Changing Dynamics in the South African Labour Market

Fundamental features of the post-apartheid South African economy include persistent and increasing unemployment alongside extreme levels of household income inequality. These well-established welfare challenges are strongly shaped by the nature of employment and earnings outcomes in the domestic labour market. This chapter reviews some of the major new developments that have occurred in the labour market since 2000. At a macro level the authors document the changing structure of the economy’s sectoral growth trajectory, which has resulted in a relative contraction of the primary and industrial sectors amidst a rapid expansion in the services economy. The latter in turn has delivered an employment path in South Africa, which has been almost exclusively services based. This sectoral shift has occurred alongside a pattern of skills-biased occupational change, and substantial wage growth for those at the top of the earnings distribution. At the same time, the public sector and a corresponding unionized class have expanded and continue to command significant wage premia, while returns to education are declining for specific qualifications. From a policy perspective there have been a series of important labour market interventions aiming to support low-wage workers, with the expansion of minimum wages a notable development in this regard. However, levels of non-compliance with both wage and non-wage labour market regulations are high. We conclude by drawing attention to several active employment policies that have been pursued by the state in an attempt to tackle the unemployment crisis, with mixed results.