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The misguided notion of ‘job creation’

Johann Redelinghuys is previously founder and chairman of Heidrick & Struggles South Africa, now The Director of the Chairman's Institute and of Portfolio&Co

From Barack Obama to Jacob Zuma, every politician is out there making promises about the millions of jobs they are going to create. Zuma is shortly going to come face to face with his pledge a year ago that 2011 'The Year of the Job' would produce at least 500,000 jobs. The truth is rather that jobs have been lost and unemployment is more serious now than it was before he began working on it.

Of course, this is not just a South African thing. We have daily updates on the chronic situation in Spain, Portugal and elsewhere. So how is it that with all the resources and ingenuity of everyone concerned, the world still cannot succeed in ‘creating jobs’?

Well, the truth is that jobs cannot just be ‘created’. Much as politicians would wish this wasn’t the case. At best political leaders can create the climate for good investment and in the long run that may create jobs. But it may not. Even if all the undertakings to accelerate infrastructure development and encourage international investment could be achieved, there remains one obstacle Zuma is clearly not taking into account. Every chief executive and project director has the overriding objective to keep costs down and limit the fixed costs usually generated by employing people. Some say one incentive may be to pay wage subsidies to employers willing to take on young unemployed people. But this goes against the whole mindset of business leaders whose firm focus is to make a profit, and not be bogged down by expensive contracts.

Cautious managers are more likely to favour contract employees who can be dispensed with at short notice. While this approach has always been an option when employing unskilled people, there has been an increasing tendency to bring skilled workers into such a contracting structure. These are often engineers or accountants or quantity surveyors who are essentially self-employed and who are happy to sell their time and skills to the highest bidder for short-term employment. This, unfortunately, does not create the security of a permanent job, but it does enable people to make a living. And it is a trend which is becoming increasingly widespread in the world.

Much is also said about developing entrepreneurs who can start businesses. As we all know, in countries like China, Italy and many others, it is the small, mostly family run, enterprises that employ the bulk of the population. So, all over we are now being confronted with initiatives to stimulate entrepreneurial thinking. There are even several MBAs in Entrepreneurship. No problem with any of this. The problem, however, comes when it is assumed that the jobless rates will drop because unemployed people can become entrepreneurs. This is nonsense. Brian Joffe is an entrepreneur. Adrian Gore is an entrepreneur and there are many others who have had a professional training of some sort, or even only business experience, and became successful entrepreneurs. But to imagine that thousands of unemployed and inexperienced people can establish and build viable enterprises from scratch is daft.

Much more realistic than trying to create jobs, would be to develop skills. We don’t need the high numbers of unemployable people with dodgy university degrees. We need people who have skills that could make them productive. At some stage we have to address the anomaly of high unemployment in a time of great skills shortage. Again this is not merely a South African problem. The big challenge of the unemployed graduate is known in most countries. In many cases these are people who have spent years working toward master’s degrees and PhDs, but who do not have the basic skills to find suitable employment or know how to make a living.

If the government was to spend money anywhere, it should be on subsidising internships. This would be an opportunity for people with a basic education who could learn on-the-job and be mentored by an experienced person who understands how to make a living. This has worked very well in Europe where for example the ‘apprenticeship’ system in Germany has been the backbone of its industry. The idea of some form of conscription into the armed forces or other needy sectors such as healthcare, emergency services and policing should also be explored further. Teaching discipline and giving young people some basic training in useable skills while earning a small wage would be infinitely preferable to scratching around for non-existent jobs. DM


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