youth brigades" - is likely to create a single job.

Predictably, the Presidency and the bien pensants in the commentariat have seized on the StatsSA report to argue for more rigrorous racial preferencing in the labour market. They urge a hit-them-over-the-head approach to the private sector.

However, any move to enforce racial quotas and introduce punitive measures is likely to be entirely counterproductive. It would deter investment, slow down growth and worsen youth unemployment.

The government should focus instead on improving education outcomes and access to skills development, along the lines suggested by NDP, and removing barriers to market entry.

But if we are to reverse youth unemployment, then we actually need to do more than apply the NDP's laudable recommendations on fixing the education system. In addition, we need a potent dose of labour market liberalisation.  The NDP is far more circumspect about that.

Such a programme of liberalisation would entail the deregulation of labour markets to free the young and the poor to find work. This means making it easier to hire workers through amendments to the Labour Relations Act, enhancing temporary work, democratising labour negotiations, and easing the burden of labour regulations in the small business sector.

We also need to be more open to options that seem to have stalled at present, including an array of incentives to the private sector to take on first time-employees and get more involved in training.

The carrot is likely to have a better effect than the stick.

That is why the DA would reimburse employers to the value of the full amount spent on approved training, including schemes administered by employers' associations. This would ensure that employees' skills are better matched with market demand. The policy would replace the bureaucratic and ineffective Sector Education and Training Authority (SETA) system.

The DA will feed all of these ideas into the National Youth Policy review process, convened by Manamela, and due to be finalised before March 2015.

We clearly need a radical programme of liberalisation geared towards investment‐driven, rapid economic growth. Without it, we will fail to drive down unemployment to the NDP's goal of 6% by 2030. Youth unemployment will continue to soar, and Manamela will only have more egg on his face in twenty years time.

Michael Cardo is the DA's Deputy Shadow Minister in the Presidency.

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