Labour broking underestimated

Labour broking underestimated

Article By: Ann Bernstein and Antony Altbeker

Youth unemployment in South Africa is at crisis levels. According to the Treasury, the unemployment rate among people younger than 25 is about 50%.

Clearly this crisis cannot be solved without rapid economic growth that is sustained over a long period. The absence of growth is not the only factor holding people back. For large numbers of the unemployed, finding work is fraught with obstacles. Many employers look unfavourably on work-seekers who have been unemployed for long periods. Most of the long-term unemployed lack marketable skills, and many have little idea about how to find work, or have given up looking for it.

Institutions and programmes designed to help people find work can play an important role in forging a path into employment for the unemployed. South Africa has many such institutions. How effective are they?
To begin answering this question, the Centre for Development and Enterprise (CDE) recently commissioned research into some of the ways in which people find work in South Africa. We looked at a range of institutions and programmes that may play a role in linking the unemployed to jobs. These included the Expanded Public Works Programme (EPWP), learnerships accredited by sector education and training authorities (Setas), the informal sector, various initiatives launched by the Umsobomvu Youth Fund, and private temporary employment-services firms, known colloquially as “labour brokers”.

This research analysed 10 000 people who registered with one branch of the largest labour broker in South Africa, Adcorp, and then compared this information with data from Statistics South Africa, the World Bank Investment Climate Assessment (which surveyed businesses in four metropolitan areas) and the Cape Area Panel Study, which followed about 5000 young people in the Western Cape for four years.

Solving the country’s unemployment crisis requires more rapid economic growth sustained over a long time. Deepening and broadening those routes to formal employment that work best will increase the efficiency of the labour market and help make growth more labour intensive.

South Africa needs much better data on the volumes of people using various services and institutions, their immediate and subsequent job prospects, and the costs of offering these services. We need more comprehensive surveys that follow young people as they move through the labour market, as well as more effective monitoring and evaluation of government programmes. But there are important insights that can be obtained from a careful analysis of the data that do exist.

The EPWP is the country’s largest, best-funded public employment programme. It generated more than a million “work opportunities” between 2004 and 2009 and achieved success in providing short-term, last-resort employment to relatively large numbers of people. However, the EPWP has done very little to increase the employability of beneficiaries and has not improved their future job prospects significantly. As a result, the EPWP no longer defines improving the employment prospects of beneficiaries as one of its objectives.

The Setas, which have been running for more than a decade, are intended to manage the expansion of training, allowing people to acquire skills to increase their employability. Available evidence suggests they may be of most benefit to people who are most likely to find employment without any assistance. Beneficiaries’ prospects may improve as a result of the increased access to training, but Setas do not seem to have expanded the number of people who have work.

By contrast, the informal sector appears largely to be a trap for young people, with very few managing to use it as a springboard into the formal sector. There is evidence that people working in this sector typically report having been in the same “job” for considerably longer than is typical for formal sector jobs. Combined with evidence that incomes generated are very modest, this may explain why young people take informal jobs only as a last resort.

Programmes run by the government-funded Umsobomvu Youth Fund have tackled the unemployment challenge from a number of angles, including the provision of training to make young people more job-ready and creating links between job-seekers and potential employers. The incomplete data and information available make it impossible to assess the effectiveness of these programmes. However, the CDE’s review of the Jobs and Opportunities Seekers Database (JOBS) initiative shows that this modest programme, now run by the National Youth Development Agency (NYDA), is helping some young people into jobs. The programme was somewhat more successful at placing people in permanent jobs than were other initiatives, but this appears to be a function of its attracting people with better qualifications.

By far the most controversial mechanism for facilitating employment are South Africa’s labour brokers. The role of these firms has been compared to “slavery” by representatives of the Congress of South African Trade Unions. Our research does not back this up. Labour-broking firms operate at a significantly larger scale than comparable government programmes. In 2008-09, nearly 1500 people found work through the NYDA’s JOBS programme. By contrast, Adcorp claims it assigns more than 25 000 people to temporary jobs every day, and that a single branch of its 34 branches across the country placed 1000 individuals each month.

An analysis of the jobs to which assignees of this branch of Adcorp were placed indicates that, while the jobs were temporary and often of quite short duration, they did not pay unusually low wages, with average earnings of about R3500 per month. A more sensible comparison with people in the rest of the economy are median earnings which, for Adcorp’s assignees, was R2934. This is nearly identical to the median monthly wage of R3000 for respondents in the Quarterly Labour Force Survey.

As routes into employment, labour-broking firms may have important advantages over other mechanisms. Whereas the vast majority of people find work through networks of friends and family who are in the labour market or by sending CVs to potential employers, many of those who find work through labour brokers appear to be among the least skilled and experienced workers. They also appear to come disproportionately from families in which no one else works, and which, presumably, have much less information about job opportunities. In this respect, labour brokers may help bring the most excluded households and workers into the economy. In practice, they expand opportunities and democratise job search. They make the economy more inclusive.

Labour brokers have become controversial in South Africa, and there are interests that would seek to have them closed. The research reported here indicates that closing these firms down would result in costs and consequences that many currently participating in this debate may not have considered. Those who argue for an outright ban of labour broking need to ask themselves whether whatever gains they think may accrue to the employed are worth the cost of reducing access to the labour market – and the economy – for those who are most excluded.

South Africa needs to deepen and broaden the links that unemployed and marginalised people have with the formal economy. Closing down vehicles that increase access to work should not be a serious option.

 

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