Why economic growth does not always create jobs
- Prashalan Govender
Economist Jayati Ghosh says governments must stop treating employment as a happy side effect of economic growth, and start creating it deliberately.
For years, South Africans have been offered the same prescription for the unemployment crisis: grow the economy and the jobs will follow.
When businesses sell more products, open new branches and make more money, they should need more workers. Economic growth goes up, unemployment comes down, and everyone gets to go home happy.
Except, according to renowned economist Jayati Ghosh, that neat relationship is breaking down.
“The link between GDP growth and job growth is broken,” Ghosh told after delivering the Southern Centre for Inequality Studies’ annual inequality lecture at the University of the Witwatersrand on 28 July.
Her argument is not that economic growth is useless. Rather, she says governments cannot assume that simply making the economy bigger will automatically create enough work, or the right kind of work.
Imagine a factory doubles its production after installing a fleet of machines. Its contribution to GDP may rise, even though it has hired nobody or has retrenched some workers because software and machinery are now doing their jobs.
Growth, but where are the jobs?
The South African economy grew by 1.1% in 2025. That is better than the two years prior, which saw economic growth below 1%, but it is nowhere near enough to transform the lives of millions of unemployed people.
President Cyril Ramaphosa again placed economic growth at the centre of the government’s employment plan in his February 2026 State of the Nation Address. “A stronger South Africa depends on a growing economy,” he said, adding that rapid and inclusive growth was needed to create more jobs and better-quality jobs.
Minister in the Presidency Khumbudzo Ntshavheni made the government’s position even plainer in June: the state could not itself create all the employment South Africa needs, but could establish conditions in which companies grow and hire people.
Ghosh believes that approach places too much faith in growth doing the heavy lifting.
“There has always been this idea that you need a certain level of GDP growth to generate a corresponding level of job growth,” she said. “That assumes there is a direct relationship between how much a country’s economy grows and how much employment grows.
“But if you look at the data from the past 20 years, that relationship no longer holds. You can have strong GDP growth with little or no job growth, as we have seen in India.”
The technical term for this is jobless growth: the economy produces more value, but employment barely moves.
Machines do not ask for lunch breaks
Part of the problem is that the sectors that once absorbed large numbers of workers have changed.
Manufacturing remains important, but modern factories can produce more goods using fewer people. Machines assemble products, computers monitor production lines, and software handles administrative work.
Automation can make businesses faster and more productive. It can also mean that a new factory creates hundreds of jobs instead of thousands.
The same shift is spreading through the services sector. Call centres, for example, once created large numbers of entry-level jobs in countries. Now chatbots, automated menus and artificial intelligence can handle some of the questions that previously required human workers.
In the past, Ghosh said, workers displaced from one sector could often find opportunities in another. Agricultural employment declined as economies industrialised, but factories expanded. Later, workers moved from factories into offices, retail and other services.
That escape route is narrowing when technology is reducing labour needs across several industries at once.
This does not mean robots are about to collect every payslip. It does mean policymakers cannot count the number of new businesses or percentage points of GDP growth and assume that employment will rise in step.
Treat jobs as the goal
Ghosh argues that governments should make employment a policy target in its own right. That means asking not only, “How do we grow the economy?” but also, “Which activities can create useful, secure and decently paid work?”
She believes the care economy offers one answer. This includes nurses, doctors, childcare workers, community health workers, teachers and people who support older people or those with disabilities.
Much of this work cannot easily be replaced by machinery. A robot may help a surgeon perform an operation, but it is not about to sit beside an anxious patient and explain what happens next.
South Africa also has enormous unmet needs in healthcare, education and social care. Expanding these services could therefore address two problems at once: unemployment and the shortage of essential public services.
Ghosh also points to the creative economy, an economy which includes film, music, design, publishing, gaming, crafts and other cultural work. These sectors can employ people with a wide range of skills while building industries around local languages, stories and talent.
Can citizens force a rethink?
Ghosh is blunt about the political challenge. Governments do not automatically adopt policies simply because they would benefit the largest number of people, she says. Policy is shaped by competing groups, including businesses, lobbyists, unions and citizens.
“There are certain people who influence government policy, and what we need is counter-pressure so that governments are forced to listen,” she said. “Governments are not good by nature. We have to force them to become good.”
That pressure can take many forms: elections, trade unions, civic organisations, public campaigns and peaceful protest.
South Africans have already used the ballot box to demand change. In the 2024 national elections, the African National Congress lost its parliamentary majority for the first time since 1994, forcing it to govern nationally with other parties.
But changing the political arithmetic does not immediately repair broken municipalities, improve policing or put millions of people to work.
Ghosh’s message is that South Africa should stop waiting for employment to trickle out of a larger GDP figure. Growth matters, but what grows, how it grows and who benefits matter just as much.
A country can produce more money without producing enough jobs. For millions of unemployed South Africans, that is not an obscure economic debate. It is the difference between growth on a spreadsheet and a salary in a bank account.