A university shutdown will have dire consequences for the economy, warn economics experts. Analysis undertaken by University of Pretoria academics suggests that such a move will knock economic growth – and will be worse for South Africa than the costly financial shenanigans at national airline SAA. Roula Inglesi-Lotz and Heinrich Bohlmann rightly point out that there is a very real risk many students will not complete this academic year. Universities unable to control violent protest action have shut their doors temporarily for safety reasons. ANC secretary general Gwede Mantashe made it clear that a long shutdown was a possibility, after he publicly announced that he would close universities for a prolonged period to each protesting students a lesson. In a conservative assessment that does not take the costs of damage to property into account, Inglesi-Lotz and Bohlmann note that there is a high price to pay for this year’s university chaos. However, a university shutdown would have dire consequences, not only for graduates and the private sector, but mostly for the poorest in society. – Jackie Cameron
By Roula Inglesi-Lotz and Heinrich Bohlmann
There is a real risk that some of South Africa’s universities will not see out the 2016 academic year which ends in November. The ongoing “fees must fall” protests have seen classes disrupted at some institutions, and there are fears that exams won’t be written.
What might a total shutdown mean for the country’s labour market in 2017? To find out, we conducted an analysis using a model designed for economic research by the University of Pretoria in collaboration with the global Centre of Policy Studies.
The model allowed us to isolate and measure the impact of a large reduction in graduates entering the labour market in 2017 against a “business as usual” baseline scenario.
The results were extremely worrying. In the worst case scenario, assumed in our modelling to be a 90% reduction in graduates entering the labour market, 2017 would be a bleak year. South Africa’s Gross Domestic Product (GDP) would fall dramatically, with the economy shedding around R5.6 billion. Investments would plummet.
Wits University
South Africa produces around 80 000 graduates a year. But this excludes other non-degree qualifications like diplomas and certificates, which may also produce new skilled labour market entrants. In our model’s database, the relevant number worked out to be little lower – around 50 000 – since we assumed that some graduates also take up lesser-skilled jobs. They can move from there into skilled categories in later years.Our analysis showed that a 90% reduction in skilled labour (graduates) entering the labour market in 2017 would have a negative impact on virtually every macroeconomic indicator. If it were accompanied by negative productivity or a loss in business confidence, the effects across the economy would be exacerbated.
Picture courtesy of Twitter @brandanrey
Our results show that the average real wage rate in the economy would rise. The anticipated real wage increase would, of course, be restricted to skilled labour categories on the back of the skills scarcity created by the lack of new graduates. For lesser skilled labour categories, average real wages would fall slightly because of the shrinking economy and the associated shrinking of demand for labour.
Industries that are skilled labour intensive in their production process would, in our scenario, experience more damage. The biggest losers would include the education and health sectors. Their production would fall 0.25% below base. Given its strong link to the investment sector, the construction industry could be expected to shrink by 0.75%, shedding many jobs.
Dire consequences
Higher education has never been more important to the process of building human capital – poverty’s kryptonite. This is evidenced by the high return it yields to graduates. In South Africa and other developing countries the return on education is much higher relative to other countries. The historical shortage of skills in the economy has made a degree, a diploma or any other proof of skills a valuable asset for everyone and a ticket into a better life.
Read also: Why switching to indigenous languages will help solve university crisis – education expert
The immediate economic impact of a national shutdown of universities should not be ignored or neglected. It would have significant, and potentially dire, consequences down the line – especially for those who are most in need.
The views expressed here are the authors’ alone and are not necessarily those of the organisation they are affiliated with.
Roula Inglesi-Lotz, Associate Professor of Economics, University of Pretoria and Heinrich Bohlmann, Senior lecturer and economist, University of Pretoria
This article was originally published on The Conversation. Read the original article.
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