Abstract
Unemployment is not only pertinacious to output growth, but it has other social costs. As economies seek to develop through elimination of inequalities, alleviating poverty and ensuring output growth, inflation and unemployment stand as scarecrows to investors. This research aims to evaluate the economic effects of unemployment and inflation on output growth in South Africa. An ARDL model was employed to estimate short-run and long-run impact of unemployment rates and inflation rate among controlled variables on real GDP in South Africa for the period of 1994-2019. The results show that inflation depresses real GDP; human capital and physical capital promotes real GDP. Based on the findings, unemployment can best be tackled through increase supply of and improvement in the quality of physical capital which increases labour productivity as well as investment in human capital. The results found that an in increase in the real GDP will increase investment, which further generates employment. Key words: Unemployment, inflation, output growth.
Highlights
When South Africa became liberated, it inherited an economy that had disadvantaged in many aspects
The results have shown that unemployment (UNEMPL) has no any significant impact on the logarithm of real gross domestic product (GDP) in the long-run
This study has investigated the impact of unemployment and inflation on economic performances in South Africa while using the logarithm of capital stock and human capital as control variables
Summary
When South Africa became liberated, it inherited an economy that had disadvantaged in many aspects. “South Africa has high level of manpower supply with shortage of critical manpower; low level of physical capital stock, which have resulted in the huge rate of unemployment” Unemployment has negative influence on economic welfare, production, human capital, social exclusion, crime, and social instability that is a matter of serious concern. South Africa has a serious problem of unemployment because many of her people who are unskilled and are not experienced to drive the economy forward.
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