EMPLOYMENT AND INEQUALITY OUTCOMES IN SOUTH AFRICA Murray Leibbrandt, Ingrid Woolard, Hayley McEwen and Charlotte Koep Southern Africa Labour and Development Research Unit (SALDRU) and School of Economics, University of Cape Town 1 TABLE OF CONTENTS INTRODUCTION ........................................................................................................................................... 4 1. GROWTH PATTERNS AND LABOUR MARKET OUTCOMES ........................................................... 6 1.1 Economic growth and inequality ........................................................................................................... 6 1.2 Composition of the labour market ......................................................................................................... 7 1.3 The Informal sector and barriers to employment ................................................................................. 15 1.4 Conclusion ........................................................................................................................................... 18 2. LABOUR MARKET OUTCOMES, POVERTY AND INEQUALITY TRENDS: WHAT LINKS? ..... 20 2.1 Introduction .......................................................................................................................................... 20 2.2 Inequality and poverty trends ............................................................................................................... 20 2.3 Links to the labour market ................................................................................................................... 22 2.4 Conclusion ........................................................................................................................................... 26 3. THE ROLE OF LABOUR MARKET INSTITUTIONS AND POLICIES .............................................. 27 3.1 Introduction .......................................................................................................................................... 27 3.2 Collective bargaining: Councils and agreements ................................................................................. 28 3.3 Institutions covering conditions of employment .................................................................................. 31 3.4 Conclusion: Taking stock of labour costs and flexibility of the South African labour market ............ 32 4. WHAT ROLE FOR SOCIAL POLICIES? ............................................................................................... 35 4.1 Introduction .......................................................................................................................................... 35 4.2 Unemployment insurance .................................................................................................................... 36 4.3 Public works programmes .................................................................................................................... 36 4.4 Social assistance grants ........................................................................................................................ 37 4.5 Conclusion ........................................................................................................................................... 38 5. OTHER POLICIES IMPACTING ON INEQUALITY ............................................................................ 39 5.1 Inequality in Education ........................................................................................................................ 39 5.2 The state of healthcare ......................................................................................................................... 45 5.3 Redistributive impact of fiscal policy .................................................................................................. 48 5.4 Conclusion ........................................................................................................................................... 50 REFERENCES .............................................................................................................................................. 51 Tables Table 1.1. Annual economic growth ............................................................................................................ 6 Table 1.2: Labour force participation rates .................................................................................................. 7 Table 1.3: Labour participation rates by age category ................................................................................. 8 Table 1.4. Labour participation rates by education levela ........................................................................... 8 Table 1.5: Labour participation rates by race .............................................................................................. 9 Table 1.6: Unemployment rates ................................................................................................................. 10 2 Table 1.7: Unemployment rates by age group ........................................................................................... 10 Table 1.8: Unemployment rates by race .................................................................................................... 11 Table 1.9. Average monthly wage by race ................................................................................................. 11 Table 1.10: Unemployment rates by province (idem as for table 1.2) ....................................................... 12 Table 1.11: Unemployment rates by education ......................................................................................... 13 Table 1.12: Employment share by education ............................................................................................. 13 Table 1.13: Job creation between 1993 and 2008 by education ................................................................ 14 Table 1.14: Share of informal employment by gender .............................................................................. 16 Table 1.15. Share of informal employment by race ................................................................................... 17 Table 1.16: Self-employment rates by race ............................................................................................... 17 Table 2.1: Gini coefficients of per capita income, aggregate and by race ................................................. 20 Table 2.2: Poverty headcount ratios ........................................................................................................... 22 Table 2.3: Wage inequality by decile ratios ............................................................................................... 24 Table 2.4. Real monthly wages by decile .................................................................................................. 25 Table 3.1: Coverage of South African labour legislation .......................................................................... 28 Table 3.2: Levels of bargaining in South Africa under the Labour Relations Act .................................... 30 Table 4.1. Household labour market attachment and access to grants of the unemployed ........................ 35 Table 4.2: Work opportunities and budget for EPWP, 2004/05-2008/09 .................................................. 37 Table 4.3: Percentage of households reporting income from social grants, by quintile ............................ 38 Table 5.1. Literacy standards for grade 5 learners, 2006a ......................................................................... 40 Table 5.2: Grade 3 standardised assessment scores by province ............................................................... 41 Table 5.3: Proportion of working age population with a degree or higher by race ................................... 42 Table 5.4: Medical scheme coverage by race (in %) ................................................................................. 47 Figures Figure 1.1: Share of part-time and casual employment in total employment ............................................ 14 Figure 1.2: Share of informal employment by age group .......................................................................... 16 Figure 2.1: Income decomposition by decile, 2008 ................................................................................... 23 Figure 2.2: South African unemployment rates by income decile and by year ......................................... 24 Figure 2.3: Real wages decomposed by race ............................................................................................. 25 Figure 2.4: Real wages decomposed by age cohort ................................................................................... 26 Figure 5.1: Educational attainment of 21-30 year olds across cohorts ...................................................... 40 Figure 5.2: Grade 12 pass rates .................................................................................................................. 42 Figure 5.3: Educational attainment by employment status across cohorts ................................................ 43 Figure 5.4. The incidence of HIV/AIDS for 15 to 49 year olds ................................................................. 47 Figure 5.5: Expenditure items as a percentage of GDP ............................................................................. 49 Boxes Box 5.1. National