Bell, Trevor : Unemployment in South Africa

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already become much more difficult for these economically more advanced countries to keep intact a satisfactory system of noncontributory unemployment insurance. The possibility that employment in the informal sector provides a 'cushion' for large numbers of people who would otherwise be completely unemployed, which is not available to the jobless in the advanced industrial countries, may thus be seen as a positive advantage. It must, nevertheless, be recognized that the possibility, indeed probability, that we have become increasingly dependent on the informal sector for employment creation in recent years, and will become yet more so in future is by no means a satisfactory state of affairs. Though the employment problem may take a somewhat different form here, we have not and perhaps cannot escape the worsening of conditions reflected by the rising unemployment rates in OECD countries shown in Table 5 above; which the best available macrcestimates of unemployment in South Africa also indicate. There is in fact no solid empirical reason to believe that the South African trends would be significantly different from those for OECD countries or those indicated by the available macro-estimates. We must remember that we do not in fact know the number or quality of informal sector jobs, or, more important for the crucial matter of the trend in the unemployment rate, how fast these have grown in the ten years since the unemployment rate began its persistent climb. A11 that is known with virtual certainty is that the rate of increase of formal sector jobs has declined markedly over the past ten years. And, furthermore, it is very likely that this has been a major reason for any acceleration which may have recurred in the rate of growth of informal sector employment. It is. therefore, important to give high priority to the task of achieving as rapid a rate of growth of output and employment as possible in the modern, formal sectors by trying to ensure that optimal strategies are being adopted for this purpose. It cannot be assumed that such policies are being pursued or that they will be in future.
As noted earlier, a major theme of the recent White Paper on strategies for employment creation is that factor market distortions are a significant if not the main cause of the unemployment problem, and it sees the remedy as lying largely in more "market orientated" policies 'regarding interest rates, vagee and salaries, prices and the exchange rate". While a "free market" approach in the form of fever legal and administrative restrictions in certain spheres, such as the geographical mobility of labour, occupational mobility, and informal sector activity, may well facilitate employment creation it is questionable whether the free market can seriouely be considered to be a universal remedy for the problem. Though it is clearly not possible within the scope of one paper to examine thoroughly all significant spheres of policy in the light of the remarks from the White Paper quoted above, there are perhaps enough grounds for questioning them. Zhe consideration above of the significance of low real interest rates, as a cause of unemployment, suggests that the role of relative factor price distortions in general may have been overplayed. A reduction in the qeneral rate of expansion of the economy, rather than increasing capital-intensity, was mainly responsible for the fall in employment growth. Proposals to deal with unemployment by raising the price of capital relative to labour, by increasing the absolute level of the interest rate and by reducing or removing depreciation allowances from the profit form structure, overlook the fact that these measures have scale as well as proportions effects. In so far ae increaeing capital-intensity has had an influence on employment growth this may well have been due mainly to various factore other than low real interest rates. Furthermore, as argued above, certain plausible explanations of the low real interest rates which prevailed in the seventies in this and other countries, suggeet that there would in any case have been little the authorities here could have done to avoid them. It is sometimes implied, too, by thoee espousing free market solutions, that all that is needed to deal with problems such as
Page 2 and 3:
INSllIUTt TOR SOCIAL AND ECONOMIC R
Page 4 and 5: i CONTENTS Page - u.t of Tabla0 and
Page 6 and 7: Preface This paper is an extension
Page 8 and 9: Applications by whltea for Employme
Page 10 and 11: Simkins. His work is noteworthy par
Page 12 and 13: There is not, to my knowledge, anot
Page 14 and 15: The evidence thus suggests a persis
Page 16 and 17: ~i~~~~ 1: UNEMPLOYMENT PATES: UNITE
Page 18 and 19: Table 5: Unemployment Rates in Scnn
Page 20 and 21: Thue in a number of other countries
Page 22: Table 6 Registered Unemployment Rat
Page 25 and 26: Table 7 Non-Agricultural Employment
Page 28 and 29: In the case of Blacks, employment g
Page 30 and 31: governwant intervention in foreign
Page 32 and 33: Real Intwraat Rats and Rats of Incr
Page 34 and 35: Table 9 Real Interest Rates and Ave
Page 36 and 37: grawth in general rather than to an
Page 38 and 39: hetbr th. unemployment in voluntary
Page 40 and 41: it is argued that for a small open
Page 42 and 43: imzlO.ion of this form of voluntary
Page 44 and 45: significance1). However, the findin
Page 46 and 47: Thus where the unemployment rate sh
Page 48 and 49: have expected a substantial increas
Page 50 and 51: vii) Finally, amongst the causes of
Page 52 and 53: traditionally been considerably hig
Page 56 and 57: unemployment is deregulated markets
Page 58 and 59: 'thirties and even the postvar peri
Page 60: might, JB (1982) "The Nature of Une
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Bell, Trevor : Unemployment in South Africa

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