Is the public or private sector more responsible for solving unemployment?

President Jacob Zuma has come under ample criticism for making false promises to his citizens. Most notably, his recent relations with COSATU have demonstrated the tensions between labour unions and the state. Many South Africans are calling for the Prime Minister to either fix his own mess, or for another individual or party to come and patch up the pieces.

Lack of demand

The underlying reason for the nation’s unemployment woes is the current lack of demand stimulating the economy. ENCA today announced that economic growth has declined for a second quarter in a row, signifying a depression. With consumption and investment down, businesses cannot afford to hire workers, hence the underlying mismatch between employers and job seekers.

This would lead one to question the ways in which we can increase the levels of consumption and investment within the economy. With this comes two sides of the coin; increased government expenditure in an attempt to stimulate such activity, or private sector investment that may give firms the resources to hire more workers.

Public Sector

South Africa has an immense level of inequality, demonstrated by its Gini coefficient of 0.67. From this, we could suggest that the government’s primary goal should be to distribute this wealth through taxes. However, with the expanded unemployment rate now touching 40%, supporting the unemployed through benefit schemes is not a sustainable solution. Of course, a far better proposition is to provide them with the means to find work. Furthermore, if taxes were spent in the right way to stimulate the economy, South Africa would be in a far stronger position. However, with high levels of corruption within government, it is evident that a large proportion of these taxes are not going towards the nation as a whole.

As you’ve probably identified, this is a topic which is not easy to summarise in 500 words. To lay it out clearly, the ideal role in government with regards to unemployment is to tax the wealthy, distribute the revenues to drive consumption, investment and small business growth. Corruption aside, this sounds pretty feasible, right?

Private Sector

With the unequal economy that South Africa possesses, it is not without an abundance of wealthy individuals and companies. With this in mind, the private sector is still where the majority of the money is. Lowy Institute explains how private sector growth is a key contributor to alleviating poverty. With more investment in small businesses from wealthier individuals and firms, they will have the means to grow and hire more workers.

South Africa’s attractive culture and landscape also make it a great place for foreign investment. If the nation can build up an attractive portfolio to increase demand from foreign companies to invest here, this will provide another way of increasing employment.

Summary

This complex topic is substantial in depth and is designed to provoke discussion. If you feel strongly, remember to comment or tweet us @jobseekerswed.

In a summarising statement, an argument certainly lies with both the public and private sector in terms of eliminating unemployment. Private sector investment is a necessity in a nation which is plagued with such inequality. In the same breath, the public sector are certainly responsible for prompting this in the right direction.

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