The privilege of employment

The Labour Force Participation Rate is defined as the percentage of people of working age who currently either have a job, or are looking for one.

Nowhere in the world is that 100%.  Neither is it strictly correlated with overall economic wealth.  Tiny and impoverished Burundi has a participation rate of 93% because societies based on subsistence farming need everyone to work.  Wealthy and sophisticated France is at 67% since people there spend longer on their high-tech educations.

The exact definition of “participation” creates a difficulty for analysts since politics can intrude.  If you assume a low participation rate, then the number of unemployed can magically shrink and flatter politicians.

In South Africa, there are 13.8 million people who have jobs, but over 30.8 million people of working age.  If you assume labour force participation of 100%, then unemployment could be as bad as 55%.  Stats SA tells us that the current unemployment rate is 21.9% and that the participation rate is set at 57%.

Somewhere between the 17 million people of working age who are currently unemployed and not being educated, and the 3.8 million people who are officially considered jobless, lies real unemployment.

The government has promised to create 1 million jobs a year until 2014 in order to halve unemployment (which means they believe unemployment to be 41%).  This level of job creation can be measured and will be a verifiable yardstick by which to gauge the strength of economic policy.

However, it is still hard to see that government has given any indication of understanding the nature of employment and where jobs come from.

Jobs are not a right that can be legislated.  They are not a miraculous creation falling nightly from the sky.  Government can certainly pay people to do things on its behalf, like sanitation, electricity or water provision, but the money to cover these expenses does not come about through magic either.

Jobs, or the money to pay for government-sponsored jobs and entitlements, are created by investors, entrepreneurs and businesses.

Those who cannot create their own jobs, as entrepreneurs do, are dependent on those who can.

Yet staff are often a burden entrepreneurs are unwilling to take on.  A legislative environment that sees jobs as an entitlement, rather than as an act of creation at the discretion of a business, can become unpleasant for employers.  “I wish you staff is actually a curse,” one business owner told me, only half in jest.

In bad months, when sales have been slow, some business owners borrow from friends or relatives to cover wages.  Public holidays may be fun for employees, but they are a disaster for delicate business cash savings.

Some business owners are idealistic, believing that they have a duty to pay staff even if they can’t afford it.  Some are more pragmatic, laying off people as soon as things get tough.

The more people who work for a company, the more the owner is forced to spend time on legal compliance and staff management that is costly and doesn’t generate any income.  Many find a balance where the effort of looking after staff is offset by added productivity and income.  That may not be as many people as they could employ, but it is as many as they are prepared to employ.

Unsurprisingly, the further into the unregulated heart of the townships a business, the more likely that the balance of power between the employer and employed shifts into the hands of the employer.  Most people working in the informal sector are paid through piece-work, or through a day-wage.  There is no guarantee of continuous work, or of security of employment. 

One Khayelitsha manufacturer I spoke to had recently laid off his entire workforce when he went into hospital and was restarting his business from scratch after resuming work.

As he said, “Work is a privilege, not a right.”