Previous work experience – and not education – plays the most important role in whether South Africans find work, or not.
According to a working paper produced by the International Monetary Fund (IMF) on South Africa’s labour market and inequality, people with prior work experience have an almost 50% higher chance of finding a job than those without it. “Education plays a minor role in employability – potentially due to the poor quality of the South African schooling system,” the report said.
This finding explains the high unemployment rate among young job seekers who often don’t have any work experience. A targeted wage subsidy for young inexperienced workers will go a long way to encourage companies to employ young job seekers who have recently entered the labour market.
With a Gini coefficient at 65%, South Africa has one of the most unequal societies in the world. But a reduction in unemployment by 10 percentage points could reduce the Gini coefficient by 3%. To achieve the same result through fiscal means, the government will have to increase transfers by 40%.
Although education per se does not guarantee that job seekers will find work, it does play a role in work retention. The report found that the level of education is an important factor of the job-exit rate. Individuals with university education have much more stable jobs on average and the job-exit rate of individuals with university education is about 55% less than that of individuals with less than primary education.
Age, race and gender are also significant determinants of job security and job-finding – whites and Indians have a much lower job-exit rate than black people, while women and the youth with no previous work experience have lower job finding rates compared to men and those who have worked before.
The report also found that individuals who work in the informal economy have a better chance of getting formally employed than those with no employment whatsoever. The informal sector does, therefore, act as a stepping-stone to employment in the formal sector.
Finally, the prominence of trade unions in the South African labour market also has an effect on employment. “This can give rise to insider-outside dynamics with trade-union members having job-security and above market wages while outsiders find it more difficult to find jobs,” the report said.
It was found that not being a trade union member reduces job security by increasing the job-exit probability by around 58%.