Labour market risks drive social instability – FNB  …informal employment more viable for youth

Labour market risks drive social instability – FNB  …informal employment more viable for youth

Without targeted interventions to stimulate job creation, address regional disparities and better align skills with market demands, Namibia’s labour market risks becoming a driver of social instability and economic stagnation. 

This is according to FNB’s analysis of the 2023 Labour Force Survey, where the bank states that the findings paint a sobering picture of Namibia’s labour market. 

“With high levels of unemployment, particularly among the youth, and a large proportion of discouraged workers in general, the country faces significant challenges in achieving inclusive and sustainable long-term economic growth. 

While sectors like agriculture and services remain major employers, job quality is poor and key industries, including agriculture, are suffering from adverse economic conditions,” reads the analysis compiled by FNB economists Helena Mboti and Cheryl Emvula. 

The analysis termed Namibian’s youth unemployment “particularly alarming”. 

The Namibia Statistics Agency (NSA) states that only 24.3% (455 030) of the working-age population is estimated to be part of the youth labour force. 

Within the labour force, 24.8% of youth are employed, and 19.8% of youth are unemployed. 

The NSA further reported that 53.8% of the working-age population (1 008 875 people) are not seeking jobs. 

“This suggests that a large portion of Namibian youth are discouraged by the system and have effectively withdrawn from the labour force. A significant portion of the youth is inactive, with 41.9% of individuals aged 15-24 neither employed, in education or receiving training (NEET). 

Combined with the high percentage of people in the potential labour force (53.6%), this points to a concerning trend, especially considering that youth make up 71.1% of the overall population,” FNB stated. 

In addition, labour force survey respondents cited taking care of family or home (44.8%), studying (27.9%) and other reasons (9.9%) as the main factors for not seeking employment. 

However, FNB pointed out that given the limitations of the data and the low-income prospects in the job market, it is likely that a majority of the youth in the potential labour force view the opportunity cost of formal employment as too high. 

Consequently, informal employment may seem like a more viable option, given the low chances of securing a well-paying formal job.

FNB further pointed out that unemployment in Namibia, as defined in 2023, stands at 36.9%.

This is based on a narrower definition, which includes only those actively seeking and available for work within a specified reference period. 

In contrast, using the broader definition from 2018, which also accounts for discouraged workers, the unemployment rate rises significantly to 54.8%, one of the highest in the world. 

Under the 2023 definition, unemployment has risen significantly – from 19.8% to 36.9%. 

FNB noted that the disparity between narrow and broad definitions highlights the extent of under-employment, as discouraged workers are excluded from the official count. 

“Regardless of the measure, the rise in unemployment is concerning. 

The issues proved systemic, with rural areas (38%) experiencing only slightly higher unemployment than urban areas (36.4%). Notably, Kavango East and West have the highest unemployment rates, surpassing 52%, signalling regional economic distress and skewed employment opportunities,” FNB stated. 

The analysis stipulated that in terms of domestic labour productivity rates, the labour market reflects a significant gap between education levels and the available job opportunities. 

“Despite 76.7% of employed individuals holding at least a secondary school qualification, a large portion of the workforce is concentrated in lower-skill occupations. 

40.2% of workers are employed in roles requiring secondary-level education or less, of which 13.4% work in service occupations. 46.9% are in elementary occupations, craft and trade work, or service and sales positions. These types of roles typically offer lower wages and skill requirements,” FNB pointed out.