The current unemployment problem in South Africa reminds me of England during the 1800's: Sylvia Nasar paints a rather vivid image of England in her book Grand Pursuit - a rich nation stricken with poverty. Unemployment was high, people were uneducated, communities were poorly developed and it seemed like the rich were simply getting richer at the expense of cheap labour. This last point does not necessary hold for South Africa. While the British are going through some economic turmoil currently, the average life of a single human being is much better than a South African. Somehow the English have escaped the 1800's problems, and somehow current-day South Africa is facing a situation that could resemble an 1800's England
As I see it there are mainly three problems that broadly explain unemployment in South Africa (there area lot of good academic papers on this subject - I don't intend to contradict or necessarily improve on that work):
- Labour is unskilled
- There is a wage premium mismatch
- The structure of education is brittle and outdated
I will discuss my views on each point separately (they are definitely related too)
(1) Labour is unskilled
Labour is unskilled because the quality of education is shocking. South Africa, as an example, scores very low in mathematics and science relative to other countries (just look at the Pirls and Timss results). Why? We don't have enough teachers, we do not have skilled teachers, we do not provide proper study materials for students, infrastructure is nonexistent in many rural areas (although I think that this is the least of the problems, still severe though), only the rich can afford good private schools etc...
Why don't we have enough teachers when South Africa's current greatest economic problem requires us to have many more skilled teachers? This is a simple economics problem. If there is such a high demand for teachers, then why don't wages increase in proportion to the demand (assuming there is a shortage of the supply of teachers)? Or is real growth in teacher wage bill capped by the quality of teaching they offer?
One would think that SA's high education expenditure would solve these issues, yet there is little change in educational outcomes. One of the things I am curious about is how much of the education spending actually goes into teaching versus the administrative aspect. I.e. by how much do wages change for government employees administrating education vs. wages for actual teachers? I am also curious about a comparison of the employment uptake for teachers vs. administrators in government.
Expect a bleak South African future if the current problems in education are not solved. A low knowledge base exacerbates the problems of the unskilled unemployed and reduces economic growth. Slower future growth will result in more unemployment and most probably increased political turmoil.
(2) - Wage premium mismatch
I often ask myself why critical skills (engineering, education, medicine, science) wages are on average way below wages of finance and management executives. The word critical for me would imply a shortage of these skills or super high demand for these skills - as a result real wages should rise by a lot. The problem is not about critical skills alone, we do not seem to have the ability to absorb such labour and create industries that utilise such labour effectively? South Africa seems to outsource a lot of critical infrastructure projects to foreign nations while perfect solutions could exist back at home. As a consequence we do not utilise the critical labour as much as we should and hence this could explain in part why real wages in these industries are not comparable to finance.
The wage premium mismatch is also exacerbated by South African unions. Let me first state that I think unions serve a valuable economic function and are necessary. My problem with unions in South Africa is that they take an explicit communist stance without any real cause. Marx prophesied that capitalism will cause a drop in real wages over time and result in longer working hours where the lives of people become more miserable. Real wages across sectors have been rising since the fall of apartheid and working conditions have improved for labour. It is true that income inequality has risen. My view is that income inequality is more important for social stability than anything else. Household income and poverty are a more important variables to look at when comparing how people's lives have improved over time - poverty and household income across all income deciles have increased. I feel rather bemused at the crazy wage demands that unions make given that real wages have risen over time, poverty has decreased and household income has increased. Another concerning factor is that the demands for an increase in real wage growth for unskilled labour seems to outpace wage growth for skilled labour. I am not saying that this is wrong - since unskilled labour work just as hard as skilled labour and often suffer physical consequences for that labour; but it does violate certain economic principles and has the potential to destabilise the economy further - I don't think anyone would dispute that union unrest over the last couple of years have hurt the SA economy.
This brings us to out final problem - and a proposed solution
(3) - The structure of education is brittle and outdated
We know that the current curricula is something to laugh at and does not provide our children with the best opportunities for life. We also know that circumstance plays an unfair role in deciding what type of education a particular child receives - wealthy parents are most likely to send their children to top private schools while poor parents have no choice but to send their children to a rural school where teachers do not even show up for work. Apart from these choices, malnutrition and creating a safe environment are also important factors that help explain the success of education.
If we know that this is a problem, perhaps the greatest challenge that a democratic South Africa is faced with, why isn't the government and private sector doing everything to change this? The effort just seems so feeble and pathetic. The myopic nature of government and the private sector will create social and economic problems for ages to come.
Some solutions:
First, education should be provided for free to give children equal opportunities to go to decent schools. Second, university graduates would do well if they spend 6 months to a year being placed in a school to teach an accepted good quality curricula - some people might be unhappy with this, but it is a low cost effective solution and should not be too difficult to implement. Third, teachers need to get a good education and incentives should be put in place to become teachers or lecturers that train teachers. This could be in the form of higher wages, better subsidies etc.
Once this is in place one can start to revamp the school system in its entirety. All students receive the same curricula up until grade 7. From grade seven children get placed. Children who score above a certain mark (let us call this X1) are placed in classes that do proper training in mathematics, science, history and language - these children will be eligible to go to university and study courses that fill critical skills. The children's incentive is that they get to choose their study path. Children who score below the above threshold, but obtain still reasonable marks (X2), i.e X2<score<X1, are also trained in the sciences and are also allowed to go to varsity - but they are not allowed to study engineering, science or medicine. They still have an incentive to work hard - they get to go to university. Finally, children who score below an accepted threshold (X3) are placed into various training colleges that teaches them skills as artisans, administrators, construction and other services. This way we make sure children obtain skills (something that is presently lacking) and are placed in jobs where there is a demand. It will also encourage children to work harder if the do not want to work in these industries.
I really do not see an alternative to the pressing education gap in South Africa. The entire school system is not working and needs to be completely overhauled.
Obviously this is my take on part of the unemployment-skills problem in South Africa. I have no doubt that there are many holes in my arguments. I urge you to help come up with a solution that is better than this, something that is realistic. Or, if you spot serious gaps in my approach, fill them with details that improve it. If we all want to live happily ever after in South Africa then we all need to take this problem very seriously.
In the next couple of blog posts I will try and provide some data on some of the problems I highlighted. I would like to compare real wages across jobs (unfortunately the labour categories in the labour force survey are rather limited). If possible, I would like to compare the wage bill for teachers vs. the wage bill for education administrators in government. I would also like to know how much of of our infrastructure projects are outsourced to foreign national companies vs. domestic companies - can we explain the differences? Finally it would be interesting to get a view on how many critical skills positions are advertised as opposed to not so critical skills - hopefully this will give us a view on the demand for these skills and possibly analyse whether there isn't any mismatching problem.
For some bedtime reading on the huge returns of education on economic growth and reducing income inequality read this and this.
No comments:
Post a Comment