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.     

‘Fit to play’: Labour market behaviour in a cohort of public-sector antiretroviral treatment patients

Given the rapid scale-up of antiretroviral treatment (ART), it is necessary to explore the impact of ART on labour force participation, employment and labour productivity. This article investigates labour market outcomes in a prospective cohort of public-sector ART clients in the Free State province of South Africa. Empirical results suggest that labour force participation increased markedly as the proportion of those too ill to work declined, becoming indistinguishable from participation rates in the general population. Unemployment rates, however, remain above those reported for the general population. ART and its health-related benefits therefore translate into increases in labour force participation, but not employment. Employment status at HIV diagnosis strongly predicts absorption in the labour force. Public-sector ART clients should be referred to vocational rehabilitation and occupational therapy programmes, and to welfare-to-work programmes, and the unskilled to adult education and training and further education and training programmes.     

Poverty,gender and migrancy: Lesotho's migrant farmworkers in South Africa

During the 1990s, eastern Free State vegetable farmers increasingly relied on migrants from neighbouring Lesotho for seasonal labour. This coincided with a major downsizing of the mine labour force in South Africa, hitherto the major employer of Basotho migrant workers. However, there was no simple process of transfer of unemployed migrants from the mining to the farming sector; rather, decisions were mediated by domestic relationships and household poverty in Lesotho. Basotho women and girls have been a major casualty of mine retrenchments and the drying up of remittances, and those with domestic skills but little formal training have been forced into the labour market, mainly domestic work in towns and labour on farms. This article examines the Basotho migrants' experiences and conditions of employment, the regulatory environment within which they are recruited and employed, and their future in the context of changing immigration and migration legislation in South Africa.     

FOREIGN BANTU WORKERS IN SOUTH AFRICA: THEIR PRESENT POSITION IN THE ECONOMY

It is not possible to compile accurate statistics about the size, origin, distribution, earnings, remittances and similar measurable aspects of the foreign Bantu labour force in South Africa. From the foregoing discussion it will be obvious that such data are most unlikely to become available in the foreseeable future. There is, however, a growing need for reasonably reliable information concerning economic interrelationships in Southern Africa. The only way to arrive at a workable basis for informed studies of labour matters in the regional context, appears to be the one followed here. By compiling, and fully documenting, as much of the accessible and relevant data as possible into comprehensive and intrinsically consistent tables, the present article can, it is hoped, serve as a convenient starting point for further, more detailed investigations. Briefly, the principal figures derived in the foregoing may be recapitulated. The total number of foreign workers in the Republic in 1964 can be put at roughly half a million men, almost 300,000 (59 per cent.) of them in mining, about 140,000 (29 per cent.) in agriculture, and about 60,000 (12 per cent.) in other employment. In these sectors, they constitute roughly 53, 14, and under 4 per cent. respectively of all Bantu employed there. Approximately 45 per cent. of all foreign workers come from the former High Commission Territories (Basotho accounting for about 60 per cent of this group), about 30 per cent. from Moçambique, 18 per cent. from Rhodesia, Zambia and Malawi together, and the remaining 7 per cent. from South West Africa, Angola, Tanzania and other territories. The total annual earnings of foreigners can be put at R133.4 million (R82.3 million cash and R51.1 million in kind), out of which cash and goods to a total value of R23.9 million (R17.7 million cash and R6.2 million worth of goods) are estimated to be remitted to the countries of origin. About 40 per cent. of the total population of Southern Africa, more than 80 per cent. of its White inhabitants, and approximately two-thirds of the region's wage-earning opportunities for Bantu are to be found in the Republic. Apart from the remittances of migrant workers, the labour supplying countries derive substantial benefits, though of course to a varying degree, from the movement of their nationals to the Republic. These are: 1. the absorption of surplus population into the Bantu groups of the Republic; 2. the fact that at any given moment, a large number of people are living off the resources of another country instead of pressing on inadequate resources at home; 3. the financial benefits from the administrative activities of the recruiting organizations; and 4. the instruction in various subjects imparted to employees on the mines and elsewhere, and generally the knowledge and skills brought back by migrants to their home countries. (The social and economic drawbacks of the migrant labour system cannot be ignored but an evaluation of this system falls outside the scope of this study. It must be recognized that intra-regional labour movements are inextricably bound up with the economic life of Southern Africa. It can, rightly, be pointed out that the abundant supply of foreigners to mining and agriculture in the Republic tends to depress the earnings of indigenous Bantu in these sectors. It is, however, prima facie, open to serious doubt whether drastic reductions in the number of foreign workers is the best way to promote the economic well-being of the local Bantu population. From the standpoint of the labour exporting countries, it is naturally regrettable that their nationals are mostly confined to the less well paying sectors of the South African economy. On the other hand, and in view of the undeveloped state of their economies, they have every reason to welcome such employment opportunities as there may be in the Republic. The newly independent states of the region are earnestly striving to develop their potentialities. By supplying (or releasing) scarce resources, labour migration to the Republic contributes materially, and in the case of Lesotho and Botswana even decisively, towards the attainment of higher levels of living throughout the region. The Republic's neighbours would suffer most if political passion or animosity towards South Africa were to disrupt the present network of the intra-regional flow of labour.     

EVALUATING THE GENERAL EQUILIBRIUM EFFECTS OF A WAGE SUBSIDY SCHEME FOR SOUTH AFRICA

Unemployment among semi‐ and unskilled labour has reached severe proportions (over 50%) and threatens the political and economic stability of the South African economy. In this paper a computable general equilibrium (CGE) model of the South African economy is used to assess the effectiveness of a wage subsidy in raising employment of semi‐ and unskilled workers. We find that employment of semi‐ and unskilled workers can be raised quite significantly. Further, the wage subsidy schemes compares favourably with alternative welfare grant schemes in terms of employment growth. However, the results are sensitive to the targeting of sectors and the substitutability between labour of different skill levels.     

European Labour Mobility: Challenges and Potentials

European Union economies are pressed by (i) a demographic change that induces population ageing and a decline of the workforce, and (ii) a split labour market that is characterized by high levels of unemployment for low-skilled people and a simultaneous shortage of skilled workers. This lack of flexible high-skilled workers and the aging process has created the image of an immobile labour force and the eurosklerosis phenomenon. In such a situation, an economically motivated immigration policy at the European level can generate welfare improvements. A selective policy that discourages unskilled migrants and attracts skilled foreign workers will vitalize the labour market, foster growth and increase demand for unskilled native workers. The paper summarizes the available economic insights, and suggests (i) the need to harmonize the single-country migration policies across Europe and (ii) that the European Union needs to become an active player on the international labour markets by providing competitive institutional settings for European companies. The author is President of the German Institute for Economic Research (DIW Berlin), Director of the Institute for the Study of Labor (IZA) in Bonn, Professor of Economics at the University of Bonn, and Honorary Professor at the Free University of Berlin. Revised version of a paper presented at the high-level expert conference ‘Jobs for Europe’ on the Social Policy Agenda for the European Union on October 25–26, 2004 in Amsterdam. The author thanks Aart Jan Bette, Henk Don, Renske Gerstel, Klara Scheepers, Jan van der Velden and other members of the editorial committee of this conference as well as conference participants, two anonymous referees of this journal, and Amelie Constant, Don DeVoretz, Holger Hinte and Stephanie Wei Wang for many useful comments on earlier drafts.     

ADAPTING TO NORTH-SOUTH TRADE:A GENERAL EQUILIBRIUM APPROACH TO POLICY OPTIONS

This paper develops a general equilibrium model of North-Southtrade with different wage setting regimes and a non-tradeablessector. Simulations confirm that substantial gains from tradeopenness can be accompanied by a significant deterioration inthe position of unskilled Northern workers. Increasing labourmarket flexibility will not correct this problem and protectionistmeasures, such as enforcing labour standards on the South, willreduce global income. Less conventional labour market policies,such as employment subsidies for unskilled workers, offer amore effective response, and one, moreover, which benefits workersin both the North and South.     

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.     

The Impact of Health on Labour Force Participation in South Africa

This paper estimates the effect of self‐assessed health (SAH) on labour force participation (LFP) in South Africa. This is motivated by a high disease burden and declining LFP in South Africa during the study period. Data is sourced from the four waves of the National Income Dynamics Study. The results indicate a positive and significant effect of self‐reporting excellent, very good or good health on LFP (relative to fair or poor health). The effect is more pronounced for men relative to women. The result indicates that health policy can be a tool for significantly improving LFP in South Africa.     

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.     

Real wages, employment and macroeconomic policy in a structuralist model for South Africa

It is now commonplace to argue that in South Africa, like manydeveloping countries, higher wages will lower employment. Thispaper shows that it is difficult to extricate the relationshipbetween wages, employment and output from the macropolicy environment.Dynamic computable general equilibrium simulations show thatthe employment effects of nominal wage increases depends oninduced monetary and fiscal policy when there is monetary 'policydominance'. While wage-led growth is inefficient, increasingthe wages of unskilled workers can improve the distributionof income, when the induced changes are neutralised.     

The Recent Performance of the UK Labour Market

We consider both the overall macroeconomic performance of theUK labour market since 1997, as well as some of the underlyingmicro problems, particularly those facing unskilled workers,On the macro front, we have seen unemployment decline to itslowest level for a generation without excessive inflationarypressure. The main factors behind this decline in equilibriumunemployment stem from actions taken by the previous government.Changes introduced in the labour market since 1997 are likelyto have only small effects on equilibrium unemployment. Underlyingthis favourable aggregate labour-market performance are seriousproblems facing unskilled men who have seen dramatic increasesin their unemployment and inactivity rates, concentrated particularlyin Wales and the northern regions of Britain. The policy responsesince 1997 has focused on encouraging the unskilled into work(the New Deal) while simultaneously raising the rewards forworking (the minimum wage, tax credits). These policies havehad a positive impact on youth employment and have significantlyreduced child poverty. So far, however, existing policies donot seem likely to have a serious impact on the high levelsof worklessness among unskilled men.     

Education and the labour market in Botswana

Using primary data from a 1993/4 Household Income and Expenditure Survey in Botswana, this article presents empirical results on occupational attainment, its determinants, and the extent of filtering down in Botswana's labour market, given changes in labour market conditions over time. It was found that the Botswana labour market has been characterised by some ‘filtering down’ of educated workers into less skilled jobs as the supply of skilled manpower exceeded demand. Those who entered the labour market earlier, those with more education, those located in the urban areas and male workers are more likely to occupy jobs that are higher up in the hierarchy than to be in an unskilled blue-collar job. Jobs higher up in the hierarchy are also more rewarding financially. The article shows that there is occupational segregation of workers by gender in Botswana's labour market in that female workers are generally confined to a narrow range of occupations. The policy implications are that employment creation has to be pursued vigorously and the issue of gender discrimination investigated further.     

Wage Divergence and Asymmetries in Unemployment in a Model with Biased Technical Change

In an attempt to explain the different wage and unemployment responses in mainland Europe and the US to a fall in demand for low-skilled labour, we present a model with two levels of skills and two classes of goods. We analyse the response to skill-biased technical change in two distinct labour market regimes. A trade-off between wage divergence and unemployment of skilled and unskilled workers occurs. Skill-biased technical change turns out to have a different impact in both regimes, due to a different working of the chimney effect.     

Openness, Technological Change and Labour Demand in Pre-Crisis Indonesia

This paper examines the impact of export orientation, import competition, foreign ownership and the rate of capital accumulation on the relative demand for skilled and unskilled labour in pre-crisis Indonesia. Estimates from an interrelated factor demand analysis indicate that openness and foreign ownership, by themselves, acted to raise the relative demand for unskilled workers in the pre-crisis period, while the newness of capital was associated with increased relative demand for skilled workers. Overall, the relative demand for unskilled workers increased yet their relative wage position weakened. These contrasting relative employment and wage changes are consistent with the examined demand shocks and the greater elasticity of supply of Indonesian unskilled relative to skilled labour.     

Reinterpreting the convict labour market

The convicts transported to NSW between 1817 and 1840 were young, fit, highly literate and brought occupational skills which were broadly representative of the British and Irish working classes. In the colonial labour market where convicts were coerced, more labour was forthcoming and at a lower wage than in a free labour market. The assignment of convict labour in the colony was efficient; skilled urban and construction tradesmen were employed in the same jobs in NSW as they had held in Britain. Domestic servants and unskilled urban workers whose skills were not suited to the needs of the colony experienced job restructuring. The organization of convict workers into teams and gangs in Australia was similar to the way work was organized in free labour Britain, and a mbc of incentives and rewards characterized the extraction of work from convicts. The human capital of the transportees and the labour system within which they worked help to explain the rapid growth of the colonial economy before 1840.     

Pesticide use among emerging farmers in South Africa: contributing factors and stakeholder perspectives

The commercial agricultural sector in South Africa has historically been dominated by large-scale operations run by white owners and managers. In redressing this imbalance, black farmers classified as ‘emerging’ are being encouraged to engage in high-input agricultural production in order to obtain ‘commercial’ status. Since existing practices in commercial agriculture rely heavily on pesticides, emerging farmers aspiring to become commercial are pressured to adopt and/or increase the use of pesticides. However, problems of access to land, finances, resources, skills and markets overshadow the health and safety of these farmers and their labour force that may be affected by exposure to pesticides. This paper presents the results of a policy study based on primary interview data with key stakeholders and secondary documentary review data, to illustrate how pesticides are used in an occupational health and safety vacuum because the focus of key institutions is rather on economic productivity.     

Skills in South Africa: The journey towards credible planning

ABSTRACT

Since 1994 the state has instituted active labour market policies to redress the apartheid skills legacy. The skills planning challenge continues to be how to coordinate efforts for the provision of the right skills to support inclusive economic growth, ensuring an alignment is achieved between what is required in the labour market and the supply from the education and training system. This article traces the South African journey of skills planning from late apartheid until the current time period in 2014 through a historical analysis of the political economy. The analysis reflects on the relationship between state formation in South Africa and the role of the state in directing skills development, and in the more recent period how skills planning responds to both the demands of the economy and ameliorating the historical legacies of education and skills exclusion.     

Education,globalization and catch-up: Scandinavia in the Swedish mirror

This paper estimates and analyses wage inequality trends in Portugal, from 1944 to 1984, a period that comprises the Estado Novo dictatorship and the first decade after the transition to democracy. Wage inequality is measured by the gap between skilled and unskilled labour, and reveals a downward trend in most of the period in analysis. We provide an explanation for the observed trends by looking at the influence of domestic and international forces on changes in the relative supply and demand of skilled labour. According to our findings, the skill premium declined due to the combined influence of two major forces: an increase in the relative supply of skilled labour due to the mass emigration of unskilled labour, and the decrease in the relative demand for skills, related to trade-induced changes stemming from the country's increasing openness, which followed the country's unskilled labour comparative advantages. Our findings point to the conclusion that the impact of openness on wage inequality is related to the country's relative level of development among its major trading partners.     

On Determinacy and Learnability in a New Keynesian Model with Unemployment

We analyse determinacy and stability under learning (E‐stability) of rational expectations equilibria in a new Keynesian model of inflation and unemployment, where labour market frictions due to costs of hiring workers play an important role. We derive results for alternative specifications of monetary policy rules and alternative values of hiring costs as a percentage of gross domestic product. We find that in general the region of indeterminacy and E‐instability in the policy space increases with hiring costs. Thus, higher hiring costs – consistent with European and South African “sclerotic” labour market institutions – seem to play an important part in explaining inflation and unemployment instability. Moreover, under lagged data‐based rules, the area where monetary policy delivers both determinacy and E‐stability shrinks. These rules also perform worse according to these two dimensions when hiring costs go up. Finally, under expectations‐based rules an additional explosive region is introduced. For South Africa, a rule based on current data – not unlike the original Taylor rule – works better than a forward‐looking rule.