Unemployment in South Africa

The unemployment rate is the number of people actively looking for employment divided by the labour force. The labour includes adults over the age of 16 who are employed or actively looking for work. The unemployment rate fluctuates because the previously unemployed people start looking for work, people who were employed lose their jobs and others stop looking for jobs. South Africa’s unemployment rate at the moment is 25.2%; the number of unemployed people is 4526 divided by the labour force of 17948 multiplied by 100%.
There are three types of unemployment namely; structural, cyclical and seasonal unemployment. Firstly, structural unemployment is associated with the incompatibility of jobs and workers due to the lack of skills or no desire for the area of work. Structural unemployment depends on the social needs of the economy and dynamic changes in the economy. Advances in technology and changes in market conditions may make certain skills useless and no longer needed; this typically increases the unemployment rate. For example, labourers who worked on cotton fields found their jobs obsolete with Eli Whitney's patenting of the cotton gin. Similarly, with the rise of computers, many jobs in manual book keeping have been replaced by highly efficient software. Workers who find themselves in this situation find that they need to acquire new skills in order to obtain a new job.
Frictional Unemployment is always present in the economy, resulting from temporary changes made by workers and employers or from workers and employers having unreliable or incomplete information. This type of unemployment is closely related to structural unemployment due to its dependence on the changing aspects of the economy. It is caused because unemployed workers may not always take the first job offer they receive because of the wages and necessary skills. This type of unemployment is also caused by failing firms, poor job performance, or outdated skills. This may also be caused by workers who will quit their jobs in order to move to different parts of the country. For instance, a case of frictional unemployment would be a college student quitting their fast-food restaurant job to get ready to find a job in their field after graduation. Unlike structural unemployment this process would not be long due to skills the college graduate has to offer a potential firm.
Unemployment that arises due to economic reduction is called cyclical unemployment. According to cyclical unemployment an economy that is in a recession faces higher levels of unemployment. When this happens there are more unemployed workers than job openings due to the breakdown of the economy. This type of unemployment is heavily intense on the activity in the economy.
High levels of unemployment are costly not only to the individuals and families directly affected, but also to local and regional economies and the economy as a whole. Unemployment causes a waste of scarce economic resources and reduces the long run growth potential of the economy. An economy with high unemployment is producing within its production possibility frontier. The hours that the unemployed do not work can never be recovered.
High unemployment has an impact on government expenditure, taxation and the level of government borrowing each year. An increase in unemployment results in higher benefit payments and lower tax revenues. When individuals are unemployed, not only do they receive benefits but also pay no income tax. As they are spending less they contribute less to the government in indirect taxes. This rise in government spending along with the fall in tax revenues may result in a higher government borrowing requirement.
Unemployment wastes some of the scarce resources used in training workers. Workers who are unemployed for long periods become de-skilled as their skills become increasingly out-of-date in a rapidly changing job market. This reduces their chances of gaining employment in the future, which in turn increases the economic burden on government and society.
Rising unemployment is linked to social and economic deficiency, there is some relationship between rising unemployment and rising crime and worsening social disorder (increased divorce, worsening health and lower life expectancy). Areas of high unemployment will also see a decline in real income and spending together with a rising scale of relative poverty and income inequality. As younger workers are more geographically mobile than older employees, there is a risk that areas with above average unemployment will suffer from an ageing potential workforce, making them less attractive as investment locations for new businesses.
The duration of unemployment affects the economic and social costs. It is clear therefore that unemployment carries substantial economic and social costs. These costs are greatest when long-term structural unemployment is high. Indeed many governments focus their labour market policies on improving the employment prospects of the long-term unemployed.