Tshepo Phakathi on how employment growth affects economic productivity

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Tshepo Phakathi on how employment growth affects economic productivity

Employment growth is important because, contrary to what most economic textbooks would suggest, it causes economic growth.

Put differently, output is simply a function of productivity driven primarily by labour input.

Even capital is ultimately a function of its previous labour input. So, it makes sense then how we ended up with a decade of jobless growth and how this exacerbated and entrenched problems of inequality and poverty. We desperately need job growth to reduce both poverty and inequality. Job creation is the most rational objective to pursue. Since you are likely to be poor if you are uneducated and unskilled and are likewise likely to be unemployed, it makes sense that we should fight first for the unemployable.

In South Africa, 55% live in poverty (Stats SA, 2017), a state complexed in low skills and poor education. This situation creates an unhealthy dependence of the Government’s social net. It makes many citizens supplicants.With this disposition often comes tyranny, where the government of the day uses such social welfare to leverage continuous power. From there on, you are well on your way to a corrupt if not failed state.

The solution, at-least in part. Is to drive investment into an area that is mostly likely to yield the highest returns.In this case, that would be the acute situation of structural unemployment. The best way in which to do this is by facilitating apprenticeships in local areas where unemployable individuals are mostly concentrated.

In any event, an investment by business on such programs yields other favourable commercial outcomes such as higher B-BBEE scores on the Skills Development scorecard, an area notoriously difficult to perform well in. In conclusion, economic growth and job creation require a substantive increase in the nation’s knowledge capital as well as an increase in investment. The strategy of using export led growth through import replacement and localisation as a means of boosting economic development has historically been employed, successfully, by nations such as Singapore (1960), Germany (1952), China (1997), United Kingdom (1840) and the United State of America (1914).