Skip to content

What have we learnt about unemployment from microdatasets in South Africa?

Literature › Works

Geeta Kingdon; John Knight (2001). What have we learnt about unemployment from microdatasets in South Africa?. Centre for the Study of African Economies, University of Oxford (paper, June 2001). Centre for the Study of African Economies, Department of Economics, University of Oxford.
Type working paper
Scope Post-1994 South African economy
Method synthesis review
Period studied 1993–1999
Regions South Africa, former homelands, rural and urban South Africa
Themes inequality poverty unemployment, labour markets wages, bantustans removals influx, education human capital, methods data sources, unions strikes
Citation key kingdon2001

Argument

Summarising four of the authors' own papers, the paper argues that South African unemployment is high, largely involuntary and best measured by the broad definition that includes non-searchers. Wages fall as local unemployment rises, but union wages are insulated from this. The non-searching unemployed are no richer or happier than searchers, and are best seen as discouraged workers. Unemployment is heavily concentrated among young, uneducated Africans in homelands. About 75% of the black-white gap in unemployment incidence is explained by differences in characteristics, chiefly education and location, which the authors tie to pre-labour-market discrimination under apartheid. The macro picture is a segmented labour market with a small formal sector at high wages and a small free-entry informal sector.

Evidence and method

Household microdata: the nationally representative 1993 SALDRU survey and the annual October Household Surveys (OHS) to 1999. Official figures from StatsSA, the SARB and the CSS are used for the unemployment-rate table and the wage-growth footnote. The analysis is cross-sectional (regressions, wage-curve estimation, a decomposition of the race gap). No longitudinal data were available. Results are drawn from the authors' four underlying papers.

Findings

  • Unemployment is very high and rose over the 1990s on both measures, with a large gap between definitions. (p. 3)

    At 36% on a broad definition, the South African unemployment rate is one of the highest in the world.

  • Broad unemployment rose from 31.2% (1993) to 38.6% (1998) and 36.2% (1999), against narrow rates of 13.0% to 26.1% and 23.3%. (p. 3)

    1998 OHS 38.6 26.1 12.5 1999 OHS 36.2 23.3 12.9

  • A negative wage curve exists in South Africa, but union wages are insulated from local unemployment. (p. 6)

    However, this wage flexibility does not extend to union wages which are well insulated from local unemployment conditions; that is, wages of unionised workers do not fall in high-unemployment localities.

  • Segmentation in wage responsiveness is stronger along homeland/non-homeland lines than rural/urban lines. (p. 6)

    Thus, labour market segmentation appears to be greater along former ‘homeland’/non-homeland lines than along rural-urban lines.

  • Non-searching unemployed are more deprived and many are discouraged workers, which weakens the case for the narrow definition. (p. 8)

    The findings indicate, firstly, that the non-searching unemployed are more deprived than the searching.

  • Evidence makes it implausible that much unemployment is voluntary; the unemployed are worse off than the informally employed. (p. 11)

    The unemployed are, on average, substantially worse off than the informally employed - both in terms of income and expenditure and in terms of a range of indicators of well-being.

  • The informal sector has historically been hostile to newcomers, partly through apartheid-era laws and mobility controls. (p. 12)

    there are indications that the informal sector has historically been inhospitable to newcomers in South Africa (harsh licensing laws, strict byelaws preventing street vending, laws to discourage mobility of black people to non-homeland areas, etc).

  • Most of the unemployed have never worked and unemployment is of very long duration, pointing to demand-side causes. (p. 13)

    the majority (62%) of the unemployed have never held a job before, i.e., they entered unemployment when they entered the labour force.

  • Education reduces African unemployment risk, but upgrading education without more jobs will only change who gets the jobs. (p. 13)

    unless there are more jobs in the economy, upgrading education of Africans will at best change the composition of employment in their favour.

  • Living in a former homeland raises unemployment risk by 18 percentage points. (p. 14)

    a person living in a homeland is 18 percentage points more likely to be unemployed than an otherwise identical person living elsewhere.

  • 75% of the black-white unemployment gap is explained by characteristics, which reflect apartheid-era schooling and location policies. (p. 14)

    While 75% of the black-white gap in unemployment incidence is explained by black-white differences in characteristics2, there remains a hefty residual (25%) that cannot be explained in that way.