An exploration of the correlates of long-term unemployment in South Africa using national survey data, 2001-2007.

Abstract

This dissertation provides an empirical analysis of the correlates of long-term unemployment in South Africa using national survey data from 2001 and 2007. Within the South African context, very little research relating to the length of unemployment spells has been conducted. The negative implications of long-term unemployment necessitate a clearer understanding of the factors that affect this phenomenon. Of particular interest to this study is the impact of human capital variables, measured by education and previous work experience, on the length of unemployment spells. The results indicate that in 2001 a degree or diploma was the only level of education that reduced the probability of long-term unemployment amongst the strictly unemployed. By 2007, no level of the education had an effect on the probability of long-term unemployment. These results raise serious questions about the ability of formal South African education qualifications to act as a proxy for human capital and thus the productive capacity of individuals. In contrast, having previous work experience significantly reduced the probability of long-term unemployment amongst the strictly unemployed in both 2001 and 2007. These results suggest that relative to education, previous work experience is a more accurate and thus acceptable measure of an individual’s productive potential amongst prospective employers. Finally, given the variety of negative effects associated with long-term unemployment such as crime, poverty as well as human capital depreciation, it is important that steps are taken to reduce the phenomenon. A short discussion is provided on the implementation of a wage subsidy which could be targeted towards the unemployed most prone to long-term unemployment; this would help these individuals to secure employment and thus gain valuable work experience. It is this work experience which will play a critical role in determining the future employment prospects of individuals within the South African economy.