Unemployment in South Africa 1970 – 2002: The development of a configuration concern for future employment

Abstract

Unemployment in South Africa has reached crisis proportions and does not seem to be decreasing in concurrence with the more propitious economic reality. Indeed, the unemployment process seems to be isolated from economic reality and has developed a life of its own. This paper investigates what initiates and underlies the development of this phenomenon. The Phillips model on endogenously determined long-run equilibrium unemployment is applied, using hysteresis models and autoregressive modelling, to determine the nature of the high and sustained levels of South African unemployment. We find evidence of unemployment in South Africa being a historical inheritance preserved by uncertainty and sunken costs in the labour market.