Creating jobs and reducing unemployment are key economic and social challenges in South Africa.
This is explicitly recognized by the South African government, which, under their policy framework
known as the “Accelerated and Shared Growth Initiative for South Africa” (ASGISA), aims to halve
unemployment by 2014 by removing a number of constraints on faster output and employment growth.
This report explores some of the linkages between growth, poverty, inequality and the labour market in
post-apartheid South Africa. The report takes a data-driven approach and relies heavily on rich household
survey data for the period 1993 to 2008.
Two key mechanisms dominate debates over the relationship between inequality and growth. The first
is the employment and remuneration behaviour of the labour market. Strong positive employment and real
wage responses to economic growth are the major poverty alleviating forces emanating from the
performance of the private sector economy. The second mechanism is the inflow of fiscal revenue that
growth makes available for active social policy and poverty alleviation. This report explores both of these
mechanisms, the first in sections I, II and III and the second in sections IV and V.
Section I provides an empirical overview of the post-apartheid labour market. The working age
population (i.e. the number of persons aged 16 to 64) increased from 23 million people in 1995 to 29 million
in 2008. At the same time, the labour force participation rate increased from 49% to 55%. These two
reinforcing factors resulted in an additional 5 million people entering the labour market over this period. As a
result the respective shares of Africans, young people, and women increased considerably. Participation rates
rose most dramatically for the less-skilled as African females began to engage with the post-apartheid labour
market and rectify their very low participation rates of the apartheid years. The sharp increase in
unemployment in the 1990s was driven by this rapid rise in the supply of less-skilled labour, accompanied by
a failure of labour demand to keep pace. Skill-biased technical change exacerbated the problem.
Section II shows that this labour market performance was central in the worsening of aggregate
inequality and also in dampening the poverty reducing impacts of economic growth. Against this context,
section III presents and evaluates the labour laws and labour market institutions of the post-apartheid
labour market. On aggregate, these institutions have not promoted effective adjustments in the labour
market or facilitated a reduction in inequality.