Information and communication technology and employment in South Africa

Abstract

History has shown how industrial transformations in societies have been brought forward by technological advances as a result of advanced knowledge affecting the ways of work. With every industrial revolution, literature explains that it became evident that the introduction of innovative technologies impact the workforce in terms of employment levels and the requirement of new skills to complement the complexities that arise. The information and communication technology (ICT) sector has shown to be a critical factor in economic growth in numerous developed and developing countries and through this awareness, many institutions have over the past years invested in research and development (R&D) strategies that will allow for a smoother transition into and the adaptation of technological advancements brought about by the Fourth Industrial Revolution. However, many argue that the effects of ICT developments may have a negative impact on the labour market resulting in increased levels of technological unemployment as technology replaces human resources. The decline in levels of employment in South Africa continues to raise concerns among organisations and policymakers. The study therefore investigates the impact of ICT on employment levels within the South African context. Many studies conducted on the relationship between ICT developments and employment are not unanimous in their conclusion regarding the existence of a causal relationship and a short-run or long-run relationship. This study employs an empirical approach in an attempt to investigate how ICT developments affect employment levels in South Africa. As a result, data on ICT components, economic growth, investments and income were collected from the World Development Indicator database while the labour statistics were gathered from Statistics South Africa for the period 1990 to 2020. The data were interrogated using econometric models to test for cointegration and causality. The Johansen cointegration test results indicated the existence of a long-run relationship among all variables and the vector autoregression (VAR) model determined that all the variables were significant determinants of employment in the long-run. Focussing specifically on ICT results, it was determined that ICT has a direct relationship with employment levels in the long-run, however, it was not a significant determinant of employment in the short-run as the results from the vector error correction model (VECM) showed. In addition, after conducting the Granger causality test to establish whether a bidirectional relationship exists between ICT

developments and levels of employment, it was observed that these variables do not Granger cause each other. Finally, policy recommendations were proposed in accordance with the findings, which focussed on the major determinants, such as human capital development, which are more capable of impacting levels of employment.