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Global Poverty Research Group

Unemployment in South Africa, 1995-2003:
Causes, problems and policies

Geeta Kingdon and John Knight

Global Poverty Research Group

January 2005

SARPN acknowledges the ESRC Global Poverty Research Group as a source of this document:
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It is our view that developments in the labour market hold the key to South African prosperity or penury. It is from the labour market that the income benefits from growing labour scarcity, or the threat to social and political stability from growing unemployment and underemployment, could emerge. The government response should be to keep this issue at the forefront and to pursue whatever policies will improve labour market outcomes.

Our primary concern in this paper is with unemployment and the informal employment that often disguises unemployment. However, in order to understand these phenomena it is necessary to consider a range of related indicators such as the adult population, the labour force, labour force participation, employment, distinguishing here between formal and informal employment, or between wage- and self-employment, and real wages and incomes.

Labour market data in South Africa are not without problems. Data collected in the early post-apartheid period are problematic for various reasons such as differing sampling, noncoverage of former ‘homelands’ in some surveys, small samples, etc.1. Moreover, comparability over time is undermined both by changing questions between the various surveys particularly as between the October Household Surveys (OHS) and Labour Force Survey (LFS), and by changes in the way employment and unemployment are derived from the questions in the different surveys (Casale and Posel, 2002). The definition of the ‘informal sector’ also changed in 1997. Further, population estimates change at every census so that when the weights are revised in each 5 year period, recent statistics require reestimation with the revised weights, though such revisions usually make only relatively minor differences in most statistics. Lastly, labour market data display some inexplicable large fluctuations - for instance employment figures rise sharply (by 10.4%) in a single year between 1998 and 1999, employment in subsistence agriculture rose and dipped over 1999-2001 and there are large fluctuations from year to year in the numbers employed in the informal sector on a comparable definition between 1997 and 20022. It is, thus, hazardous to make categorical statements about labour market changes over time in South Africa. This hazard is somewhat reduced if one takes a longer term view than to look at year-on-year changes. This is what we do below. Nevertheless, our presentation is intended not to be seen as an accurate reflection of specific labour market numbers but rather as a description of broad labour market trends. We use mostly the October Household Survey 1995 (OHS95) and the Labour Force Survey, September 2003 (LFS03).

  1. Klasen and Woolard, 2000; Casale and Posel, 2002.
  2. See Bhorat, 2003, p.4; Altman, 2002, p6; and Devey, Skinner and Valodia (2003).

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