A focus on the labour market is particularly important given South Africa’s already high unemployment, and the inequality which is generated by the labour market. We highlight four areas of the labour market which will require scrutiny in the coming months: the informal economy; turbulence and job churn; increasing capital intensity; and gender and work.working in the informal economy
In the current crisis, this is exacerbated by the design of the lockdown and physical distancing protocols. These have had a particularly severe impact on the informal economy. Any economic policy responses must therefore take the informal economy into account, and provide support where possible.The second area South Africa needs to focus on is which kind of jobs will be lost, who will be most affected, and where opportunities exist to create new employment.
The third important labour market issue to consider is capital intensity in the economy. In the production of goods and services, firms use a combination of labour, machinery and equipment , land and entrepreneurship; the factors of production. The proportion of labour versus capital that firms in an economy use matters for job creation and unemployment. South Africa has seen a general trend toward capital.
An increasing capital-to-labour ratio in production is an important consideration for two reasons. The first is its effect on unemployment. Secondly, a shift towards capital intensity will increase existing inequalities. One way this will occur is through the rising portion of value that is generated by capital that will be claimed by the relatively small number of owners of capital. This is a common driver of long-term inequality that persists if it is not countered by redistributive policies.