Playing the numbers game
Statistics South Africa’s latest Labour Force Survey, released last Thursday, contradicts what most of us believe about the country’s unemployment situation. The survey concludes that unemployment decreased to 23% by September 2007. This represents a moderate improvement from the 25.5% recorded in September 2006. Statistics SA says “the LFS is a twice-yearly household survey, specifically designed to measure the labour market.” It also analyses a range of issues in the local labour market, “including the level and pattern of unemployment and the industrial and occupational structure of the economy.”
There are a number of problems with statistical compilations of this nature. The first is that you can manipulate the numbers to support the result you want. And the second is that the survey represents a relatively small data set. Statistics SA reveals that the Labour Force Survey is based on “detailed information collected about the labour market situation of approximately 67 000 adults of working age (15 to 65 years) living in over 30 000 households across the country.”
A game of definitions
To better understand the Labour Force Survey we need to look at the various definitions used in compiling the results. The most important among these is what constitutes and employed person. The survey defines an employed person as someone “aged 15 to 65 who did any work or who did not work but had a job or business in the seven days prior to the survey interview”. An unemployed person, in contrast, is “any person aged 15 to 65 who did not have a job or business in the seven days prior to the survey interview but had looked for work or taken steps to start a business in the four weeks prior to the interview and were available to take up work within two weeks of the interview.” The sum of employed and unemployed people is the total labour force of the country. At September 2007 the country had a labour force of 17.178m people of whom 13.124m were employed.
Labour surveys moderate the actual unemployment statistics by classifying people as ‘not in the labour force’ or ‘discouraged work seekers’. So anyone who falls outside the previous definitions is considered ‘outside the labour force’ effectively shrinking the base used to determine the unemployment rate. The argument is that people who don’t want to work (i.e. are not prepared to look for employment) cannot be counted as unemployed… But the practice tends to create a much rosier picture than what exists in reality.
If we add back the 13.250m individuals who the survey classifies as ‘not in the labour force’ then the South African unemployment rate is much worse. The survey estimates there are 30.4m ‘working age’ citizens in the country. Of these only 13.124m were employed… Meaning the ‘real’ unemployment rate is closer to 56%!
Where have all the people gone
Taking a closer look at the labour force survey we couldn’t help thinking there are some trends that aren’t reflected in the numbers. The Labour Force Survey concludes that South Africa’s total labour force has declined from 17.19m people in Q3 2006 to 17.18m now. Unemployment definitions are creative at the best of times; but how has South Africa’s total labour force declined in a period when matriculation numbers are at their highest in decades and ‘immigrants’ pour through out borders by the millions?
A flood of new school leavers should boost the total number of job seekers. And though we understand that ‘illegal’ immigrants probably won’t make it into an official employment survey that doesn’t change the fact they are here, competing for scarce jobs in an economy where jobless rates are already high.
433 000 more jobs
One positive outcome from the survey is that South Africa added 433 000 jobs in the 12 months to September 2007… But there are concerns that the strong gains in 2007 (and 2006 which saw 197 000 jobs added) could come to a crushing halt as South Africa’s economy comes under pressure. The media has been full of talk of job cuts in the wake of Eskom’s recent electricity supply concerns. And if this were not enough there are serious signs that the global economy is slowing on the back of a US-led recession.
New job opportunities are dependent on GDP growth. As soon as the country’s growth slows, private sector firms look for ways to cut overheads. And unfortunately one of the easiest areas to cut back on is the wage bill. Should South Africa’s growth rate suffer significantly in 2008 we can expect the good showing in the latest Labour Force Survey to come undone in the next period.
Editor’s thoughts:
The Labour Force Survey is a useful indicator of what is happening on the ground in South Africa. Do you think we can combat the unemployment problem if the local economy slows? Add your comments below, or send them to [email protected]
