Presentation For The DHET Inaugural Planning Workshop 30 - Sep

Forecasting skills demand in the broader
South African context
Asghar Adelzadeh
Director and Chief Economic Modeller
Applied Development Research Solutions
Presentation to the Inaugural Planning Workshop

Pretoria, South Africa
30 September 2013
(All numbers in this presentation are preliminary and

as such are subject to revision)
Objectives
This presentation:
reviews imbalances in the South African labour market, and
shows how economic modelling techniques is being used to
forecast demand for and supply of qualifications and
occupations.
Why are there imbalances in
the SA labour market?
Growth, Employment and Demand for Skills
The demand for employment reflects demand for various types of
occupations, and occupations are distinguished primarily by
differences in the skills/qualifications that are utilised in the work
process.
Each year the economy generates a certain number of job opportunities
in various sectors of the economy that are allocated among various
types of occupations with given skill requirements.
At the same time, each year a significant portion of the working age
population seek employment.
Imbalances and mismatches in the labour market are associated with
not enough or too many job seekers with qualifications that are in
demand
To devise policies to minimize imbalances in the labour market, policy
makers need to expand their capability to project future economic
trends and their implications for demand and supply of skills
South African economy: National output
The levels and trends in production of primary, manufacturing and service
sectors show differences across sectors and continuity of trends in
sector productions
Trends and Allocation of National Output
Primary Mfg Services Total

2,000,000
(R millions, constant 2005 prices)
1,800,000
1,600,000
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
.2
.3
.4
.1
.2
.3
.4
.1
.2
.3
.4
.1
.2
.3
.4
.1
.2
20 3
.1
.4
.
08
08
08
09
09
09
09
10
10
10
10
11
11
11
11
12
12
12
08
12
20
Source of data: Stats SA

South African economy: National Output
South African economy is dominated by the service sector. It produces
more than 70% of national output.
Distribution of National Output
Primary Manufacturing Services

100%
80%
60%
40%
20%
0%
2008.1
2012.4
08.2
08.3
08.4
09.1
09.2
09.3
09.4
10.1
10.2
10.3
10.4
11.1
11.2
11.3
11.4
12.1
12.2
12.3
Data Source: Statistics South Africa
Employment by economic sectors
South African economy generates approximately 14 million jobs with the
service sector employing more than 10 millions
C omposition of Employment: Economic Sectors
Primary Manuf ac turing Serv ic es Total

16 000
14 000
12 000
10 000
(Thousand)
8 000
6 000
4 000
2 000
2008 2009 2010 2011 2012 2013
D ata Source: Stats SA

Employment by Occupations
Occupational Demand (2008-2013)
2008 2009 2010 2011 2012 2013

3 500
3 000
2 500
(Thousand)
2 000
1 500
1 000
500
Manager Technician Clerk Sales & Skilled Craft & Plant & Elementary Domestic
Professional services agriculture related trade machine w orker
operator
Qualifications of Employed
Qualifications of 64% of employed in South Africa fall under secondary not completed
and secondary completed. 31% of employed have tertiary education
Allocation of Qualifications Among Employed

2008 2009 2010 2011 2012 2013
5 000
4 500
4 000
3 500
(Thousand)
3 000
2 500
2 000
1 500
1 000
500
No Less than Primary Secondary Secondary Tertiary Other

schooling primary completed not completed
completed completed
Source: Statistics South Africa, QLFS

Labour Force Characteristics
Population 15-64 y rs Labour Forc e (Broad) (LS) Employ ed (LD) Unemploy ed (broad) (Ex c es s Supply )
2 0 13 .2
13 .1
12 .4
12 .3
12 .2
12 .1
11.4
11.3
11.2
11.1
10 .4
10 .3
10 .2
10 .1
0 9 .4
0 9 .3
0 9 .2
0 9 .1
0 8 .4
0 8 .3
0 8 .2
2 0 0 8 .1
5 000 10 000 15 000 20 000 25 000 30 000 35 000 40 000

(T housand)
Qualifications of Unemployed
Qualifications of 73% of the unemployed in South Africa fall under secondary not completed
and secondary completed. 18% of unemployed have tertiary education.
Allocation of Qualifications Among Unemployed

2008 2009 2010 2011 2012 2013
2 500
2 000
(Thousand)
1 500
1 000
500
No Less than Primary Secondary Secondary Tertiary Other

schooling primary completed not completed
completed completed
Source: Statistics South Africa, QLFS
Policy challenge: how to minimise imbalances in the labour market

over time?
Objectives
The main objective of the joint REAL-ADRS project is to support strategic

thinking and policymaking at the DHET by building the Departments
capacity as well as that of the SETAs to anticipate trends in the demand
for and supply of skills from the education and training sector. More
specific objectives include:
Building a holistic and sustainable linked macro-education model with

which to regularly generate credible projections of supply and demand of
skills in the economy under alternative what if scenarios related to the
evolution of the economy, the labour market, key external drivers, and key
policy changes and prospective reforms.
Building capacity at the Department, as well as SETAs, to effectively use

the model for their planning purposes.
What is the architecture of the model?
Linked Macro-Education Model (LMEM)
LMEM links the ADRS Macroeconometric Model of

South Africa (MEMSA) to models of supply and
demand for occupations and skills that have been
developed for the project. The unique structure of
LMEM captures the interactions between
macroeconomics and the education sector in South
Africa.
Linked Macro-Education Model (LMEM)
LMEM performs simulations to quantify the supply and

demand for occupations and skills of diverse
macroeconomic, industrial, and education policy scenarios.
It enables you to design future scenarios for the demand

and supply of skills for the South African economy
Conceptual Framework of M odelling Demand and Supply of Skills
MODULE 1
ADRS Multisecctoral Macroeconomic Model (MEMSA)
Final Demand Block Output Block Income & Expenditure

Block
Exogenous & Labour Market Block

Prices &Wages Block
Parameter Block (45 Sector
--Working age Employment Demand)
population
--Active Labour Force Unemployment
Financial/Monetary
Block
SUPPLY OF SKILLS DEMAND FOR SKILLS
MODULE 5 MODULE 2
Stock of People by Qualifications and Occupation Demand
by Economic Status
MODULE 6 MODULE 3
Flows of Graduate Numbers Qualification Demand
MODULE 4
Replacement Demand
MODULE 7
Overall Supply of Skills
(in the population
and Job opennings by qualifications
in the labour force)
Job opennings by Occupations
MODULE 8
Demand-Supply Imbalances
How is LMEM built?
(Module 1: Macroeconomic Model)
MODULE 1

Block

Prices &Wages Block
population
Financial/Monetary
Block
MODULE 5 MODULE 2
by Economic Status
MODULE 6 MODULE 3
MODULE 4
Replacement Demand
MODULE 7
(in the population
MODULE 8
Module 1: MacroEconometric Model of South Africa
(MEMSA)
MEMSA captures the inter-linkages and dynamic relations
that exist between:
industrial sectors of the economy,
macro-economic variables,
policy variables, and
various protagonists in the economy.
MEMSA has the power to forecasts short and long term

macro and sectoral impacts of alternative
macroeconomic and
sector specific policies
Module 1: Features of MEMSA
Captures the structure of the National Income and Product Account

(NIPA) of the economy
Uses cointegration techniques (Pesaran 1997, 2000) for its 374
estimated equations
Is a bottom-up model with about 3200 equations, including 7 estimated
variables for 41 economic sectors. The model includes:
45 categories of investment
45 categories of employment
45 categories of average remuneration rates
45 categories of outputs
45 categories of exports
45 categories of imports
103 categories of prices
26 categories of private consumption expenditure
16 categories of private sectors income and expenditure
16 categories of households income and expenditure
28 categories of government sector income and expenditure
Module 1: MEMSA's Economic Sectors
with 7 variables for each sector
(output, employment, investment, exports, imports, prices, wage rates)
Primary Manufacturing Se rvice s
1. Agriculture, Forestry and 5. Food 33. Electricity, Gas and water

Fishing 6. Beverage 34. Building construction and engineering
2. Coal Mining 7. Tobacco 35. Wholesale, retail trade, catering &
3. Gold, uranium and ore 8. Textiles accomodation services
mining 9. Wearing Apparel 36. Transport, storage, and communication
4. Other mining 10. Leather and Leather products 37. Financial services, business intermediation,
11. Footwear insurance & real estate
12. Wood and wood products 38. Community, social & personal services
13. Paper and paper products 39. Other services
14. Printing, publishing and recorded media 40. Households
15. Coke & refined petroleum products 41. General government
16. Basic chemicals
17. Other chemicals & man made fibres e, Forestry and
18. Rubber products
19. Plastic products Aggregate Se ctors
20. Glass and glass products
21. Non-metalic minerals
22. Basic iron & steel 42. Total primary (sum of sectors 1 to 4)
23. Basic non-ferrous metals 43. Total manufacturing (sum of sectors 5 to 32)
24. Metal products excl.machinery 44. Total services (sum of sectors 33 to 41)
25. Machinery and equipment 45. Total economy (sum of sectors 1 to 41)
26. Electrical equipment
27. Tv, radio & communication equipment
28. Professional & scientific equipment
29. Motor vehicles, parts & accessories
30. Other transport equipment
31. Furniture
32. Other industries
How is LMEM built?
(Module 2: Occupational Demand)
MODULE 1

Block

Prices &Wages Block
population
Financial/Monetary
Block
MODULE 5 MODULE 2
by Economic Status
MODULE 6 MODULE 3
MODULE 4
Replacement Demand
MODULE 7
(in the population
MODULE 8
Module 2: Occupation Demand
The aim of this module is to capture the occupational structure within

economic sectors in order to translate changes in employment demand
within sectors of the economy to demand for occupations.
Thus, we combined three LFS datasets into one pooled dataset and
used multinomial logit methods to relate employment of 10
occupational categories to 39 sectoral employment and a number of
demographic categories.
Next we used transition matrices to translate demand for 10
occupations to demand for 400 detailed occupations.
After fully testing the results, the final set of estimated equations were
used to write the computer codes for the occupational module. With
links to the ADRS macroeconomic model, the module translates the
macroeconomic models annual sector employment forecasts to
parallel forecasts for occupations.
How is LMEM built?
(Module 3: Qualification Demand)
MODULE 1

Block

Prices &Wages Block
population
Financial/Monetary
Block
MODULE 5 MODULE 2
by Economic Status
MODULE 6 MODULE 3
MODULE 4
Replacement Demand
MODULE 7
(in the population
MODULE 8
Module 3: Qualification Demand
The aim of module 3 is to translate demand for occupations and the

demographic trends to demand for various educational qualifications.
To achieve this, we used the pooled LFS datasets and multinomial
logit method to relate the educational background of employed to
occupation and demographic categories.
After fully testing the results, a set of estimated equations were used to
write the computer codes for the qualification module. With links to
the ADRS macroeconomic model (module 1) and the occupation
module (module 2), this module translates sector employment and
occupational forecasts to parallel forecasts for educational
qualifications.
How is LMEM built?
(Module 4: Replacement Demand)
MODULE 1

Block

Prices &Wages Block
population
Financial/Monetary
Block
MODULE 5 MODULE 2
by Economic Status
MODULE 6 MODULE 3
MODULE 4
Replacement Demand
MODULE 7
(in the population
MODULE 8
Module 4: Replacement Demand
The aim of this module is to take account of replacement

demand arising from retirement, migration, occupational
mobility, and mortality.
We used the pooled LFS dataset to analyse the
demographic composition of each occupation. This made it
possible to estimate specific rates of retirement for each
occupational class and for estimating the rates of outflow.
The replacement demand model is driven in part by
projections of level of employment by occupations
combined with the information on the probability of
leaving employment due to retirement, migration and other
reasons.
How is LMEM built?
(Overall Demand for Skills)
MODULE 1

Block

Prices &Wages Block
population
Financial/Monetary
Block
MODULE 5 MODULE 2
by Economic Status
MODULE 6 MODULE 3
MODULE 4
Replacement Demand
MODULE 7
(in the population
MODULE 8
Overall Demand for Skills
Overall, the demand modules of LMEM produce

projections of future trends in employment by sector,
occupation, and qualification. Together these produce
estimates of the numbers of job openings (net employment
change plus replacement demand) by occupations and
skills.
How is LMEM built?
(Modules 5-7: Supply of Skills)
MODULE 1

Block

Prices &Wages Block
population
Financial/Monetary
Block
MODULE 5 MODULE 2
by Economic Status
MODULE 6 MODULE 3
MODULE 4
Replacement Demand
MODULE 7
(in the population
MODULE 8
Supply of Skills (Modules 5-7)
Modules 5 to 7 are dedicated to the development

of the supply-side of skills.
We used a combination of demographic and
education indicators to estimate the size of the
labour force (employed plus unemployed, defined
broadly). We used multinomial regression
methods.
We wrote the computer code for the module to
capture the supply-side of skills with the necessary
links to the macro model.
How is LMEM built?
(Module 8: Imbalances)
MODULE 1

Block

Prices &Wages Block
population
Financial/Monetary
Block
MODULE 5 MODULE 2
by Economic Status
MODULE 6 MODULE 3
MODULE 4
Replacement Demand
MODULE 7
(in the population
MODULE 8
Module 8: Supply-Demand Imbalances
The aim of this module is to compare the

projections of demand and supply of skills to
provide information on possible future labour
market imbalances and skill mismatches
In the face of demand and supply imbalances, this
module distributes the projected supply of people
with qualifications to the projection of jobs on
offer. It is used to establish the adjustment
mechanism in the model and to establish the
magnitude of imbalances by occupations and
qualifications.
MODULE 1

Block

Prices &Wages Block
population
Financial/Monetary
Block
MODULE 5 MODULE 2
by Economic Status
MODULE 6 MODULE 3
MODULE 4
Replacement Demand
MODULE 7
(in the population
MODULE 8
How does LMEM work?
What kind of output does it generate?
How does LMEM work?
A user specifies shocks or changes to policy parameters related to:

macroeconomics
economic sectors
demographic, and
education sector
The model simulates the impact on:
Aggregate economic variables (e.g., growth, employment, etc.)
Economic sector variables (e.g., investment, employment, output)
Other key economic indicators (e.g., BOP, budget balance, etc.)
Demand for various occupations
Demand for various qualifications
Supply of various qualifications
What kind of output does LMEM generate?
LMEM generates the following outputs:

Projection of macroeconomic performance including employment for
45 economic sectors.
Projection of demand for 11 aggregates and approximately 400
disaggregate occupations.
Projection of demand for 7 aggregate and 27 disaggregate levels of
educational qualifications, that are also cross tabulated with the main
occupational categories.
Projection of supply of 7 levels of educational qualifications by race,
gender, and provinces.
Projection of workforce skills under alternative education scenarios.
How does LMEM work?
A hypothetical economic scenario
A hypothetical economic scenario
LMEMs occupational and skill projections require the specification of a

macroeconomic scenario in order for its macroeconomic model component to
produce projections of future trends in overall employment growth,
distribution of employment across industries, remuneration rates, and other
economic variables.
The macroeconomic scenario that underlies the results in this presentation is a

hypothetical scenario developed only for demonstration purposes. For the
benchmark projection, the macroeconomic scenario will be developed in
collaboration with the DHET and other relevant authorities.
Under the hypothetical economic scenario for the next 7 years (2014-2020),
the models macroeconomic projections include:
Average real annual GDP growth rate close to 4.5 percent
Six percent decline in the unemployment rate
Increase in total employment by about 2 million
LMEM Projections: Sector Employment (2014-2020)
Under the hypothetical scenario, economic growth is projected to increase labour
demand by about 1.9 million between 2014-2020. The employment share of
the service sector is expected to decline by 6% as opposed to 1% and 5%
increases in the primary and manufacturing sector employment
Employment Projections for Aggregate Economic Sectors
2014 2020
Total services
Total manufacturing NOTE: All

numbers are
preliminary
Total primary
0 2,000,000 4,000,000 6,000,000 8,000,000 10,000,000 12,000,000
Source: ADRS MEMSA

How does LMEM work?
Job Openings
LMEM Projections: Sources of Job Openings
Job openings are positions that need to be filled due to:
Expansion Demand: new jobs that are generated through

economic growth
Replacement Demand: any existing jobs which have been

vacated and that require to be filled
Total Job Openings is the sum of job openings due to the

expansion demand and the replacement demand
LMEM Projections: Job Openings by Occupation (2014-2020)
The economy is projected to generate about 5 million job

opportunities between 2014-2020. About 40% will be due to
economic growth
Job Openings by Occupation (2014-2020)
Expansion Replacement Total Job
Occupations
Demand Demand Opportunities
Legislators, senior officials and managers 86,213 100,935 187,148
Professionals 132,570 159,568 292,138
Technicians and associate professionals 479,708 450,515 930,223
Clerks 165,273 393,370 558,643
Service workers 141,344 560,880 702,224
Skilled agricultural workers 15,157 35,665 50,822
Craft and related trades workers 126,282 302,548 428,830
Plant and machine operators 438,099 267,888 705,987
Elementary occupations & domestic workers 313,364 780,629 1,093,993
Total 1,898,010 3,051,998 4,950,008

NOTE: All
numbers are
preliminary
LMEM Projections: Job Openings by Occupation (2014-2020)
Total job opening in each occupation is a combination of the effect

of the expansion demand and replacement demand NOTE: All
numbers are
preliminary
Shares of Occupational Demand (2014-2020)
Elementary occupations & domestic workers
Plant and machine operators
Craft and related trades workers
Skilled agricultural workers
Service workers
Clerks
Technicians and associate professionals
Professionals
Legislators, senior officials and managers
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Expansion Demand Replacement Demand
Source: Linked Macro-Education Model

LMEM Projections: Job Openings by Qualification (2014-2020)
Close to 50% of job openings during the next 7 years will require secondary and
higher rate of education. Job openings related to replacement demand are
relatively higher in lower skill categories.
Job Opportunities Due to Expansion Demand by Job Opportunities Due to Replacement Demand by
Qualification 2014-2020 Qualification 2014-2020
Level of qualification Allocation % of total Level of qualification Allocation % of total
No schooling 27,367 1.4% No schooling 53,617 1.8%
Less than primary completed 118,662 6.3% Less than primary completed 216,981 7.1%
Primary completed 90,021 4.7% Primary completed 161,812 5.3%
Secondary not completed 755,398 39.8% Secondary not completed 1,274,054 41.7%
Secondary completed 571,229 30.1% Secondary completed 920,504 30.2%
Tertiary 312,646 16.5% Tertiary 387,930 12.7%
Other 22,692 1.2% Other 37,088 1.2%
Total 1,898,015 100% Total 3,051,986 100%
Total Job Opportunities by Qualification 2014-2020
Level of qualification Allocation % of total

NOTE: All
No schooling 80,981 1.6% numbers are
Less than primary completed 335,638 6.8% preliminary
Primary completed 251,837 5.1%
Secondary not completed 2,029,450 41.0%
Secondary completed 1,491,729 30.1%
Tertiary 700,579 14.2%
Other 59,776 1.2%
Total 4,949,990 100%
How does LMEM work?
Job Seekers
LMEM Projections: Job Seekers
Job seekers are individuals who are in the labour

market seeking employment. They are comprised
of three primary components:
School leavers who leave full-time education
programmes to participate in the labour force
Those who previously left the labour force and are
back in the labour force
Occupational movers who are changing
occupations without leaving the labour force
Unemployed who are continue to seek employment
LMEM Projections: Job Seekers (2014-2020)
The growth path that underlies the hypothetical scenario only partially
reduces the imbalances between demand and supply of labour
Job Openings and Job Seekers (2008-2020) Labour Supply and Demand (2008-2020)
Job seekers Job Openings LS LD

10,000,000 24,000,000
9,000,000
22,000,000
8,000,000
7,000,000 20,000,000
6,000,000
18,000,000
5,000,000
4,000,000 16,000,000
3,000,000
14,000,000
2,000,000
1,000,000 12,000,000
- 10,000,000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
(1,000,000)
Source: LMEM Source: LMEM
NOTE: All
numbers are
preliminary
The Next Phase of the Project
Phase 2 of the project
The second phase of the project includes:
Extensive consultation with the Department and
researchers to further refine and validate the model,
Use of LMEM to generate a set of benchmark projections
of demand and supply of occupations and qualifications for
the period 2013-2020,
Delivery of training workshops to build the capacity within
the Department and SETAs on how to effectively use the
model
Building of a user-friendly web-platform for LMEM, and
Production of various project reports
For questions and enquires, please contact
THANK YOU Asghar Adelzadeh

Applied Development Research Solutions (ADRS)
email: asghar@adrs-global.com
Phone: (011) 083-6474 (South Africa)
Phone: (+1) 916-505-4874 (U.S.A.)
Siphelo Ngcwangu
Centre for Researching Education and Labour (REAL)
Email: Siphelo.Ngcwangu@wits.ac.za
Phone: (011) 687-3074
Phumzile Ncube
Applied Development Research Solutions (ADRS)
email: Phumzile.Ncube@adrs-global.com

Presentation For The DHET Inaugural Planning Workshop 30 - Sep

Hochgeladen von

Dokumentinformationen

Originaltitel

Copyright

Verfügbare Formate

Dieses Dokument teilen

Dokument teilen oder einbetten

Freigabeoptionen

Stufen Sie dieses Dokument als nützlich ein?

Sind diese Inhalte unangemessen?

Copyright:

Verfügbare Formate

Presentation For The DHET Inaugural Planning Workshop 30 - Sep

Hochgeladen von

Copyright:

Verfügbare Formate

Forecasting skills demand in the broader

South African context

Presentation to the Inaugural Planning Workshop

(All numbers in this presentation are preliminary and

Primary Mfg Services Total

Source of data: Stats SA

Distribution of National Output

Primary Manufacturing Services

C omposition of Employment: Economic Sectors

Primary Manuf ac turing Serv ic es Total

2008 2009 2010 2011 2012 2013

D ata Source: Stats SA

Occupational Demand (2008-2013)

2008 2009 2010 2011 2012 2013

Allocation of Qualifications Among Employed

No Less than Primary Secondary Secondary Tertiary Other

Source: Statistics South Africa, QLFS

5 000 10 000 15 000 20 000 25 000 30 000 35 000 40 000

Allocation of Qualifications Among Unemployed

No Less than Primary Secondary Secondary Tertiary Other

Source: Statistics South Africa, QLFS

Policy challenge: how to minimise imbalances in the labour market

The main objective of the joint REAL-ADRS project is to support strategic

Building a holistic and sustainable linked macro-education model with

Building capacity at the Department, as well as SETAs, to effectively use

LMEM links the ADRS Macroeconometric Model of

LMEM performs simulations to quantify the supply and

It enables you to design future scenarios for the demand

Final Demand Block Output Block Income & Expenditure

Exogenous & Labour Market Block

SUPPLY OF SKILLS DEMAND FOR SKILLS

Job opennings by Occupations

Final Demand Block Output Block Income & Expenditure

Exogenous & Labour Market Block

SUPPLY OF SKILLS DEMAND FOR SKILLS

Job opennings by Occupations

MEMSA has the power to forecasts short and long term

Captures the structure of the National Income and Product Account

Primary Manufacturing Se rvice s

1. Agriculture, Forestry and 5. Food 33. Electricity, Gas and water

Final Demand Block Output Block Income & Expenditure

Exogenous & Labour Market Block

SUPPLY OF SKILLS DEMAND FOR SKILLS

Job opennings by Occupations

The aim of this module is to capture the occupational structure within

Final Demand Block Output Block Income & Expenditure

Exogenous & Labour Market Block

SUPPLY OF SKILLS DEMAND FOR SKILLS

Job opennings by Occupations

The aim of module 3 is to translate demand for occupations and the

Final Demand Block Output Block Income & Expenditure

Exogenous & Labour Market Block

SUPPLY OF SKILLS DEMAND FOR SKILLS

Job opennings by Occupations

The aim of this module is to take account of replacement

Final Demand Block Output Block Income & Expenditure

Exogenous & Labour Market Block

SUPPLY OF SKILLS DEMAND FOR SKILLS

Job opennings by Occupations

Overall, the demand modules of LMEM produce

Final Demand Block Output Block Income & Expenditure

Exogenous & Labour Market Block

SUPPLY OF SKILLS DEMAND FOR SKILLS