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Structural Change and Patterns of Inequality in the South African Labour Market

Author

Listed:
  • Haroon Bhorat
  • Safia Khan

    (University of Cape Town
    Director)

Abstract
In the post-apartheid era South Africa has found itself in a long run growth trap with growth in Agriculture and Manufacturing notably absent from the economy, resulting in an inability of the economy to absorb excess labour supply. To understand the role that structural change has had on inequality in the labour market this paper provides an overview of key labour market trends in the post-apartheid era followed by an analysis of labour demand trends, and structural transformation. The impact of structural transformation on wage shifts and wage inequality is investigated pointing to the existence of a “missing middle” in the real-earnings distribution of those employed. Post-apartheid wage inequality is explained using a participation, employment and quantile regression framework, showing that wage inequality has increased over time. The role of unions, the impact of the New Minimum Wage, and the influence of legislative changes such as the regulatory amendment accounting for workers in Temporary Employment Services, and the employment tax incentive is evaluated. We show that in the two decades following the end of apartheid South Africa’s growth path has been characterised by a rapid relative expansion in the services (or tertiary) sector resulting in the marginalization of workers in the middle of the skills and wage distribution. Ultimately, inequality in South Africa has been replicated through a reversion to a skills biased employment trajectory. With policies in place to protect the bottom end worker, a hollowing out of workers in the middle of the wage distribution has arisen. This “missing middle” is a key new manifestation of the persistent and high inequality in the South African labour market.

Suggested Citation

  • Haroon Bhorat & Safia Khan, 2018. "Structural Change and Patterns of Inequality in the South African Labour Market," Working Papers 201801, University of Cape Town, Development Policy Research Unit.
    • Handle: RePEc:ctw:wpaper:201801
    as

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    File URL: https://commerce.uct.ac.za/sites/default/files/content_migration/commerce_uct_ac_za/1093/files/DPRU%2520WP201801.pdf
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    References listed on IDEAS

    as
    1. Haroon Bhorat & Karmen Naidoo & Derek Yu, 2014. "Trade Unions In An Emerging Economy: The Case Of South Africa," Working Papers 201402, University of Cape Town, Development Policy Research Unit.
    2. Bhorat, Haroon & Cassim, Aalia & Hirsch, Alan, 2014. "Policy co-ordination and growth traps in a middle-income country setting: The case of South Africa," WIDER Working Paper Series 155, World Institute for Development Economic Research (UNU-WIDER).
    3. Nicoli Nattrass & Richard Walker, 2005. "Unemployment And Reservation Wages In Working‐Class Cape Town," South African Journal of Economics, Economic Society of South Africa, vol. 73(3), pages 498-509, September.
    4. Haroon Bhorat & Halton Cheadle, 2009. "Labour Reform in South Africa: Measuring Regulation and a Synthesis of Policy Suggestions," Working Papers 09139, University of Cape Town, Development Policy Research Unit.
    5. Andrew Kerr & Martin Wittenberg, 2017. "Public sector wages and employment in South Africa," SALDRU Working Papers 214, Southern Africa Labour and Development Research Unit, University of Cape Town.
    6. Haroon Bhorat & Robert Hill & Safia Khan & Kezia Lilenstein & Ben Stanwix, 2020. "The Employment Tax Incentive Scheme in South Africa: An Impact Assessment," Working Papers 202007, University of Cape Town, Development Policy Research Unit.
    7. Haroon Bhorat & Ravi Kanbur & Natasha Mayet, 2013. "The impact of sectoral minimum wage laws on employment, wages, and hours of work in South Africa," IZA Journal of Labor & Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 2(1), pages 1-27, December.
    8. David H. Autor & Frank Levy & Richard J. Murnane, 2003. "The skill content of recent technological change: an empirical exploration," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
    9. Haroon Bhorat & Karmen Naidoo & Morné Oosthuizen & Kavisha Pillay, 2015. "Demographic, employment, and wage trends in South Africa," WIDER Working Paper Series 141, World Institute for Development Economic Research (UNU-WIDER).
    10. Haroon Bhorat & Tara Caetano & Benjamin Jourdan & Ravi Kanbur & Christopher Rooney & Benjamin Stanwix & Ingrid Woolard, 2016. "Investigating the Feasibility of a National Minimum Wage for South Africa," Working Papers 201601, University of Cape Town, Development Policy Research Unit.
    11. Haroon Bhorat & Aalia Cassim & Alan Hirsch, 2014. "Policy Co-ordination and Growth Traps in a Middle-income Country Setting: The Case of South Africa," WIDER Working Paper Series wp-2014-155, World Institute for Development Economic Research (UNU-WIDER).
    12. Haroon Bhorat & Sumayya Goga & Carlene Van Der Westhuizen, 2012. "Institutional Wage Effects: Revisiting Union And Bargaining Council Wage Premia In South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 80(3), pages 400-414, September.
    13. Haroon Bhorat & Ravi Kanbur & Benjamin Stanwix, 2014. "Estimating the Impact of Minimum Wages on Employment, Wages, and Non-Wage Benefits: The Case of Agriculture in South Africa," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 96(5), pages 1402-1419.
    14. Haroon Bhorat & Karmen Naidoo & Morné Oosthuizen & Kavisha Pillay, 2015. "Demographic, employment, and wage trends in South Africa," WIDER Working Paper Series wp-2015-141, World Institute for Development Economic Research (UNU-WIDER).
    15. Haroon Bhorat & Sumayya Goga, 2013. "The Gender Wage Gap in Post-Apartheid South Africa: A Re-examination," Journal of African Economies, Centre for the Study of African Economies, vol. 22(5), pages 827-848, November.
    16. Bhorat, Haroon & Naidoo, Karmen & Yu, Derek, 2014. "Trade unions in an emerging economy: The case of South Africa," WIDER Working Paper Series 055, World Institute for Development Economic Research (UNU-WIDER).
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    Citations

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    Cited by:

    1. Haroon Bhorat & Ravi Kanbur & Benjamin Stanwix & Amy Thornton, 2021. "Measuring Multi‐Dimensional Labour Law Violation with an Application to South Africa," British Journal of Industrial Relations, London School of Economics, vol. 59(3), pages 928-961, September.
    2. Florent Dubois & Christophe Muller, 2022. "Residential segregation matters to racial income gaps," Working Papers hal-03622711, HAL.
    3. Florent Dubois & Christophe Muller, 2020. "The Contribution of Residential Segregation to Racial Income Gaps: Evidence from South Africa," AMSE Working Papers 2029, Aix-Marseille School of Economics, France.
    4. Ihsaan Bassier & Ingrid Woolard, 2021. "Exclusive Growth? Rapidly Increasing Top Incomes Amid Low National Growth in South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 89(2), pages 246-273, June.
    5. Mondli Hlatshwayo, 2020. "Workers’ education under conditions of precariousness: Re-imagining workers’ education," The Economic and Labour Relations Review, , vol. 31(1), pages 96-113, March.
    6. Caitlin Allen Whitehead & Haroon Bhorat & Robert Hill & Tim Köhler & François Steenkamp, 2021. "The Potential Employment Implications of the Fourth Industrial Revolution Technologies: The Case of the Manufacturing, Engineering and Related Services Sector," Working Papers 202106, University of Cape Town, Development Policy Research Unit.
    7. Florent Dubois & Christophe Muller, 2022. "Residential segregation matters to racial income gaps: Evidence from South Africa," AMSE Working Papers 2205, Aix-Marseille School of Economics, France.

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    More about this item

    Keywords

    Structural change; inequality; labour markets; missing-middle; wage distribution; south Africa; labour market;
    All these keywords.

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
    • N17 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Africa; Oceania
    • N37 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - Africa; Oceania
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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