Development Southern Africa

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How might a national minimum wage affect the

employment of youth in South Africa?

Leila Patel, Zoheb Khan & Thomas Englert

To cite this article: Leila Patel, Zoheb Khan & Thomas Englert (2020) How might a national
minimum wage affect the employment of youth in South Africa?, Development Southern
Africa, 37:1, 147-161, DOI: 10.1080/0376835X.2018.1552556

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DEVELOPMENT SOUTHERN AFRICA
2020, VOL. 37, NO. 1, 147–161
https://doi.org/10.1080/0376835X.2018.1552556

How might a national minimum wage affect the employment

of youth in South Africa?
Leila Patel, Zoheb Khan and Thomas Englert
Centre for Social Development in Africa, Faculty of Humanities, University of Johannesburg, Johannesburg,
South Africa

ABSTRACT KEYWORDS
Labour market policies such as National Minimum Wages (NMW) are Youth employment; youth
widely used in different countries to reduce poverty and inequality. unemployment; national
Given the high and rising rate of youth unemployment in South minimum wages; youth
Africa, we ask the question: how might a NMW affect the labour minimum wages; youth
focused policies; youth
market outcomes of employed and unemployed youth? The perspectives; South Africa
perspectives of employed and unemployed youth aged 18–25
years were solicited through focus group discussions in five
provinces. The findings suggest that a NMW could benefit youth
engaged in formal employment, it could stimulate job-seeking for
discouraged work seekers and is unlikely to crowd out
investments in further education. However, the vast majority of
unemployed youth will probably not benefit from a NMW. This is
due to the multiple and complex needs of disadvantaged youth.
Other social interventions are needed to address the youth
unemployment crisis.

1. Introduction
The introduction of a statutory National Minimum Wage (NMW) in South Africa to sup-
plement the country’s sectoral minimum wage determination system, is a far-reaching
labour market policy to ensure a minimum living standard and to reduce poverty and
inequality. Limited attention has however been paid in the national policy debate to
young people’s perspectives of the proposed policy in a context of extraordinary high
youth unemployment and low wages paid to those who are employed in formal and infor-
mal sector jobs. How to provide protection for those who are in the labour market, while
taking the needs of those who are outside the labour market into account, remains a key
challenge for the country.
Youth unemployment is a global phenomenon (ILO, 2013) and is one of South Africa’s
most critical social, economic and political challenges. Failure to find work soon after
leaving school is associated with long-term unemployment. The longer young people
are unable to gain work experience and other marketable skills, the less likely their
future employment prospects become (Graham et al., 2016). Large-scale unemployment
and the preponderance of low-paying work for young people can affect their material,

CONTACT Leila Patel [email protected] Centre for Social Development in Africa, Faculty of Humanities, University of
Johannesburg, P.O. Box 524, Auckland Park, Johannesburg 2006, South Africa
© 2018 Government Technical Advisory Centre (GTAC)
148 L. PATEL ET AL.

psychosocial and household well-being. Without the opportunity to gain a foothold in the
labour market, or to gain marketable skills, these young people are a generation at risk of
long-term unemployment and chronic poverty. The economic and social costs of this
phenomenon could further undermine the economic growth potential of the country.
The aim of this study was to gain an understanding, from the perspective of young
people, of how a NMW policy might affect their labour market trajectories. The focus
of the research was on 18–25 year old youth who are over represented among the unem-
ployed and under-represented among those who are in employment. Finding solutions
and timely interventions to interrupt the cycle of long-term youth unemployment and
intergenerational poverty remains an urgent national priority. More specifically, the
study focused on young people’s experience of unemployment and work-seeking, their
knowledge of minimum wages and how a NMW might impact on the labour market out-
comes of those who are either looking for work or working in low-wage jobs in South
Africa. The structure of the article is as follows: part one provides an overview of the situ-
ation of youth employment and unemployment in South Africa with reference to the
factors that drive youth unemployment followed by an overview of the youth employment
situation. Part two reviews the literature on theoretical models undergirding NMW and
Youth Minimum Wage (YMW) policies internationally. Part three and four present the
method of study and the results respectively. The paper ends with the conclusions and
pointers from youth themselves for addressing their unemployment challenge in part five.

2. Youth employment/unemployment in South Africa

Approximately one in five South Africans between 18 and 25 years is in paid employment.
Within this group, racial, gender and spatial divides play an important role (StatsSA,
2015). Twenty one percent and 12% of African men and women respectively are
working, compared to 42% and 31% of white men and women respectively. Young
people are employed largely in wholesale and retail (30.5%); community, personal and
social services (16%) and manufacturing (11%) (StatsSA, 2017). The Temporary Employ-
ment Services (TES) sector is subsumed under financial services, real estate and business
services (12.6%); it is however one of the fastest growing employment sectors for young
people (Bhorat et al., 2014).
Regarding employment sectors, two thirds of young workers are employed in the
formal sector with the remaining third in the informal sector. Excluding the top 17% of
high-paid workers, those in the formal economy earn an average of R2 893 per month,
while those in the informal economy earn an average of R1 976 per month (medians of
R2 500 and R1 733 respectively) (StatsSA, 2014, own calculations). Sixty eight percent
are employed in firms with less than 50 employees; and a third in firms with 50 or
more employees. The mean monthly earnings for employees of small firms is R2 516
and for large firms R2 779 (with medians of R2 166 and R2 400 respectively). Based on
a youth discount of 10% that is, how much less young people earn than older workers
on average, wage progression for low-wage and relatively unskilled workers is limited.
This pattern is in line with international trends (Grimshaw, 2014), though it is substan-
tially more compressed. Young people are particularly vulnerable to unemployment due
to the barriers they face in gaining access to the labour market. with. This is particularly
 DEVELOPMENT SOUTHERN AFRICA 149

acute for young black women and those living in rural areas who are most severely affected
by unemployment (StatsSA, 2015).
The factors that influence youth employment and unemployment operate on both the
demand and supply side of the labour market. South Africa’s economic growth trajectory,
focused on high productivity and technology-led growth to stimulate investment in skills
and higher wages, occurred alongside the decline of labour intensive industries in agricul-
ture and mining. This resulted in lower employment rates of low skilled workers (Seekings
& Nattrass, 2005). There is a higher absorption rate in the labour market for those persons
with post-secondary qualifications (Altbeker & Storme, 2013). Young people, who lack
work experience and marketable skills relative to older workers, as well as the financial
means to meet the high costs of higher education, find it harder to find work. The
global recessionary environment since 2008 has also had negative impacts on the local
economy, resulting in job losses especially for those employed in low skilled jobs.
Despite some economic recovery since 2009, youth employment levels have worsened
for 15–19 year olds and also for those aged 20–24 years (De Lannoy et al., Forthcoming).
Youth unemployment for 18–25 year olds is 42% using the narrow definition and 59% if
the expanded unemployment rate is used (StatsSA, 2015). Unemployment rates are higher
for those who do not have a matric certificate (55%) compared to 36% and 8% for young
people with a matric and tertiary education respectively (De Lannoy et al., 2015).
At the household or community level, factors such as the high costs of transport, inter-
net or printing are making work seeking expensive for young people living far from places
of work (Graham et al. 2016). This, coupled with the lack of social networks to facilitate
job search activities resulted in the exclusion of young people from accessing the labour
market (Mlatsheni & Rospabe, 2002; Altman 2007). Those that have to take on care
responsibilities in the household particularly young women, experience further barriers
to labour market inclusion (Mlatsheni & Rospabe, 2002; Altbeker et al. 2013).
High reservation wages are another frequently-cited reason for youth unemployment.
Reservation wages are defined as the lowest wage an individual is willing to work for
(Brown & Taylor, 2013). At wages lower than the reservation wage, the individual
would choose not to work, or choose leisure or continued job-searching (Zoch, 2014).
Studies on the unemployed in general seem to indicate that most unemployed are ready
to accept jobs at lower wages than their predicted wages (Zoch, 2014) especially in a
context of limited access to social protection (Nattrass & Walker, 2005). Inadequate
labour market knowledge and information are other reasons cited for ineffective job
search strategies and possibly for higher reservation wages. Similarly, Rankin & Roberts
(2011) find evidence of ‘inflated’ or unrealistic expectations. These studies suggest a
range of structural, individual and behavioural factors that are associated with youth
unemployment in South Africa. These factors were explored in the focus groups with
youth in this study.

3. Approaches to minimum wages and youth sub-minima

Minimum wage policies in various forms have been used over the past century to intervene
in the labour market to regulate wages and working conditions in many countries around
the world. Minimum wages and protections for workers in different sectors where wages
were very low and where there were no collective bargaining agreements were advocated
150 L. PATEL ET AL.

in the ILO Conventions since 1928 including the later adoption of the principle of univer-
sal minimum wages (statutory minima) in 1970 (ILO, 2014). A minimum wage floor
below which no one should fall is also upheld in the United Nations Universal Declaration
of Human Rights, the International Covenant on Economic, Social and Cultural Rights,
and the 1986 African (banjul) Charter on Human and People’s Rights. Thus the principle
of establishing appropriate minimum wage standards adequate to meet reasonable human
needs is now widely accepted and forms part of international law. Countries such as South
Africa that have not ratified the ILO Convention are not bound by it. Nine out of ten
countries that are signatories to the ILO Minimum Wage Fixing Convention of 1970
(No 131) have minimum wage systems consisting of either national statutory minimum
wages, or sectorally determined minimum wages or a hybrid of the two. Minimum
wage policies may serve different purposes such as compensating workers who have
been left behind due to exogenous factors beyond their control; including reducing
income poverty, and redistributing income to promote greater equality. As Krueger
(2015) argues, it was also a ‘smart thing to do’ because labour markets are unstable and
imperfect, and where employers have monopsony power over workers with limited bar-
gaining power, a minimum wage could further social justice and economic growth by sti-
mulating household purchasing power and demand for goods and services. Isaacs (2016)
also argues that minimum wages could boost productivity and GDP growth. These ideas
are related to the institutional school of labour economics informed by Keynesian econ-
omic models. In the social policy literature, minimum wages are associated with the
post-war welfare state compromise and liberal welfare state regimes (Wilson, 2017).
These ideas have been contested over the years dating back to the 1940s. Neo-classical
economists argued that minimum wages were harmful to employment and interfered with
the efficient working of markets. Stigler (1946) challenged the notion that minimum wages
reduced poverty and argued that they instead, reduced employment. In the 1980s, the
drive towards labour market deregulation, workfare centred social policies and reduced
fiscal spending on the social wage were a part of the latter discourse. Much of the
debate about minimum wages settled around these two positions until the 1990s when
new econometric data emerged that provided a counter to the prevailing orthodoxy.
Since then, a range of studies in the United States found evidence to support the claim
that there were no negative employment effects of minimum wages (Card and Krueger,
1995; Doucouliagos and Stanley, 2009; Dube et al., 2010). Consequently, there has been
a resurgence in minimum wage policies since the late 1990s and the adoption of statutory
minimum wage policies in developed countries such as the UK and in some developing
countries. The politicisation of poverty wages of large sectors of the electorate in developed
economies and legislative action inspired by civil society activism resulted in renewed
interest in these types of labour market policies. Wilson (2017:244) also points out that
in the Northern English speaking welfare states, the trend was towards shifting the
burden of addressing inequalities from fiscally-constrained governments to employers.
The impact of these policies on employment in low and middle income countries
remains under-researched. Bhorat et al. (2016b) and Isaacs (2016) find that in low and
middle income countries the overall consensus is that employment is either unaffected
or where there are negative effects, these are usually small but are stronger for low-
skilled workers (Neumark & Wascher, 2007). In the debate leading up to the adoption
of the national minimum wage in South Africa, Bhorat et al. (2016b) base their findings
 DEVELOPMENT SOUTHERN AFRICA 151

on economic modelling which suggests job losses for low skilled workers of 4.3% of all
employees with the most likely effects to be in agriculture and in domestic work. On
the other hand, Isaacs (2016) argues that the impact on employment levels is likely to
be neutral. This he argues is due to the way in which the economy is expected to adjust
to higher minimum wages; the positive spin-offs lie in its potential to enhance pro-
ductivity, compress wages, boost consumption spending in low-income households, and
thereby achieve GPD growth of between 2.8% to 2.9% instead of 2.4% without a national
minimum wage. Based on Isaacs’s (2016) economic modelling, it is estimated that poverty
will decrease by 2%, and that inequality – measured by the Gini coefficient – will decline
steadily over time. These two studies did not model the potential risks and opportunities
for youth specifically in South Africa. However, Bhorat et al. (2016a) assessed the impact
of the introduction of sectoral minimum wages in the early 2000s on youth in key sectors
where they were employed. They found a small but negative impact on youth employment
in agriculture with some increases in the retail and taxi sectors with no negative effects in
four other sectors. They also found significant levels of non-compliance with the law, with
between 40% and 50% of youth earning less than the applicable minimum wages. Econ-
omic and social impacts of a minimum wage would need to be carefully monitored when
the national minimum wage is implemented. This is critical because this remains under
researched in developing countries compared to developed countries (Bhorat et al., 2016a).
Although the policy principle is now more widely accepted and implemented, there is
agreement that skilful setting of the level of the minimum wage is needed and that this
should be strongly supported by empirical evidence and in a partnership model
(Brown, 2009). A range of factors are considered by countries in the adoption of
minimum wage systems and in setting the level of the wage. These include a country’s
history of wage minima, employment and youth unemployment rates, demographic
factors such as countries with large youth populations, economic and institutional con-
texts, the capability to monitor compliance, access to appropriate educational and training
opportunities as well as interventions to facilitate school to work transitions of young
people (ILO, 2011).
To address the particular needs of youth in the labour market, half of the countries that
have a national minimum wage also have a youth minimum wage (ILO, 2011). The jus-
tification for youth minimum wages is to prevent exploitation, improve labour markets,
promote work experience, incentivise young people to enter the labour market and to
set standards for youth in training or apprenticeships. NMW policies are also used in
some countries to create opportunities for young people to gain access to the labour
market. Indeed it is also argued that minimum wages make entry level labour more
expensive and thus less desirable or affordable for employers. As a result of this tension
some countries appear to use different policy approaches to youth compared to adults.
Countries such as Canada, Chad, Chile, the Czech Republic, Lebanon, Papua New
Guinea, and Tunisia, have youth minimum wages, but do not make provision for appren-
ticeships on the one hand. Bulgaria, El Salvador, Ghana, Japan, Morocco, Pakistan, the
Philippines, Portugal, South Africa, and Vietnam on the other hand, do make provision
for sub-minima for apprenticeships but do not have youth minimum wage policies. In
these instances, lower wages are justified for purposes of gaining experience and training
which makes it more affordable for employers. Some countries provide protections for
different age groups such as the Netherlands which has nine wage rates for youth of
152 L. PATEL ET AL.

different ages. Wage rates are time limited and are usually set as a proportion of the adult
wage and ranges from 30% at the lower age bands to 90% at the upper end. These measures
were also introduced in different countries to limit the impact of minimum wages on
young people.
Arguments against a youth sub-minimum wage are related first to issues of fairness and
the need to value both older and younger workers equally and when they are performing
the same jobs. Second, Grimshaw, (2014) and the ILO (2014) point out that there is the
risk that young people may choose work over pursuing post-secondary opportunities
which will make them less marketable in the long run. A third concern is that a lower
wage may perpetuate lower expectations of young people as was observed in the United
States in relation to persons with disabilities (Coy, 2014). Finally, concerns of perverse
effects have been cited such as exploitation, laying off youth once the youth wage discount
ceases to apply (Grimshaw, 2014). In South Africa, trade unions have argued that active
labour market policies (ALMPs) for youth such as the Employment Tax Incentive
(ETI) scheme could lead to large public expenditures and the displacement of older
workers by younger workers. The ETI has not been found to have significantly increased
youth employment levels (Ranchhod & Finn, 2015; Ebrahim et al., 2017), adding to scepti-
cism about ALMPs more generally. A lack of policy coherence and coordination between
government, private and non-profit tsector strategies to address youth (un)employment
also have a bearing on how effective a youth sub-minimum wage may be.
In conclusion, the low pay of the large number of full-time workers estimated to be 5.5
million in 2016 (Isaacs, 2016) as well as the national Gini coefficient of 0.69, an outlier
from an international perspective (Cottle, 2015), has resulted in policy goals focused on
the reduction of poverty and inequality in line with the institutionalist approach.
Minimum wage policies are considered to be most effective when implemented in
concert with other social protection policies (Coy, 2014), and have been recognised as
valuable countercyclical stabilisers, maintaining consumption levels of households living
in conditions of poverty during economic downturns. However, the desire to protect
workers against pay which is too low has to be balanced against the interests of employers
who will be responsible for the implementation of the policy. The primary insight from the
neo-classical economic perspective is that employers will respond to increased costs of
doing business by cutting jobs, hiring fewer new workers and or reducing working
hours. This is a grave concern given crisis-level unemployment in South Africa. The
opportunity that the policy presents needs to be balanced against the risks referred to
above (Omar, 2016). In this study the authors explored the views of both employed and
unemployed youth about their perspectives on minimum wages in South Africa.

4. Method
A qualitative research design involving focus group discussions held in September and
October 2015 with unemployed and working youth aged 18–25 years was deployed.
This approach involves engagement of young people in critical dialogue and reflection
about an issue of vital importance to their everyday lives and in the transition to adult-
hood. Researching young people’s lives is emerging as an important area for social
science research to assess the age-specific institutional, spatial and policy contexts of
young people and their often relative powerlessness in the research process (Heath
 DEVELOPMENT SOUTHERN AFRICA 153

et al., 2009). In this study the focus group methodology was adopted because it is a method
that can generate complex information quickly, from marginalised young people in socio-
economically disadvantaged communities that usually have no say in policy debates. This
semi-structured, yet enjoyable and interactive method of engaging youth participants to
talk to each other and form their own opinions was considered to be most appropriate
to this study (Stewart et al., 2007). Facilitators who conducted the focus groups were all
young people themselves who were trained to facilitate the group process following
accepted guidelines of data collection for this method (Krueger & Casey, 2009).
Through engagement in the group process the youth participants were able to weigh up
the different positions expressed in the group and take their own stand on the issues.
South African research on unemployment, for example, very rarely accounts for the
experiences and viewpoints of unemployed people themselves. Similarly, research on
minimum wages rarely goes deeper into the lives of low-wage workers or job-seekers
than responses to survey questions.
The aim of the study was to assess knowledge and perceptions of youth about minimum
wages and their influence on their labour market behaviour. A total of 153 young people
participated in 19 focus group discussions (73 employed; 80 unemployed). They were
selected essentially through snowball sampling. The Centre for Social Development in
Africa (CSDA) has conducted extensive research across South Africa with young people
through a network of organisations working with young people. Snowball sampling was
used to recruit and select youth within the age cohort that were employed or unemployed
at the time of study. They were then allocated to the relevant focus groups. To avoid
recruiting from a limited pool of respondents from the organisations, a classical risk
with snowball sampling, recruiters ensured that they used multiple networks. Moreover,
focus groups were held in 10 urban, two semi-urban and four rural locations in
Gauteng, the Western Cape, Kwa-Zulu Natal, the Eastern Cape and North West province,
and were conducted in four languages. These provinces were selected to ensure represen-
tation of the provinces with the largest shares of youth employment as well as to account
for regional variation in the dominant economic sectors where youth were likely to be
employed, based on the Quarterly Labour Force Survey data for Quarter 4 of 2014
(StatsSA, 2014). For example in rural Western Cape and North West, the dominant
sectors were agriculture and mining respectively.
Demographic information was collected from respondents via short, self-administered
surveys at the start of each focus group discussion. The composition of the sample is
broadly reflective of the marginalised youth population nationally. A focus group discus-
sion guide was developed. To support the discussions, other materials were also developed
such as information flyers on minimum wages to facilitate discussion. This information
was presented in neutral terms so as not to unduly influence respondents. Focus groups
were held in informal settings such as community centres in local communities and in
languages of their choice. Experienced researchers facilitated the focus groups.
Data analysis followed a thematic approach and followed standard analysis procedures
in qualitative research (Stewart et al., 2007). The research questions guided the thematic
analysis. Ethical approval was obtained from the Faculty of Humanities Ethics Committee
at the University of Johannesburg which is a requirement for research with human sub-
jects. The distinction between employed and unemployed youth was not always clear-
cut because some were engaged in volunteering programmes where they received a
154 L. PATEL ET AL.

stipend. Site selection was driven to some extent by the partner organisations’ operational
footprint which may have skewed the results. These limitations should be noted; the
findings are however consistent throughout the focus groups suggesting they are indicative
of wider patterns.

5. Results
A total of 153 young people participated in the study of which 73 were employed. The
majority were young women with a fairly even split between the two groups. The two
groups are similar in terms of averages for the highest level of education achieved
(Grade 12) and in terms of age with the average age being 22.5 years. Most of the
working participants were employed in the social services and retail sectors. Two thirds
of those who were working had an employment contract; 23% had a retirement fund
and 19% received skills training. Employed youth on average also had more other
people in their households who were working (2.3) than those who were unemployed
(1.8). Employed youth had access to social networks and financial resources to aid job
search from family and friends. They also emphasised the positive impression they
made in their job interviews. Many stated that they accepted the job they currently had
because they had little choice.
The findings are presented in three main themes namely knowledge and perceptions of
minimum wages; experiences and challenges of work seeking; wages and the influence of
minimum wages on their labour market behaviour.

5.1. Knowledge and perception of minimum wages

Most of the participants in both groups, the employed and the unemployed, did not know
what minimum wages were and of the country’s wage determination systems as a whole.
After establishing this in each of the groups, the facilitators worked through the material
provided on minimum wages set by bargaining councils and sectoral determinations of the
Minister of Labour. This suggests that there is need for more effective information and
education about minimum wages especially when the new statutory minimum wage
comes into operation. This finding is in line with previous research (Omar, 2016).
Additionally, employed youth reported their lack of bargaining power to claim their
rights or to negotiate for better working conditions. Respondents spoke about the per-
ceived widespread non-compliance of employers with existing minimum wage legislation.
This is also consistent with previous research (Bhorat et al., 2016a), and was confirmed in
some cases by the reported current wages of employed respondents as discussed below.
In many groups the common perception was that employers would try to sidestep
minimum wage agreements. A respondent said:
… a lot of employers will not register their employees … that system of employing outside
people, it will come … it will be implemented because if you look at many people, for
example, gardeners, you will hire a gardener and not register them, but that person will be
working for you for three years, and you will pay them R70 a day … when you calculate
that amount it’s not even a minimum wage. No one can survive on that … . [Luka, North
West employed youth participant]
 DEVELOPMENT SOUTHERN AFRICA 155

Although some participants indicated that they would be ready to confront their employer
if necessary, most were acutely aware of their weak bargaining power and the risk of losing
their jobs if they raised objections.
yeah imagine you have been at home for like two years you will just sign but you do not
[know] what that paper will do to you in a few years’ time [Killarney, employed youth
participant].

Besides the need for information to be provided to youth about how to claim their rights,
enforcement would also need to be enhanced. Moreover, there was some evidence that a
guarantee of higher wages could stimulate or incentivise job-seeking, including for those
who have become discouraged and who dropped out of the labour market. However, this
could also suggest unrealistic expectations that a NMW would solve severe food shortages
and other poverty related challenges.
For me it’s an opportunity to advance myself. Maybe at home I’ve got no shoes, no toiletries.
So for me that is something I would look up to. Sitting at home doing nothing, being hungry
the whole day and no food … for me the minimum wage is a way out of that. [Hillbrow,
unemployed youth participant]

There was no evidence that a higher MW would affect a young person’s decision to study
further. It thus seems unlikely that minimum wages would crowd out investments in
further education and training as argued in the literature.
The idea of a youth sub-minimum wage was not well-received by the majority of young
people in the study. They perceived it as unfair as young people have the same responsi-
bilities and face the same cost of living as older workers – in terms of dependents for
example: ‘[…] I’m the only one at home who is working. So what about my parents,
what about anyone else at home, I need to take care of them also.’ A female unemployed
participant in Luka (North West) added ‘if its office work it is more appropriate to pay an
older person more money but when it comes to labour, guys young people work harder.’
Although most participants rejected the idea as not being in line with the realities they
faced, except for one participant who thought that differentiated wages may be justified
in certain types of jobs. Further, a minority saw it as providing an opportunity to enter
employment and gain experience:
I think this might be a good idea because if you make it cheaper to hire and have a lower
minimum wage for youth, if I am an employer then it costs me less to hire young people
and if it’s a country like South Africa where lots of young people do not get jobs then
maybe more employers will hire more young people. [Orange Farm, unemployed youth
participant]

5.2. Experience of unemployment and work-seeking

Overall participant responses suggested that youth unemployment in South Africa is
largely involuntary, and the cost of work-seeking is very high. To increase youth employ-
ment, respondents in the focus groups suggested that government and the private sector
could provide better education and training both in and out of school particularly in
relation to career guidance and how to apply for jobs. This is what a young unemployed
participant had to say:
156 L. PATEL ET AL.

Without skills you are nothing, matric is nothing

I am unemployed because my parents didn’t save money for me to go to varsity [Orange

Farm, unemployed youth]

You cannot learn or further your education without money and that is what is increasing the
rate of drug abuse and alcoholism [in] our young people in communities. People are not
getting jobs because they don’t have qualifications … . [Vrygrond, unemployed youth].

Respondents also recommended that the government should crack down on fraudulent
job advertisers. Many of the respondents reported being exploited in the process of work-
seeking. Such exploitation included scams and soliciting sexual favours and money,
leading them to be wary of further job-seeking. A respondent reported being asked to
‘do some little things for him [the recruiter], he can definitely give me a job’. These state-
ments show how desperate youth are vulnerable to exploitation which in turn discourages
work-seeking. Another factor that discourages work-seeking is its cost: looking for work is
described as an expensive process, and often prohibitively so. The two most frequently
cited expenditure items were transport and the costs of making applications. In putting
together applications and looking for advertisements, job-seekers need to pay for internet
usage, printing, certification, copying, and postage. In Luka, North West, one of the
respondents reported that there is one internet café servicing the entire village, and this
monopoly allows the owners to charge R1 per minute for internet access and R10 per
page for printing. This generally resulted in job applicants only being able to make one
or at most two applications per month. When several job applications failed (and respon-
dents very rarely, if ever, got feedback from employers), the spending on applications was
perceived to be wasteful expenditure. Alternatively some job-seekers borrowed money in
order to cover costs, these were loans they were then unable to repay. Other CSDA
research indicates median job-search costs among young work-seekers of R500 per
month (Graham et al., 2016).
Travel is a large expense for work seekers because participants lived far from their
places of employment. For example, contract cleaners living in Soweto reported spending
up to three hours per day travelling, with a return trip between Soweto and the Northern
suburbs, costing around R40. Respondents in other provinces reported similar costs.
Participants narrated the detrimental emotional and psychological experiences of
unemployment reflected in the following statements:
It makes me feel small and I don’t feel adequate

… you had friends when you were working … but when you’re [not] … they pass you like
you no longer exist …

… its depression,.you no longer get that respect from your parents

[Luka, North West, unemployed participants].

In Mandeni in rural Kwazulu-Natal, a female unemployed participant spoke about the

tensions in families caused by dependence on others and ‘sugar daddies’. Others spoke
about stigmatisation of being unemployed and feelings of hopelessness.
 DEVELOPMENT SOUTHERN AFRICA 157

5.3. Wages
Table 1 below points to significant differences in the wage expectations of employed and
unemployed youth regarding reservation wages, expectations of a fair monthly wage, and
the amount of money needed per month to meet their cost of living expenses. Unem-
ployed youth reported higher wage expectations in all three areas than employed youth.
This might be due to their lack of knowledge and experience of the labour market.
Despite the higher reported reservation wage of unemployed youth, almost all participants
indicated that they would accept a job at a wage of R2 600 per month which was the
average wage for young work seekers in 2014 based on data drawn from Statistics
South Africa (2014).
Although young people were willing to work for relatively low wages, they did not
regard these wages as being fair. Both employed and unemployed respondents considered
the cost of living ‘and a little bit […] to save and for emergencies’ as the main determinant
for their selected reservation wages. Contrary to earlier findings (Zoch, 2014), participants
in the study distinguished between fair and reservation wages. Higher reservation wages
should therefore not be taken to indicate a lower likelihood of acceptance of an offer.
They are possibly more an indication of a balance between what youth would like to
earn and what they consider to be realistic, than a reflection of the absolute lowest
amount they would work for. Most unemployed and employed respondents said that
they would accept even lower wages if they were absolutely desperate, or as a female
respondent in Worcester put it, ‘if there is no food in the cupboards’.
In addition, average monthly wages earned in full-time jobs by employed youth were
very low (mean R2703; median R2185), and in some cases were substantially lower
than sectoral determinations governing their work – for example in contract cleaning in
Johannesburg and agriculture in rural KwaZulu Natal. This is captured in the high stan-
dard deviation of R2338. Some youth were not aware that minimum wages applied to their
work, and were therefore similarly unaware of their employers’ non-compliance.

Table 1. Perspectives of youth on wages and earnings.

Unemployed
respondents (n =
Employed respondents (n = 73) 79)*
Mean Median Mean Median
Their reservation wage per month R2945 R2100 R3771** R3000**
Their idea of what a fair wage would be per R10141† R6000† R7960 R5500
month††
The amount of money needed to cover the R4520 R2900 R5914 R3700
cost of living for a month
††† †††
Current wage per month (for employed R2703 R2185
respondents) (Standard deviation = R2338; inter-
quartile) range R1000-R3000
*One set of outlying observations were excluded: reservation wage = R1.2 m; fair wage = R3.4 m; cost of living = missing.
Thus n = 79 unless otherwise stated.
**One non-response, thus n = 78.
†
One missing response, thus n = 72.
††
The median fair wage for ALL respondents, whether employed or unemployed, is R6000 per month.
†††
The reported wages of 8 volunteers receiving stipends of R1900 (who attended the focus groups of employed youths in
Mandeni, KwaZulu Natal and Luka, North West) were excluded, along with an outlier earning R25000 per month, hence n
= 63. When these observations are included, this brings the mean up to R2925 and the median down to R2000. The stan-
dard deviation is R3434, and the inter-quartile range is R1500 to R3000.
158 L. PATEL ET AL.

6. Conclusions
The study provides valuable insight into the knowledge, experience and perspectives of
young people about employment and unemployment and how these influence their
labour market behaviour and policy preferences. Overall we find that structural barriers
to employment such as a lack of jobs, the cost of work seeking, and a lack of qualifications,
skills and work experience including a lack of social networks underlie high rates of youth
unemployment. Not only did these experiences result in poor psycho-social well-being but
they increased their vulnerability, stigmatisation and social exclusion. Although unem-
ployed youth cited higher reservation wages than employed youth, this was likely due
to a lack of knowledge and experience of the labour market, coupled with the very high
costs of work-seeking and being unemployed. . Almost all participants would work for
a lower wage even though they considered this not to be a fair wage or to meet the cost
of living. Youth unemployment is therefore not voluntary but a structural problem over
which they have very little control. A recent study (Graham et al., 2018) shows that in
addition to the need for broader employment opportunities, young people face significant
barriers to access the labour market. These include poor educational outcomes for youth
in a labour market requiring increasingly high skill levels, employer risk aversion towards
hiring youth, work seeking discouragement due to the high costs of work seeking, low
information access and limited work seeker support as well as the mismatch (e.g. geo-
graphical, skills) between young work seekers and employers. Graham et al. (2018)
further argue that existing interventions are poorly coordinated and tend to focus on
supply side interventions leaving substantial space for improvement on demand side inter-
ventions (Public Employment Programmes, better up take of the Employment Tax Incen-
tive Scheme for small businesses) as well as intermediate interventions (matching, work
seeker support services). Recommendations for youth sensitive interventions on the
supply side of the labour market offered by youth in the study related to (a) improving
education – both technical skills and soft skills, such as how to write Curriculum Vitae
and how to prepare for interviews; (b) providing more and better-quality information
about job opportunities and assisting youth with more efficient job search strategies as
well as the provision of job-search resources (such as internet access and computers) at
youth-targeted locations (such as job centres); (c) providing career guidance to young
people, preferably while still at school; (d) cracking down on scamming and exploitation
of work seekers; (e) improving public transport and making it more affordable. Other
policy options advocated by researchers include opportunities to complete matric and
access to post school education, social support, job seekers allowances or grants, and
using a combination of supply and demand side interventions (Graham & Mlatsheni,
2015; Graham et al., 2016).
There was significant support for a NMW and less so for a youth minimum wage. A
NMW has the potential to benefit youth in the formal labour market. It could also stimu-
late job-seeking by discouraged workers and is unlikely to crowd out investments in
further education. Increased wages could also contribute to higher levels of household
income and reduce poverty. Public information and education will be needed to
empower youth to claim these rights as many lacked knowledge about minimum
wages. The impact of the NMW will need to be carefully monitored to understand how
 DEVELOPMENT SOUTHERN AFRICA 159

unemployed youth might be affected once the policy is implemented. However, the vast
majority of unemployed youth are unlikely to benefit directly from a NMW.

Acknowledgements
This study was conducted as a part of a wider study on the minimum wage led by the Development
Policy Research Unit (DPRU) at the University of Cape Town. The research team at the Centre for
Social Development in Africa (CSDA) thanks the following organisations for their invaluable assist-
ance with the preparation and coordination of fieldwork across the country: loveLife; The Fit for
Life, Fit for Work programmes at the Vrygrond Community Development Trust and at the Wits
Reproductive Health and HIV Institute (WRHI); The Association for Rural Advancement
(AFRA); Radebe’s Bed & Breakfast & Coffee Shack; Onamandla Project Management; The
Language Unit at the University of Johannesburg. The Department of Labour’s reference group
members provided valuable insight and suggestions and a special thanks to the youth participants.

Disclosure Statement
No potential conflict of interest was reported by the authors.

Funding
Funding was secured from the Department of Labour of the Republic of South Africa.

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