How wages of recently employed youth help the economy

By Joshua Budlender and Ihsaan Bassier

In October 2020, the South African government launched a collection of public employment programmes, initially intended as a response to the Covid-19 pandemic. The initiative, called the Presidential Employment Stimulus, has been extended since then. The total budget allocation to March 2024 was R42-billion.

By December 2023, it had directly created 1.8 million jobs and livelihood opportunities. These have been mostly temporary jobs in public employment programmes such as school education assistants.

An important question is how much the programme’s spending stimulates economic activity in local communities and nationally. That is, to what extent it support job creation or higher incomes outside the programme?

South Africa has a high unemployment rate (32% or 41%, depending on the definition), particularly concentrated among the youth. Economic growth has been stagnant for the last 15 years. While the core objective of a public employment programme is to provide direct employment and improve service provision, in this context it is also important to understand how it might stimulate economic activity.

At the Southern Africa Labour and Development Research Unit at the University of Cape Town, we were commissioned by the Presidency to draw on our knowledge of programme evaluation and South Africa’s social assistance policy to try to answer this question

We found that the programme likely does support broader economic activity. Participants buy goods, which are produced to some extent in local value chains, and which employ local labour, rather than being imported. The programme spending does not just “disappear” but recirculates in the South African economy.

The Basic Education Employment Initiative has employed about 245 000 young people per phase to assist schools across the country. The duration of employment has varied with each phase. More recently it has been eight months. Participants are employed in full-time positions and are paid the monthly national minimum wage, which is approximately R4 000.

The programme completed its fourth phase last year. Since it was launched in December 2020, it has employed over 850 000 young people, becoming the largest youth employment programme in South Africa’s history.

In our study, we focused on phases 2 and 3 of the programme, from November 2021 to August 2022.

Our initial evidence came from a WhatsApp survey of 31 250 participants we ran with Harambee Youth Employment Accelerator, a non-profit which supported the programme in partnership with the Department of Basic Education.

The survey response rate was unfortunately low. But it showed participants spent their cash mostly on groceries (about 50%), transport and rent.

Most of their income went to necessities, much of it from local stores.

However, our main evidence comes from information provided by a leading grocery retailer. The retailer gave us limited access to fully anonymised sales records from its loyalty rewards programme.

In partnership with Omnisient, a privacy-preserving data collaboration platform, we were able to see who in the data was a participant in the programme and who wasn’t, while retaining individual anonymity.

  • The article first appeared in The Conversation

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