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Approach

An integrated approach to unemployment and employment in South Africa.

The employment focus area approaches unemployment as a complex, multi-faceted problem, closely interrelated with poverty and inequality and the social, spatial and structural features of the South African economy. It seeks to develop an integrated and coherent analytical picture of unemployment, employment, and self-employment in the formal sector, the informal economy and the survivalist segment - drawing on labour economic, macroeconomic and poverty/development studies.

Key issues inclue segmentation of the labour market and barriers to entry related to geography and workers' mobility; discouragement from economic participation realted to poverty and marginalisation; and the dynamics of firm behaviour, including the determinants of labour demand (and elasticities) across the formal and informal economies. 

 

Focus area 1 builds on a wide-ranging study of unemployment undertaken in 2011 and the work of a research group active for some months prior to the initiation of the project. The initial phase identified a list major gaps and research priorities, based on a consultative process involving an initial core group of participating researchers. This constituted the basis for a first call for expressions of interest to the core group noted above. This group has been expanded considerably since then to include researchers all over the country. Subsequent calls for participation have been issued, also to all universities and several relevant research institutes, as well as policymakers and researchers in government.

Conceptually and theoretically the aim of this focus area is to:

  • integrate development and suastainable-livelihood perspectives with, and into, labour market analyses;
  • integrate such an 'integrated livelihood-labour package into macroeconomic analyses; and
  • derive policy proposals based on such an integrated perspective on unemployment, inequality and poverty.
In particular, the following pertinent dimensions of emplpyment and unemployment in the developing country context of South Africa need to be considered explicitly:
  • The entire economy, not just the formal sector. This encompasses the full spectrum of livelihoods: from surviving off grants to rural and urban subsistence, to various types of informal economy employment and self-employment, to formal sector employment and self-employment.
  • The complexity of 'access to labour markets' amidst segmentation and various entry and mobility barriers between segments.
  • Marginalistaion and the conditions of poverty which appera to constitute substantial discouragements factors as well as barriers to access and mobility.
  • The complexity of labour demand and firm dynamics (including entry and exit) in a formal-plus-informal and multi-segment context.

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The broad agenda

A joint paper (Fourie & Leibbrandt 2012) on research gaps and priorities in this focus area was presented at the Towards Carnegie 3 Conference in Cape Town, 4 Sept. In it, the latest version of the research agenda is set out as follows:

  • An appropriate labour market model for South Africa that explicitly engages with the developmental, multi-segment and multi-livelihoods contexts.
  • Developing macroeconomic and growth models that incorporate the micro reality of segments and labour market mobility barriers. 
  • Giving content to ‘inclusive growth’ as both a process and an outcome involving linkages and transitions between segments (survivalist, subsistence, informal, formal), and both rural (farm and non-farm) and urban areas.
  • Labour demand and firm behaviour in the formal and informal sectors, urban and rural, in various sectors of the economy.
  • Livelihood, employment and (self-)employment strategies/potential (and barriers) in rural (farm and non-farm), peri-urban and urban areas
  • Labour market dynamics and transitions between employment/livelihood states (subsistence, informal and formal) amidst segmentation and mobility barriers. 
  • Job search in a developing country, segmented-market and spectrum-of-livelihoods context: its nature, behavioural underpinnings, obstacles and facilitation.
  • Skills-related barriers to employment and self-employment in the informal and formal sectors. 
  • A critical review of policy initiatives in the post-apartheid period with regard to employment generation and the persistence of unemployment.
  • Evaluating the potential role of industrial and other policies to increase employment multipliers, labour-intensity and –absorption.
  • Large infrastructure projects and employment. 
  • Land reform and employment.
  • The optimal role of labour market regulation and other employment-related policies in the formal and informal economies. 
  • The impact of UIF, social grants and other household resources/transfers on livelihood strategies and on individual labour supply.
  • Reforming the measurement of unemployment, underemployment, employment and related livelihood states.

This research will be complemented, and supported, by projects to generate better and more consistent labour market databases and firm survey data - including regular informal sector surveys, if possible - to underpin research in this focus area. These will represent resources that eventually will become available to the community of researchers.

Issues and Questions: an illustration 

  1. What is the nature, and implications of, a spectrum of interacting labour market segments - a primary sector, a secondary sector and a third segment (survivalist and subsistence) - also characterised by various entry and mobility barriers?
  2. What are the determinants of transitions between segments or livelihood states? Can/must policy create 'transition enablers' in order to increase employment? Or is 'growth pull' enough?
  3. How should one integrate mobility and entry barriers in micro-and macroeconomic analysis of employment? (Only economic barrers - or also social, power and psychological factors?)
  4. How to view and analyse the secondary, or informal, economy?
  • is it a problem sector - or a promising sector?
  • is the informal economy competitive and accessible - or full of barriers to entry for both workers and entrepreneurs?
  • can labour absorption in the informal economy be increased? Can a diversified, vibrant informal economy not generate substantial income-generating opportunities?
  • How can one integrate marginalisation, poverty traps and powerlessness into labour market analysis?
  • Is it correct to bunch the analysis and policy promotion of employment and of self-employment together, or should they be distinguished?
  • How to understand wage flexibility in the context of multiple market segments and entry barriers.
  • How can one better incorporate the information, search and access problems caused by poverty and segmentation into micro (and macro-) economic unemployment analysis?
  • What is the realtionship between social grants and productive economic activity (including job serach and self-employment initiatives) in the context of marginalisation and multiple segments? Why does the significant growth in social grant payments not stimulate village economies?
  • What is the relationship between education/skills and productive economic activity given the condition of poverty, marginalisation and multiple segments? Which skills are most relevant to transitions between livelihood states?
  • What determines firms' demand for labour? How to analyse firm behaviour given formal/informal and urban/rural dualisms?
  • Do poverty-oriented policy analyses of (un)employment and wages engage sufficiently with
    • the importance of formal sector growth (even if constrained)?
    • the presence, nature and implications of a negative wage elasticity of the demand for labour (also in a segmented market context)?
  • How does the business cycle affect employment in different segments?
  • What are the implications of macroeconomic growth for employment in varius segments? In which segment(s) does the growth originate, does participation spread via linkages, and where do the employment and other benefits of growth go?
  • How should a growth-oriented employment analysis (or an employment-oriented growth strategy) deal with
    • the constrained employment-creation capacity of formal sector growth and
    • the growth potential (and constraints) of informal production/employment and survivalist activities, as well as
    • the implications of segmentation, barriers and poverty conditions for the flow of labour into the formal sector, even a growing one with 'flexible' labour markets?
  • To what extent is a strategy to boost the 'engine of job growth' fundamentally constrained as long as large sections of the working-age population are structurally excluded from accessing formal employment? (Policy attempts to promote labour-intensive production can at best increase employment in the formal sector.)
  • To what extent should, and can, industrial policy promote employment?
  • To what extent can macroeconomic policy measures - e.g. interest and exchange rates - shoulder the burden of explaining and resolving long-term, structural unemployment?
  • To what extent can a proper policy evaluation of labour regulations primarily be based on a stylised model of (flexible) formal-sector labour markets - given segmentation and barriers?
    • A more detailed list of gaps and research questions for the Employment/Unemployment Focus Area can be downloaded here.

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    The specific agenda

    A more detailed list of gaps and a corresponding research agenda to use as a reference in considering a research proposal in this focus area, as well as information on the general framework and approach, can be downloaded here.

    Fourie, FCvN & Leibbrandt, M. (2012): Unemployment: State of knowledge, gaps and research priorities for an integrated approach, paper presented at the Towards Carnegie3 Conference, University of Cape Town, 4 September 2012.

    • Section 2 summarises the diagnosis of fragmentation in unemployment research
    • Section 3 assesses the current state of knowledge (and gaps in knowledge) on unemployment
    • Section 4 contains an illustrative list of issues and questions that may need to be tackled
    • Section 5 (esp. 5.2) contains the provisional list of gaps and specified topics for research.
    The original unemployment discourse survey paper:
    Fourie, FCvN. (2011): The South African unemployment debate: three worlds, three discourses? Working Paper 63 (June), SALDRU, University of Cape Town, 4 September 2012. This paper can be downloaded here.
    Download Gaps PDF