Rates of return to education of blacks in South Africa

The aim of this empirical study was to calculate private and social rates of return to education and to test the hypothesis that education is a major determinant of earning differentials for blacks in South Africa. Data for 23 278 working men and women were extracted from the 1985 Current Population Survey files. This comprised a sample representative of the black population in the Republic of South Africa excluding the former Transkei, Bophuthatswana, Venda and Ciskei territories. Lifetime earnings profiles were constructed from these data for five educational levels, namely, no schooling up to Standard 1; Standards 2 to 4; Standards 5 to 7; Standards 8 to 9; and Standard 10. Schooling was assumed to account for 60 per cent of the earnings differentials between these profiles. Imputed average household outlays on schooling were taken as the private direct cost of education. These were supplemented by estimates of per pupil spending by the various government departments responsible for black education, to calculate the social costs per year of primary and secondary schooling. Indirect costs in the form of imputed foregone earnings were included from Standard 5 (age 15) onwards. The private internal rates of return to education of males were found to be about 16 per cent at primary level and 24 per cent for secondary schooling. Corresponding social rates of return are about 6 per cent for primary and 15 per cent for secondary education. Estimates for females showed negative rates of return between no schooling and Standards 2 to 4, the private and social rates being estimated at ‐1 per cent and ‐4 per cent respectively; from Standards 2 to 4 to Standards 5 to 7, a private rate of 12 per cent and a social rate of 4 per cent are reported; and for the remaining secondary school phases private rates of about 32 per cent and social rates of about 15 per cent are estimated. The study confirms that education is a major determinant of earnings differentials and education expansion can be regarded as a powerful earnings equaliser.     

Private rates of return to education of Africans in South Africa for 1995: a Double Hurdle model

In this study, the private rates of return to education of African males and females in South Africa are estimated. Both Heckman's (1976) two-stage selection model and the more recent Double Hurdle model, with correlated errors between the participation and employment equations, is found to be more suitable for the earnings analysis than the one with uncorrelated errors. This might imply that people make the decisions to participate in the labour force and to take up a job offer simultaneously. The private rate of return to education of Africans is found to be 12 and 11 per cent for males and females, respectively. These rates are significantly higher than those found in previous analyses of rates of return to education in South Africa. In these older studies, the private rate of return to education of Africans was found to vary from 2,5 to 7,7 per cent.     

The implications of South Africa's skills migration policy for country competitiveness

South Africa suffers from a shortage of skills, while at the same time having an excess of unskilled labour. The brain drain and the impact of HIV/Aids are threats to the current skills level in the labour force. Skilled workers generally create jobs for unskilled workers, and the level of skills in the labour force is an attraction for foreign investment. The new international migration policy imposes financial penalties and other restrictions on employers of foreigners with skills. The policy is detrimental to South Africa's competitiveness in the global economy and will deter investors and those needing to utilise skills not available in the South African labour market. A general immigration policy would be more appropriate to attract skilled foreigners to South Africa, where their skills can be absorbed into the labour force by supply and demand forces.     

MODELLING INFLATION IN SOUTH AFRICA: A MULTIVARIATE COINTEGRATION ANALYSIS

We employ an expectations augmented Phillips curve framework to investigate the link between inflation, unit labour costs, the output gap, the real exchange rate and inflation expectations. Using multivariate cointegration techniques, we find evidence consistent with mark‐up behaviour of output prices over unit labour costs. Most importantly, we find that the mark‐up in the South African economy is much higher than in the U.S. For South Africa we find a markup of about 30 per cent: three times as high as the 10 per cent markup found for the U.S.     

Is there a trade-off between the employment and wages of unskilled African South Africans?

The possible trade-off between employment and wages has characterised most of South Africa’s labour market debates, particularly with regards to decent wages versus unemployment. In this article we explore the relationship between labour market earnings and the level of employment among African birth cohorts using labour force data from 1997 to 2011. We find that the association between an increase in the proportion of unskilled employed in a birth cohort and earnings is mediated by the sector of employment. While some sectors exhibit the expected negative association, there is a robust positive relationship between the first two quartiles of the earnings distribution within birth cohorts and the proportion of the birth cohort who are employed in unskilled occupations in the manufacturing and trade sectors. Because a range of market forces determine this relationship, further research is needed to unpack the reasons for such varied outcomes in order to better inform the debates on labour market interventions like the proposed National Minimum Wage and to appreciate the potential impact of such policy interventions on wages and employment.     

South Africa's special employment programme of R600 million∗

In 1985 an amount of R6OO million was allocated for special employment projects. The most important ones were labour intensive projects by the public and private sectors, projects to support the small business sector, and the training of unemployed persons.

Various conditions were set for the programmes. Regarding the labour‐intensive projects for instance, a relatively small allowance was paid to the unemployed person in order to accommodate as many persons as possible, and to ensure the workers were not diverted from other employment opportunities. Furthermore, at least 50 per cent of the total funds allocated had to be for the wages of the unemployed persons. In terms of acceptability among both training institutions and the persons involved, the scheme for the training of unemployed persons was particularly successful.

Only a relatively small part of South Africa's unemployment problem can be addressed with a programme of this nature. Measures to address the structural unemployment problem remain first priority.     

Social Transfer Benefits and Retirement Decisions: Evidence from South Africa

Population aging poses a new challenge to the fiscal sustainability of social security programs around the globe. As life expectancy increases, among other reasons, many governments in developed countries have begun to reform key features of their programs, such as increasing the eligibility age for access to social benefits. However, as in the case of South Africa, some opt to decrease the eligibility age for access to such pension benefits. The South African old age pension, which is one of the most expansive cash transfers in developing countries, puts a significant monthly cash transfer in the hands of its recipients. This cash transfer is conditioned on age and a means test that is very generous to most South Africans. In this paper, we seek to understand the impact of such an increase in non‐labour income on the labour force participation of older men by exploiting a phased‐in reduction in pension eligibility age. We estimate that, at the median predicted market wage, pension age‐eligibility reduces the probability of labour force participation by approximately 9.85% points for single males and 15.45% points for married males.     

REVISITING INFORMAL EMPLOYMENT AND SEGMENTATION IN THE SOUTH AFRICAN LABOUR MARKET

This study revisits the definition of informal employment, and it investigates the puzzle of high open unemployment co‐existing with relatively limited informal employment in South Africa. We estimate earnings equations using data from the September 2004 Labour Force Survey and present evidence of persistent earnings differentials not only between formal and informal employment, but also between types of informal employment. These persistent earnings differentials are suggestive of complex segmentation in the South African labour market and challenge the presentation of informal employment as an undifferentiated residual with no barriers to entry or mobility.     

Labour market discrimination in the North West province of South Africa

This article provides an econometric estimate of labour market discrimination in the North West province of South Africa. Using data obtained from the October 1995 Household Survey, it was found that in 1995 statistically significant gender discrimination exists against women in North West's labour market. The male discriminatory wage advantage of 127 per cent and the female discriminatory disadvantage of 195 per cent were ascribed to the overrewarding and underrewarding of some personal characteristics of males and females, respectively. Productivity differentials of 40 per cent in favour of females and a premium paid to women measuring 71 per cent also exist. Discrimination explains 50 per cent of the wage gap between genders, while productivity differentials and the premium account for 13 and 37 per cent respectively. The study supports 'affirmative action' and suggests policies that aim to alter the occupational distributions, and these may need to target educational decisions made prior to labour market entry.     

Pension Challenges and Pension Reforms in Oecd Countries

The 30 OECD member countries have very diverse pension systems.Current old-age public pension spending varies between lessthan 1 and more than 10 per cent of gross domestic product (GDP).Public spending on pensions per person aged 65 or over variesfrom less than 15 to more than 40 per cent of economy-wide GDPper head. For workers entering the labour market today, thetarget pension from all mandatory sources for an average earnervaries between 30 and 100 per cent of individual earnings. Recentpension reforms have a number of common themes. First, pensioneligibility conditions have been tightened. Second, the indexationof pensions in payment has become less generous. Third, somepension schemes link benefit levels to changes in life expectancy.Finally, a number of countries have introduced defined-contributionpensions: privately managed schemes where the pension benefitdepends on contributions and investment returns. Footnotes ¹ E-mail addresses: peter.whiteford{at}oecd.org; edward.whitehouse{at}oecd.org     

Child Labour: a survey of selected Asian countries

While the African continent has the highest child labour force participation rates, Asia contains the largest pool of child workers. The nature, magnitude and decline in child labour vary sharply between Asian countries. East Asia now has little child labour; however, child labour continues to have a significant presence in South Asia and in parts of Southeast Asia. This paper surveys the literature on child labour in selected Asian countries, paying special attention to its causes and consequences. The evidence presented shows that Asian child labour, especially in South and Southeast Asia, has some common features. For example, the bulk of child labour is in the 10–14 years age group. The phenomenon is largely rural, and child domestic labour constitutes a significant share. The participation rate of Asian children in the 15–17 years age group in economic activities, 48.4 per cent, is the highest in the world. There is a significant gender element in Asian child labour with boys outnumbering girls in economically active work, while the reverse is the case with domestic child labour. A focus of the survey is the empirical findings that provide insights into the policy instruments that may be needed in combating this phenomenon. The survey also discusses some of the important international and national initiatives that have been taken to reduce child labour.     

Determinants of labour force participation in the North West province of South Africa

Based on data extracted from the 1995 October Household Survey of Statistics South Africa, this study has found that potential income is a major factor in labour force participation by African women in the North West province of South Africa. Other significant determinants of participation for both genders are age, education, region, marital status and relationship to the head of the household. The results imply that significant discrimination against African women still exists in the North West province, which partly explains the much lower participation rate for African women (64 per cent), compared with that of African men (86,5 per cent). The study supports the North West government's development strategy of developing human resources to eradicate poverty.     

Job Creation and Destruction in South Africa

Analysts of the South African labour market have mainly used household surveys to analyse the labour market. It has been more difficult to explore the labour demand of firms, as a result of limited data availability. We use the Quarterly Employment Statistics survey, an enterprise survey conducted by Statistics South Africa, to explore how South African firms create and destroy jobs, thereby shedding light on many of the policy questions that are relevant in a high unemployment society like South Africa. We find that job creation and destruction rates are similar to those found in Organisation for Economic Co‐operation and Development countries. There is little evidence that labour legislation creates rigidities that prevent firms from hiring or firing workers. We also find that larger firms are better net creators of jobs than small firms and that net job creation rates are negative in manufacturing. Our research has important policy implications – particularly for the South African National Planning Commission's 2030 plan, in which new jobs are envisaged to come mainly from small‐ and medium‐sized firms. Our research suggests that this scenario is not likely without changes to policy or legislation.     

Inequality in South Africa: The distribution of income,expenditure and earnings

This article empirically analyses the state of inequality in South Africa. International comparisons show South Africa to be among the most unequal countries in the world. The levels of income inequality and earnings inequality are analysed with a range of measures and methods. The results quantify the extremely high level of inequality in South Africa. Earnings inequality appears to be falling in recent years, with relative losses in the upper-middle parts of the earnings distribution. Decomposing income inequality by factor source reveals the importance of earnings in accounting for overall income inequality. The article concludes by observing that, internationally, significant sustained decreases in inequality rarely come about without policies aimed at achieving that, and suggests that strong policy interventions would be needed to reduce inequality in South Africa to levels that are in the range typically found internationally.     

SOUTH AFRICA AND THE NEW PARTNERSHIP FOR AFRICA'S DEVELOPMENT: ECONOMIC SPIN-OFFS AND LINKAGES

The New Partnership for Africa's Development (NEPAD) is a concerted effort by Africa's political leaders to develop a comprehensive and integrated strategic policy framework to raise current levels of socio‐economic development and reduce high levels of poverty across the African continent. The NEPAD framework recognises the need for African countries to pool their resources together in order to enhance regional development and economic integration. To this end, NEPAD emphasises capacity building and also seeks to solicit and disburse funds towards infrastructural development programmes and poverty alleviation projects, among others. South Africa's involvement with the rest of Africa has increased significantly since 1994. Trade exports, foreign direct investment (both market and resource‐seeking in nature) and public‐private partnerships have mushroomed in many parts of the continent. Many South African firms are providing the financial impetus for the infrastructural development and rehabilitation of African economies. This paper discusses salient economic linkages between South Africa and the rest of Africa within the framework of NEPAD. South Africa is the economic hub of sub‐Saharan Africa (and indeed of the African continent), with significant agricultural, manufacturing and services capacity. South African firms have invested in the development of a number of sectors in the rest of Africa, taking advantage of the new investment incentives offered by the NEPAD framework. The target sectors range from mining, the hospitality industry, engineering and construction, finance to telecommunications. These investments and economic involvements are crucial to the development of African countries and the relevant sectors that are important for the realisation of some of the objectives of NEPAD.     

Down on the farm and barefoot in the kitchen: farm labour and domestic labour as forms of servitude

This article evaluates the claim that working conditions for farm workers and domestic workers in South Africa can be analysed in terms of the constitutional prohibition against servitude. Recent research and statistics suggest that for most of these workers the conditions fit the accepted definition of servitude. Although a finding that the constitutional right to be free from servitude has been violated is not a straightforward matter, the existing research provides the empirical and legal predicates for such a finding. The appropriate remedy for violations of the 1996 Constitution's prohibition against servitude is the creation, by the state, of a comprehensive and coordinated programme designed to realise the manumission of these workers. The use of law as a tool for social transformation has inherent limits. At a minimum, however, a legal finding of such a constitutional infraction obliges the state to employ all available means at its disposal to restore the dignity of these workers.

No one may be subjected to slavery, servitude or forced labour. (Constitution of the Republic of South Africa, Section 13)     

Do Foreign Firms Transfer Gender Norms in the Labour Market? Evidence from Sub-Saharan Africa

Closing the gender gaps in economic opportunities is crucial for boosting economic growth and the empowerment of women. In this paper, we study how foreign firms contribute in reducing gender disparities in the labour market by transferring the gender norms of their country of origin to the affiliates in the host countries. We use cross sectional data on foreign firms located in 19 Sub Saharan Africa countries in 2010 by UNIDO. We find that firms coming from more gender equal countries employ more female workers in their affiliates. This effect is more relevant for the highly skilled female workers.     

Immigration policy in South Africa: does it make economic sense?

Current levels of international labour migration are exceptional. Several thousand skilled South Africans leave the country each year. Historically, the country attracted more skilled workers than it lost, from Europe and, more recently, other African countries. But emigration is increasing and immigration is restricted by policy and a range of socio-economic factors. The trends in the ‘brain drain’ from South Africa and its causes and severity are relatively well understood and will be reviewed in this paper. However, the policy response has been slow and confused. The paper highlights some of the economic determinants and effects of South African emigration and immigration and reviews recent changes to South African migration legislation. It asks how South Africa can attract the right kind of skilled immigrants and what more can be done to stem the loss of professionals from the country.     

Relationship regarding the demand for labor between domestic temporary and foreign workers: Korean case

With the progress of globalization, South Korea, one of the emerging industrial countries, has recently witnessed a sharp increase in the number of enterprises that employ foreigners. However, there are only a limited number of studies on the influence that such an increase has had on the labor market in the Republic of Korea. Thus, using ‘Workplace Panel Survey’ data surveyed by the Korea Labor Institute (KLI), this paper examines the relationship concerning the labor demand of an establishment between domestic temporary and foreign workers. Analysis using a bivariate Tobit model shows that a typical Korean firm attempts to employ domestic temporary and foreign workers simultaneously. Further, the empirical analysis found that any establishment that is relatively newly established and has difficulty in recruiting domestic workers hires foreign workers, but there is no evidence that establishments hire foreign workers rather than domestic temporary workers to save on the production cost.     

Recent U.S. economic policies and the Central Caribbean economies

This study examines the trade and investment performances of three economies in the Central Caribbean region since the Caribbean Basin Initiative (CBI) and associated programs. We find that the rapid growth in nontraditional exports from these economies to the United States did not necessarily translate into net foreign exchange earnings. On a per capita basis, export-related investment in Haiti was much lower than in the other two economies — Jamaica and the Dominican Republic. As a percentage of the labor force, gross employment gains for Jamaica have been significantly larger than those in either the Dominican Republic or Haiti. It appears that the policies favoring expansion in the offshore sector may foster employment opportunities of females, especially where traditional sectors are in decline.