Concern about the scarcity of jobs, not just jobs but good jobs is fuelling interest in labour-market interventions from political parties.
Some of them speak re-skilling and training services for the unemployed, decent living wages, and an SMME-centric approach to job-creation. Jobs are a hot contentious issue on everyone’s electoral agenda.
I think we can all agree that the country has had its fair share of jobs summits and conferences to last us probably until the end of the fourth industrial revolution. From a practical State-planning point of view, it’s easier to move the right pieces to create jobs than it is to talk to about it.
Talking about it should be a task left to think-tanks, universities, of course with engagement from the government’s chief policy advisors.
For government, all it must take is the right amount of planning and a good team to transition planning outcomes to implementation. This is where Presidential directives can be useful.
To spur job growth; change key policy mechanisms such as immigration policy, tax policy, and incentives for investment, and you’ve done half the job to get all the right parts moving.
On the other hand, growing the economy doesn’t automatically mean that jobs will come as a result. The right amount of economic growth to spur the right amount of jobs growth must mean that everything must be going exactly according to plan both in the domestic and international economy.
Slowing economic growth in China and throughout Asia, a trade war and a BREXIT that’s been on its way for a long time indicate that job-creation hangs on a stack of factors.
How do we create jobs, pay decent living wages and ensure that the same people we created jobs for aren’t put out of work by machines in the next five years? The challenge for job-creation also isn’t the quantity of jobs but the quality of jobs we are striving to create and whether they’ll pay enough to provide a decent standard of living.
But to reduce unemployment, whoever ends up at State House next definitely needs to prioritise labour-intensive work. I’m not convinced that job-creation is a simple outcome of quality, sustainable jobs with the right number of zeros. Some compromises will have to be made and it won’t be all pretty as electoral season often paints it.
For a bit of economics history for context, W. Arthur Lewis is the only person of African descent to have won the Nobel prize for economics. Lewis, who might be considered the founding father of development economics in the 1940s and 1950s, combined writing and teaching with providing economic advice to policymakers, including Ghana’s first president, Kwame Nkrumah.
Lewis thought extensively about the path along which farming societies in the Caribbean, Africa and elsewhere could develop. He focused on the structural changes needed in societies with what he called “unlimited supplies of labour” or “surplus labour”. Botswana faces this problem of an oversupply of labour, (I’m not sure if this is a problem or more an opportunity).
In these societies, he argued, labour can move out of the peasant farming sector, without affecting production there, and into low-productivity capitalist sectors, including industrial sectors such as clothing manufacturing, if wages in those sectors are low, in line with productivity.
As capitalist economies grow, Lewis argued, they will reach a turning point at which labour becomes scarce. They will then shift into higher-productivity sectors and wages will rise.
Lewis’s model was reflected in the economic history of east and south-east Asian countries. The economies of South Korea, Hong Kong and China developed through job-creation in labour-intensive manufacturing sectors before these economies reached the Lewisian turning point and wages began to rise.
Lewis’ ideas are very relevant today across much of southern Africa. In Botswana and in most of its neighbours, “surplus labour” exists in the form of massive unemployment and under-employment (employed at less than full-time or paid too little for economic needs) rather than in subsistence agriculture.
Faced with this kind of economy, Lewis would recommend that the government expand the clothing manufacturing sector and other labour-intensive capitalist sectors.
But this is not how the Botswana economy has evolved over the past 50 years. Instead, Botswana’s industrial sectors have become more and more capital and skill-intensive. Our small population didn’t help to sustain large manufacturing industries either.
The demand for less-skilled labour in our proactive sectors has gone down significantly. Economists refer to the effect of economic growth on employment as the employment elasticity of growth.
An employment elasticity of one means that, when the economy or sector grows by, say, four percent, employment grows at the same rate, that is, by four percent.
If the employment elasticity is more than one, then economic growth results in a faster rate of job-creation.
If the employment elasticity is less than one, then employment rises more slowly than output. In an economy with surplus labour, the goal of job-creation requires a high employment elasticity of growth. Only when the economy reaches the Lewisian turning point should raising wages become more of a priority than creating jobs.
In developing economies, economic growth can generate lots of short-term jobs in sectors such as construction. Sustainable job-creation on a large scale generally requires, however, job-creation in labour-intensive manufacturing sectors such as clothing manufacturing.
To create jobs on a large scale requires taking advantage of global markets by producing labour-intensive products for export.
This was what the east Asian tigers, including China, did.
The south-east Asian countries are now doing the same thing: In Vietnam, Cambodia and Thailand, an additional one million jobs in clothing production were created between the mid-1990s and mid-2000s.
Burma is now following suit. In Bangladesh, also, as many as four million people work in clothing manufacturing.
In these economies, the expansion of labour-intensive sectors has been crucial to poverty reduction. Policymakers need to study and digest history and focus on creating jobs in labour-intensive sectors.
But in the same breath, a recent study by UNCTAD suggests that economic growth through industrialisation is no longer the top contributor to transitions from different classes of the economy. That is, industrialisation as it happened for the Asian tigers may not be a viable model for economic growth anymore. We should attempt to strike a balance at least between industrialisation and growing the services sector.
*Bakang Ntshingane is a graduate student at Chonbuk National University’s Department of International Trade in South Korea. He writes on the intersections of politics, international trade and foreign policy.