|
Blog : 21 December 2016 (Manufacturing sector keeps bleeding jobs)
|
Related Topics |
|
In today's blog we take a look at South Africa's manufacturing sector and how it has been bleeding jobs for years, not helping at all in reducing South Africa's stubbornly high unemployment levels. We take a look at the numbers from Statistics South Africa (Stats SA) quarterly labour force survey (QLFS) below.
|
Manufacturing sector bleeds jobs in most provinces
In the first quarter of 2008, South Africa's manfucturing sector employed 2,11million people. By the end of the third quarter of 2016, the same sector only employed 1.68million people. That's a net loss of 428 000 jobs over the last 9odd years (or roughly 48 000 people) per year losing their jobs in the manufacturing sector.
Question is whether these job losses are due to improved technology, and therefore less demand for manual labour and greater use of automated machines to take care of manufacturing output. Or is the decline due to decline in demand for manufactured goods? Less demand, less produced, less staff required. Or is a combination of both? We will look to answer these questions below.
The pie chart below shows the various reasons provided by manufacturers for their under-utilisation of their capacity. Over the period under- utilisation averaged 18.93%. The pie chart shows the value the main reasons given contributes to the 18.93% as well as the percentage contribution (in brackets) to under utilisation
So the main reason for under-utilisation of manufacturing production according to the manufacturers is insufficient demand, with it making up almost 60% of the reason for under-utilisation of manufacturing capacity. Problem is we do not no if manufacturing capacity increased over the period or not. Best way to gauge this is to check volumes produced since 2008 and compare that to under-utilisation. We might be producing a lot more and under-utilisation is higher than it was in the past, indicating factories have greater manufacturing capacity, supporting the notion that people are being replaced by automated machines to do the work. The graphic below will take a look at volumes produced if factories were working at full capacity.
The line graph below shows the index level (January 2008=100) of manufacturing output at full capacity level. Current output adjusted for under-utilisation of capacity. The graphic clear shows that the level of output in the manufacturing sector has remained relatively stable over time (bar the seasonal movements). The overall level of output hasn't dropped or increased significantly from 2008. The step graph (light green line) shows the level of employment in the manufacturing sector since January 2008 (Indexed to ensure January 2008=100). Its clear that while output in the manufacturing sector has not increased or decreased substantially over the years, the level of employment has dropped signifcantly over the period. This clearly indicates that manufacturing companies are becoming more efficient in producing the same level of goods with way less staff employed. The only plausible answer being the "rise of the machines"
So with the manufacturing sector shedding close to 500 000 jobs since 2008, where will increased employment to meet government's targets for unemployment come from? It cant be in the public sector as government is looking to tighten the belt on state spending, and a larger wage bill wont help. We know the tourism industry now employes 1 in every 22 people in South Africa. But this is a drop in the vast unemployment ocean of South Africa. Major discussions on unemployment in South Africa needs to take place to identify and nurture industries which could pick up the slack left by sectors such as manufacturing that's consistently shedding jobs.