The World has looked on with increasing worry whilst the global economy implodes, and with it pushes its icy tendrils of woe and recession to all corners of our World, even here in South Africa. Yet as serious as this situation is, it is put the tip of the iceberg of the ills to come. And here I am also not going to talk about the imminent Chinese debt implosion, the EU crisis or US ills, nor even global-warming, or shortages of critical raw materials as basic as water; businesses and individuals should have factored all of these into their scenario plans for 2012 – 2020, rather I am going to talk about employment, or jobs and where we might find this illusive phenomenon, the bedrock of all economic activity.

 

The right to employment is enshrined in our constitution; but legislating it so, wishing it so, is a far cry from the reality of job creation itself, as President Zuma now all too well knows, having promised jobs by the hundreds of thousands over the past two years in office.

 

For five decades we have accepted growth as a seeming immutable right; believing that it could continue forever, bringing with it, jobs, opportunities and spreading and deepening economic well-being.

 

Yet analysis of jobs in markets such as the United States where detailed information facilitating analysis is readily available throws up some disturbing facts, not least demographics itself. Over the past decade the immigrant inflow to the US has been 30 million, implying the need for an additional 18 million jobs just to maintain existing unemployment levels, if all other factors remained equal. Yet the other end of the equation, persons seeking to leave the employment arena, mainly as a result of ill-health and old-age, are decreasing as we all, certainly in the Western World, live longer and healthier lives. Thus even standing still, or holding unemployment percentages static requires that we run uphill fast.

 

In Africa and South Africa, demographics also works against full-employment, or the reduction of unemployment, as our population surges ahead both as a result of births but also immigration, and over the past 15 years our population increase from the two factors has been similar to that of the US, although of course we are coming off a lower base. The impact however is the same; we need to have generated around 18 million additional jobs likewise just to have maintained our rate of unemployment; yet we know that job creation has been nowhere near these levels and so our unemployment problem is deepening by the day, and unless we take urgent stock of the present situation and take immediate and strong remedial action, the reality is it will get worse – far worse with all the societal strains that will bring with it.

 

Yet this also is just the backdrop to the real changes that I want to focus on which is the ever-accelerating pace of technological and computer information-processing knowledge and skills that is relentlessly replacing the human input (jobs) with the capital input – that technology itself, rather than creating jobs is now taking them.

 

 

 

 

We also need to be aware of what can be called the Superstar, or “winner takes all” scenario. We see it most clearly in the sporting world where global super stars command phenomenal earnings, but it happens in all industries, where the global leaders take all the cream and leave the rest scrambling for the crumbs. Does this matter you ask? Yes it most certainly does. In the US, again using it for illustrative purposes as statistics there are more readily available, Emmanuel Saez, an economist, informs us that the top 1% of US households got 65% of all growth in the economy since 2002; and more disturbing in fact, is that the top 0.01% of households in the US, that is 14,588 families with income above $11,477,000, saw their share of national income double from 3% to 6% between 1995 and 2007 – and the rate of their growth, the amount of the National pie that they consume, is still ever-rising. And we are aware that the same patterns hold here in South Africa; and further that the diminishing marginal utility of income exacerbates the effect, as these high-earners have a far higher propensity to save rather than spend, thus effectively “storing” their wealth outside of the economy, rather than re-cycling it via expenditure, and thus ensuring growth lower than would otherwise be the case.

 

Cyclical changes are of course not new; through history we have known that in 1800, 90% of Americans worked in agriculture, but that by 1900 this had shrunk to 41% and by 2000 to just 2%. And of course we are aware that this migration from the land to cities provided the human capital necessary to enable the industrial revolution; yet now we are very much in the post-industrial age and the employment needs of the sectors that most heavily absorbed and required labour, the heavy engineering, chemical, automotive, ship-building sectors are a fraction of what they had been as robotics and technology have replaced human sweat and toil, and further this trend is both accelerating and being exacerbated by the further global migration of such remaining jobs to lower cost locations, generally in the Far East.

 

As with agriculture, so with mining; modern mining techniques have replaced much of the human grunt with technology, and the apocryphal story of Henry Ford the second, when touring a new plant with the head of the union and asking him, “How are you going to get these robots to pay union dues?, elicited the immediate response, “and how are you going to get them to buy your cars?”

 

Yet technology today is increasingly moving into the “middle class” sectors as technology such as ATM make bank clerks redundant, workforces flatter and technology enables a small, highly skilled and technology resourced senior management to run vast empires without the pyramidal layers of management once necessary, feeding further of course the “superstar” earnings of the fortunate few running these global corporations.

 

All industries, all levels of management, save perhaps the most senior are impacted, and the pace of change and job-shedding is if anything, increasing, as even the sales and marketing arms of enterprises utilise the internet and social marketing to increasing degrees.

 

So this global crisis is very different to anything that has gone before; its reach is more global and its impact on, both on societies and employment structures, or more pertinently unemployment structure, as here in South Africa, as with countries around the globe, there are whole swathes of communities and society that are unlikely ever to have a job in the traditional sense.

 

It will challenge how we organise society; perhaps we may look to “ration out” employment to ensure a more even spread of opportunity, though global competition and the striving for efficiency will militate against this.

 

What can we do should be the number one question on all in Government’s lips, and the answer comes fundamentally twofold; firstly we certainly need to maximise the areas of comparative advantage that we do have, and secondly we need to strip away every vestige of legislation that impedes employment, creates red tape and militates against a free-flowing fluid labour market place.

 

Fifteen years ago Africa looked to South Africa to lead the way in its redevelopment, and whilst we have lost many of the leadership skills, and pool of artisans that would now be invaluable, we need to consolidate our position as the natural gateway and starting point for multinational companies looking to develop a bridgehead into the African continent, building on the strengths in particular of our financial institutions.

 

Most countries around the World are looking to move up the value chain, building from and onto the superior education systems they have put in place, and it is not too late for us to similarly act; we still are the leading economy in Africa, and whilst many of our important competitive indicators have over the past decade headed in the wrong direction, we ought to be able to rescue the situation to a degree if we concentrate on developing an elite pool of talent capable of competing internationally.

 

Payroll taxes and regulatory red-tape associated with hiring and firing is totally counter-productive and illogical in the “man versus machine/technology environment that clearly currently prevails.

 

Again I stress it will be essential that we harness our brightest talents; notionally excluding some of the cream of our crop because they happen to be the wrong colour is a luxury we can no longer afford; we need the shoulder of our brightest at the wheel, driving our economy forward and generating the wealth that will have to sustain us all.

 

This will of course mean scrapping immediately all BEE legislation and taking on the unions to minimise the frictional costs and time delays impeding worker mobility, and we should look seriously at de-coupling benefits such as healthcare from employment to likewise enhance flexibility.

 

We also need to take cognisance of what is known as “Moravec’s paradox” – who noticed that the relationship between skills and wages has recently become U-shaped with skills much harder to automate, like hairdressers, home health aides, gardener, plumber, electrician gaining ground, as well as those at the top. We need to ensure that our trade schools and technical institutions can provide the necessary training to ensure that as many as possible can earn a livelihood in these sectors.

 

Lastly it would be encouraging to think that our political leaders have been reading the recent book “Race against the machine” from Erik Brynjolfsson, Professor at the MIT Sloan School of Management as they enjoy their well-earned Christmas break and can thus hit the ground running in January, setting the pace for a better 2012.

Tags: #Africa, #employment, #South Africa, #Zuma