Crunching the unemployment numbers – John Kane-Berman, GG Alcock

In a recent interview with BizNews (watch or listen below), author and businessman GG Alcock told Alec Hogg that while SA’s unemployment numbers are tragic, they don’t take the large informal sector into account. “It’s a tragedy that unemployment is so high, [but] it’s not a true reflection. Other forms of income generating activities –  backroom rental, for example – is a R20 billion a year sector in townships and certain rural areas. That’s money that people – who may be formally unemployed – are earning. That is not measured in our numbers.” Below, John-Kane Berman (former CEO of the IRR) shares his thoughts on Alcock’s perspective. “Mr Alcock is correct in his assertion that the informal sector is “huge”. But he is wrong to claim that employment in this sector is “unmeasured,” writes Berman. Under the former CEO’s mail is a reply from Alcock.

By John-Kane Berman*

Your newsletter suggests that South Africa’s high unemployment figures are “bunk”. In supporting this, you cite your interview yesterday with GG Alcock, in which he repeatedly makes the claim that Statistics South Africa’s figures do not measure the “invisible, informal, unmeasured” sector. Mr Alcock asserts that if employment in this sector were to be taken into account, unemployment would be closer to 15% than the current official figure of 34.4%.

But you are both wrong. Stats SA does measure employment in the informal sector. Its figures for the second quarter of this year show employment in the informal sector outside agriculture at 2.69 million. This accounts for 18% of all employment – nearly one job in five! The formal sector (outside agriculture) accounts for 68% of jobs, agriculture (formal and informal) for 6%, and private households for 8%. Mr Alcock is correct in his assertion that the informal sector is “huge”. But he is wrong to claim that employment in this sector is “unmeasured”. Stats SA has been measuring it for at least 20 years, and publishing these figures along with its figures for the formal sector.

A further breakdown of informal (non-agricultural) employment shows that these jobs are in mining, manufacturing, utilities, construction, trade, transport, finance, and community and social services. Two years ago, in answer to a query from the Institute of Race Relations (IRR), Stats SA said that the informal economy accounted for around 6% of GDP.


GG Alcock’s reply:

I have not said the figures are bunk and I did say that the Stats SA figures include the informal sector (although I said I was unclear how they defined this). But I said – and stand by – the assertion that Stats totally under-measure the informal sector for a few reasons:

  • Respondents definition of what a job is – so, not saying you are employed if you work in (or have) an informal business.
  • Stats SA’s definition of what an informal job is. I’d like them to define this. For instance, is a sangoma “employed” and would a sangoma say they are employed?
  • No measure of incomes vs jobs. Backroom rental is huge in terms of income – but it is not a job. The report states levels of employment/unemployment not earnings/passive income.
  • Multiple incomes/partially employed. For instance, a social grant/unemployment grant recipient (who also has a side job in the informal sector) might claim to be “unemployed” but receives income from other jobs such as babysitting, selling vegetables, backroom rental etc. Are they then genuinely unemployed?
  • The expanded definition of unemployment is someone who has given up looking for a job. What’s the expanded definition of employment?  There is none and considering that GDP has just had an “expanded definition” there is an urgent need to create an expanded definition of employment.

There are many other factors I can highlight.

David Hurwitz’s (CEO of Transaction Capital) statement is that 1/3rd of people paying back debt are not formally employed.   That’s 30% of people are informally employed in his books.  John says Stats SA says 18% of people are informally employed. That’s half of what Transaction Capitals figures show. Just using that indicator they are under-reading by 50%!

But besides all of this, I’m not sure what John saying. Is he saying the Stats SA figures for the informal sector are accurate and not under-measured?  Is he saying that the 34.4% is accurate and fully measures the informal sector?  And, two years ago when the IRR got the 6% figure for the informal economy, was it the old measure of GDP or the new “oops we under-measured” one, and hence possibly much larger?

I stand by my contention that the employment figures of informal sector jobs are under-measured by a substantial factor but admire John’s confidence in Stats SA’s measure of the informal economy.

Read more:

 

  • GG Alcock is the author of KasiNomic Revolution: The Rise of African Informal Economies.
  • John Kane-Berman, a graduate of Wits and Oxford (where he was a Rhodes Scholar), is a former CEO of the IRR. Prior to that he spent ten years in journalism, where he was senior assistant editor of the Financial Mail and South African correspondent for numerous foreign papers. He is the author of several books on South African politics, and has also published his memoirs.
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