WP 99/032 - Modelling Vulnerability and Low Earnings in the South African Labour Market

Haroon Bhorat and Murray Leibbrandt

Date of Publication: 
October 1999

Drawing on a comparative overview of the earnings function work on South Africa, this article presents an alternative and comprehensive model of earnings in the South African labour market. The paper uses the standard Heckman two-step approach in trying to model participation, employment and earnings. The results of the modelling indicate, amongst other outcomes, that structural, involuntary unemployment is a crucial feature of the labour market. In addition, rural labour markets and rural participants are seen to be very distinct from those in urban areas - suggesting that spatial rigidities are essential to understanding employment creation in the domestic economy. Finally, age and education are prominent in all the equations of the youth in the labour market, either as non-participants or as the unemployed. The education coefficients show that while non-tertiary schooling encourages participation, it does not secure employment. In turn though, for those in employment, the positive returns to schooling are still reflected.

Download Working Paper: DPRU WP 99/032