Labour Market Policy Responses amidst Globalisation: The Case of South Africa

The South African economy is mired in a long-run, low-level growth trap which has entrenched high levels of structural unemployment. The economy has also witnessed a rapid and extensive integration into the global economy, which has exposed it to short-term shocks that adversely impact the labour market. ALMPs have been introduced to address both long-term structural problems as well as immediate crises This paper uses a variety of empirical techniques to assess three ALMPs – a job re-training scheme, a public employment scheme and a wage subsidy scheme – implemented in the post-apartheid period. Expenditure on ALMPs and the number of beneficiaries of these schemes has risen over time. The former comprises 0.4 percent of GDP, and the latter constitutes 1.8 million beneficiaries or 8.7 percent of the labour force. In relation to OECD and LAC countries, the reach, in terms of beneficiaries as share of the labour force, and the extent, in terms of expenditure as a share of GDP, of ALMPs in South Africa is notable. The analysis indicates that poor monitoring and evaluation, government capacity, fiscal leakages, difficulty in balancing trade-offs, and an inability to convert the support offered under the scheme to long-term employment have generally hampered the success of these schemes thus far. The implementation of a rigorous monitoring and evaluation programme for each of the ALMPs is of key importance to assessing the impact of such schemes and tailoring them to ensure increased effectiveness in the future.