Politicians, especially during election campaigns, are prone to exaggeration, but the claim by trade & industry minister Alec Erwin in parliament last week that the economy had created 2m "net jobs . . . mostly in the formal sector" was stretching the truth too far.
The ANC's election manifesto also says the economy has "created 2m net new jobs between 1996 and 2003". It adds that many people have lost their jobs and been negatively affected by conversion of jobs to casual work. But where does the 2m figure come from?
Government's claim originates from a paper commissioned by President Thabo Mbeki's policy unit, written by University of Cape Town economist Haroon Bhorat, as part of government's 10-year review. Bhorat's data comes from two sources: the October household surveys of 1995 and 1999, and the labour force surveys (LFS) from 2000 to 2002, both compiled by Statistics SA.
The numbers speak for themselves (see table). Whereas in 1995 9,6m were employed, in 2002 the number rose to 11,2m - an increase of 1,6m. Erwin and the writers of the ANC manifesto appear to have included the 2003 LFS (not available at the time Bhorat wrote his paper), bringing the number to 2m. But these figures make no distinction between formal and informal jobs. Hence traders, subsistence farmers, domestic workers and casual workers in retail or construction are counted as employed.
Bhorat's paper points out another important trend. While overall employment grew, unemployment ballooned from 3,9m in 1995 to 7,3m in 2002 (see table). That's because there was a dramatic increase of 5m in the size of the economically active population.
But Bhorat's paper also critically asks what kind of employment grew.
The answer is two types: top-end jobs and informal casual jobs.
The proportion of unskilled workers in the labour force in fact declined by four percentage points while skilled and semiskilled employment both increased by two percentage points. In addition, many sectors, such as agriculture, manufacturing and mining, show heavy attrition at the lower end. One of the few sectors in which the number of unskilled workers increased is "internal trade" - likely a reflection of the growth of informal traders.
Bhorat says it is quite possible the aggregate growth of employment is due to "growing informal employment, but aggregate contraction of formal employment". In other words, as people have been pushed out of formal work, they have taken up informal jobs. These people are now counted as employed rather than unemployed.
In the period 1995-1999, Bhorat (in another paper) says employment growth was 84% informal. After 2000, informal growth levels off and the most recent LFS survey shows impressive growth of 700 000 jobs in the formal sector. Still, the overall trend over the seven-year period is informal.
Does it matter whether jobs created were formal or informal? The Human Sciences Research Council's Miriam Altman, who also wrote for the presidency's 10-year review, says it matters "a great deal". Earnings in the informal sector are half those of the formal sector. Informal-sector workers lack benefits such as pension funds and many don't have access to the unemployment insurance fund (UIF).
The conclusion of Bhorat's paper is not a vindication of government's job-creating policies; it is a warning that the economy is failing to create low-end jobs and that for many there is little hope. "The winners have been the highly skilled, while the losers have been, almost without exception, unskilled workers . . . individuals who have low levels of education will in all probability not get a job. Furthermore, those who are older and not well educated will most likely never obtain a job in their lifetime."
A depressing but realistic conclusion one would hardly expect to appear in the ANC manifesto.
