Context: the South African Labour Market

Characterized by the world's highest unemployment rates and persistent effects of historical social segregation, the South African labor market presents a particularly challenging context.

This review is a work in progress. We will update it continuously with the latest research to date.

At 33% as of 2024 Q1, South Africa has the highest unemployment rate in the world, with the rates doubling (61%) for youth aged 15-24. This is an unequal crisis on multiple dimensions. Rates are overwhelmingly higher among the Black African population (36%), followed a far second colored population (23%). Women face a 13% higher likelihood of unemployment than men.

Depending on measures, years and institutions, South Africa continuously displays one of the highest unemployment rate in the world.

Over three million young people in South Africa are not in employment, education or training (NEET). The same patterns of unequal outcomes persist: These individual who are NEET are particularly vulnerable to

This map suggests that, contrary to other countries on the continent, the issue South Africa has mostly pertain to labour demand and intermediation and not education or labour market participation.

5+ years. Low enrolment rates in tertiary education (25.2% as of 2021), is a key factor behind this widespread and persistent unemployability of youth. The lack of tertiary education is further compounded by the apartheid legacy of legal discrimination and segregation that generated large wealth and spatial inequalities across the country. This means, for many of these already disadvantaged jobseekers, available jobs are also located prohibitively far away.

Together, these factors characterize a labor market facing a vast disconnect between labor demand and labor supply sides. On the supply side, a large pool of jobseekers struggle to signal their skills to prospective employers and face inherently high search costs due to socioeconomic and spatial inequalities. On the demand side, firms appear uncertain about the quality of the applicants they attract with . This in turn leads to firms relying on trial-and-error recruiting tendencies, creating insecure entry level jobs.

. Job search support interventions have proven useful in improving employment outcomes. Studies have tested and found positive results for job search support through 1) behavioral encouragement interventions such as , social support; 2) better utilization of job search platforms such as and 3) endorsement mechanisms such as and. When implemented at scale, better job search infrastructure has the potential to bridge the gap between what firms need versus what jobseekers can offer through increased visibility of the labour market and pathways within it for both sides.

Spatial mismatches between jobs and jobseekers, combined with high search costs, further deepen inaccurate beliefs about the job market among youth. Overly optimistic beliefs about the job market lead to young jobseekers under searching and holding out for "better jobs". On one hand, , but these search efforts do not necessarily translate to better employment outcomes on average.

Further readings:

Abebe, G., Caria, A.S., Fafchamps, M., Falco, P., Franklin, S. and Quinn, S., 2021. Anonymity or distance? Job search and labour market exclusion in a growing African city. The Review of Economic Studies, 88(3), pp.1279-1310.

Abebe, G., Caria, S.A., Fafchamps, M., Falco, P., Franklin, S., Quinn, S. and Shilpi, F.J., 2023. Matching frictions and distorted beliefs: Evidence from a job fair experiment (No. 958). working paper.

Abel, M., Burger, R., Carranza, E. and Piraino, P., 2019. Bridging the intention-behavior gap? The effect of plan-making prompts on job search and employment. American Economic Journal: Applied Economics, 11(2), pp.284-301.

Abel, M., Burger, R. and Piraino, P., 2020. The value of reference letters: Experimental Evidence from South Africa. American Economic Journal: Applied Economics, 12(3), pp.40-71.

Afridi, F., Dhillon, A., Roy, S. and Sangwan, N., 2023. Social Networks, Gender Norms and Labor Supply: Experimental Evidence Using a Job Search Platform (No. 677). Competitive Advantage in the Global Economy (CAGE).

Banerjee, A. and Sequeira, S., 2023. Learning by searching: Spatial mismatches and imperfect information in Southern labor markets. Journal of Development Economics, 164, p.103111.

Beam, E.A. and Quimbo, S., 2023. The Impact of Short-Term Employment for Low-Income Youth: Experimental Evidence from the Philippines. Review of Economics and Statistics, 105(6), pp.1379-1393.

Bertrand, M. and Crépon, B., 2021. Teaching labor laws: Evidence from a randomized control trial in South Africa. American Economic Journal: Applied Economics, 13(4), pp.125-149.

Bhorat, H., Köhler, T. and de Villiers, D. (2023). Can Cash Transfers to the Unemployed Support Economic Activity? Evidence from South Africa. Development Policy Research Unit Working Paper 202301. DPRU, University of Cape Town.

Branson, N., DeLannoy, A., & Kahn, A. (2019). Exploring the transitions and well-being of young people who leave school before completing secondary education in South Africa. Working Paper Series Number 244, NIDS Discussion Paper 2019/11 Version 1.

Carranza, E., Garlick, R., Orkin, K. and Rankin, N., 2022. Job search and hiring with limited information about workseekers’ skills. American Economic Review, 112(11), pp.3547-3583.

Chakravorty, B., Bhatiya, A.Y., Imbert, C., Lohnert, M., Panda, P. and Rathelot, R., 2023. Impact of the COVID-19 crisis on India’s rural youth: Evidence from a panel survey and an experiment. World Development, 168, p.106242.

Fields, G.S., 2011. Labor market analysis for developing countries. Labour economics, 18, pp.S16-S22.

Franklin, S., 2015. Location, search costs and youth unemployment: A randomized trial of transport subsidies in Ethiopia.

Hardy, M. and McCasland, J., 2023. Are small firms labor constrained? experimental evidence from ghana. American Economic Journal: Applied Economics, 15(2), pp.253-284.

ILO., 202. The impact of COVID-19 on the informal economy in Africa and the related policy responses.

ILO., 2023. African youth face pressing challenges in the transition from youth to work.

Jones, S. and Sen, K., 2022. Labour market effects of digital matching platforms: Experimental evidence from sub-Saharan Africa.

Kiss, A., Garlick, R., Orkin, K. and Hensel, L., 2023. Jobseekers’ beliefs about comparative advantage and (mis) directed search. Available at SSRN 4593303.

Loiacono, F. and Silva Vargas, M., 2023. Improving access to labor markets for refugees: Evidence from Uganda.

McKenzie, D., 2017. How effective are active labor market policies in developing countries? a critical review of recent evidence. The World Bank Research Observer, 32(2), pp.127-154.

Mudiriza, G., De Lannoy, A. (2023). Profile of young people not in employment, education or training (NEET) aged 15-24 years in South Africa: an annual update. Cape Town: Southern Africa Labour and Development Research Unit, University of Cape Town. (SALDRU Working Paper Number 298).

Wheeler, L., Garlick, R., Johnson, E., Shaw, P. and Gargano, M., 2022. LinkedIn (to) job opportunities: Experimental evidence from job readiness training. American Economic Journal: Applied Economics, 14(2), pp.101-125.

World Bank (2023), “Skills and Workforce Development,” worldbank.org. Hensel, L., Tekleselassie, T., Isphording, I., Radbruch, J. & Witte, M. 2024. Demand for Feedback and Job Search. Working Paper.