SHAMSUNISAA MILES-TIMOTHEUS AND PEDZISAI NDAGURWA | SA can create millions of jobs and still have more unemployed people

South Africa’s economic debate has become fixated on a seemingly simple proposition: get the economy growing again and unemployment will fall. There is obviously truth in that. Faster growth is indispensable. But research by the Inclusive Society Institute (ISI) suggests that the question is not simply how fast the economy must grow. It is whether the economy can create jobs fast enough to absorb a labour force that will itself continue growing for decades; and whether the kind of growth South Africa produces translates into sufficient employment.

South Africa’s population is still growing despite declining fertility, partly because large cohorts born previously are moving into working age. Our research projects South Africa’s population and labour market to 2045 by bringing these demographic and economic dynamics together. The results should give policymakers pause.

Under what we regard as the most realistic demographic assumptions, namely declining mortality, continuing fertility decline and broadly unchanged migration trends, South Africa’s population is projected to reach about 75-million by 2045. But the more economically consequential number is the working-age population.

Under the demographic scenario used for the employment projections, the population aged 15-64 increases from just under 40-million in 2025 to almost 49-million in 2045. At a constant labour force participation rate the labour force grows from about 23.8-million to 29.1-million. That is more than 5-million additional participants who will have to be absorbed into employment simply to prevent unemployment from becoming larger in absolute terms.

We modelled three economic growth scenarios: 1%, 2.5% and 4% a year. If the historical relationship between economic growth and employment persists, the results are sobering. At 1% annual GDP growth unemployment declines from 32.4% in 2025 to about 31.6% in 2045. At 2.5% growth it falls to about 31.4%. And at 4% annual growth, sustained for two decades, it still stands at about 31.3%.

There is another reason why the 4% scenario matters. It is already the paper’s high-growth scenario, reflecting sustained reform and improved investment conditions. Sustaining growth materially above this level over two decades would be an increasingly unrealistic basis on which to plan South Africa’s future, particularly given the longer-term growth experience of upper-middle-income economies. The 4% scenario should therefore be regarded as an optimistic test, rather than a modest assumption.

More strikingly, the unemployment rate tells only part of the story. The model starts with about 7.7-million unemployed and 16.1-million employed people. Under the 4% scenario, employment rises to about 20-million by 2045, almost 4-million additional jobs. But the number of unemployed people also rises to about 9.1-million.

There is no contradiction.