Stats SA: Avoiding the word retrenchment

The headlines today were dominated by the long-awaited release by Stats SA of unemployment data for the second quarter. Lockdown only affected 10 days or so of Q1, but the true impact was felt from April to June. This Q2 data should’ve finally painted a picture of what really happened.

Except, it didn’t.

Much like the GDP data for Q2, the unemployment numbers just cannot be interpreted in the same way that they would be in a no-lockdown environment.

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The Stats SA headline already points to confusion:

“SA economy sheds 2.2 million jobs in Q2 but unemployment levels drop”

It’s a pity that Stats SA missed the opportunity to find out how many people were retrenched, but lets cover off some basics first.

Someone on your street is struggling

There are around 60 million people in South Africa. Within this population, there are children and elderly folk who cannot work. There are also countless people engaged in informal market activities, like selling cooked mielies on the side of the road.

The actual employed population is now 14.1 million people. That’s the core tax base, although millions of these people pay zero or close to zero tax, because they earn too little to fall into the tax brackets.

In Q1, there were 16.3 million employed people. A loss of 2.2 million jobs means that just under 1 in 8 people lost their jobs in Q2 and couldn’t find work. With the simplifying assumption that a household has two sources of income, that means 1 in 4 households lost a major source of income. Someone in your apartment block or on your street is going through a tough time right now.

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Discouraged job seekers

The official unemployment rate includes persons who are employed and unemployed. Sounds obvious enough, until you consider that “discouraged work seekers” are excluded. If you’ve given up looking for work, you are no longer considered unemployed.

There are some logical reasons for this. For example, a stay-at-home parent who has no interest in working shouldn’t be considered unemployed, because nothing the government does will move this person into the workforce.

Stats SA claims that the number of discouraged work seekers decreased by 447,000. It’s totally counter-intuitive, although Stats SA claims that this is in line with global trends.

This number is too small to matter, so let’s move on from this distraction to the really important point.

Not economically active? All Stats SA needed to ask was one question…

The report notes that the category “not economically active for reasons other than discouragement” grew by 5.6 million between Q1 and Q2. This is why the official unemployment rate decreased by 680bps from 30.1% to 23.3%.

This is the lowest official unemployment rate since the third quarter of 2009. It shows how utterly useless this statistic is in the context of lockdown.

There was a data collection issue in this survey, which doesn’t help. Data was collected telephonically, rather than through face-to-face interviews. This introduces clear bias into the sample, because only householders with known contact numbers could be sampled.

Stats SA tried to adjust for this using complex techniques (and full credit to them for doing so), but it does make the data harder to interpret properly.

Instead of all the fancy statistical analysis, I think Stats SA needed to ask a simple question over the phone:

“Have you been retrenched or do you know anyone who has been retrenched?”

Press CTRL-F in the Stats SA report and try find the words “retrench” or “retrenchment” – they do not appear once. Not once. Not even in the 138-page final report.

All Stats SA needed to do was ask people whether or not they were retrenched. Then the true picture would emerge along with a useful statistic.

Of course, the ANC wouldn’t like that so much, now would they?

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