WITH barely 40% of adults working, South Africa’s labour market is in deep crisis. Depending on one’s assumptions about population growth and the relationship between economic growth and job creation, getting to the global norm of 60% employment levels could require economic growth of 7% a year to be sustained for a generation. Reforming the labour market is one of the country’s most significant policy challenges. It is also one of the most controversial. Comparing South Africa’s labour-market challenges with those of Brazil, India and Malaysia provides some useful insights. Of the four countries, South Africa’s labour market is the one in which unskilled and inexperienced workers struggle most to gain purchase. This is reflected in the vastly higher levels of unemployment in South Africa relative to the other economies. Last year, South Africa’s unemployment was 26%, Brazil’s was 8% and both India and Malaysia had unemployment rates of 4%. The proportion of South Africa’s adults in the labour market (at 52%) was also lower than India’s (56%), Malaysia’s (60%) and Brazil’s (70%). These divergent labour market outcomes both shape and are shaped by different labour market policies and institutions, which are, in turn, embedded in each country’s history and development. This makes it inadvisable simply to transplant the specifics of policies from one country to another. There are, nevertheless, lessons to be learnt. Brazil and South Africa have economies with similar sectoral compositions, and comparable rates of growth over the past decade. But Brazil has far lower levels of unemployment and has seen a substantial decline in poverty in recent years. Both labour markets are heavily regulated, but a critical difference is that there are no restrictions on Brazilian employers who wish to dismiss workers. The key lesson to draw from Brazil is that you don’t have to fix everything at once. Despite high levels of regulation and taxation, substantial employment has been generated in Brazil by minimising the employer’s risks when taking on new staff. Easy dismissal helps the labour market to perform more efficiently and encourage employment. South Africa and India share a political history in which a national liberation movement, closely allied to organised labour, established comprehensive legal protections for workers on coming to power. In the past decade, India’s economic growth has averaged 8% a year. But this has not been matched by employment growth, particularly in the formal sector, which has barely grown since 1994. More than 90% of Indian workers are in the informal sector, a result, mainly, of extremely complex labour market regulation. The effect of excessive labour market regulation on formal sector job creation in India is an important lesson for South Africa, as is India’s (unhappy) experience of overregulating contract labour. With South Africa’s government moving to limit and even prohibit, the use of contract labour, India’s experience suggests that this is unlikely to work. It is, in any event, clear that nonstandard employment, including temporary employment and employment through labour brokers, is increasingly common around the world. And this trend will not be halted by workers or governments. Malaysia and South Africa looked very similar in the 1980s. At that point, they had similar levels of output per head, used technologies of comparable levels of productivity, and had similar levels of human capital. Both also relied heavily on primary commodities for exports. Today, Malaysia is a development success story that looks very different from South Africa. Malaysia committed itself to a low-cost, export-oriented industrialisation policy, which, among other things, put limits on wages. This approach produced economic growth that was consistently more than 3% a year. It also resulted in large numbers of formal sector jobs. Today, unemployment is only 4%. It is clear that managing labour costs can play an important role in encouraging employers to hire more workers. Millions of South Africans have no work. Improving education and skills development is vital but this will take time. In the meantime, this generation of unemployed deserve better. For South Africa to accelerate employment growth, the country has to reform its labour markets. In doing so, there are important lessons from other developing countries.