Unemployment in South Africa is extremely high and very unevenly distributed, being concentrated among young less-skilled blacks. The sharp increase in unemployment in the 1990s was driven by a surge in the supply of less-skilled labour, accompanied by a failure of labour demand to keep pace. Growth of the working-age population and the release of pent-up pressures for labour force participation in the majority black population explain the big increase in the supply of less-skilled labour, while negative demand shocks in labour-intensive sectors were an important factor in the slow growth of demand. The combination of these factors means that market-clearing would have required a substantial fall in real wages in the decade after 1994, especially for less-skilled workers. Although some decline in real wages does appear to have taken place, this was insufficient to prevent the jump in unemployment – union power and other features of the labour market prevented a much larger downward move in real wages.