The Archive

Articles

Accessible, evidence-based analysis on growth and inclusive development in South Africa.

Hiding in plain sight: high-value agriculture’s large-scale potential to grow jobs and exports

South Africa has a major but overlooked opportunity to expand the production of high-value agricultural products that are both labour-intensive and export-oriented. There is an extensive and growing global demand for these products. Various supply side constraints must be addressed, such as how land is used; public investment in irrigation, agricultural inputs and R&D; development finance; and logistical costs and quality. Around 300 000 jobs could be created directly and indirectly, primarily benefitting the poorest: rural women in former homelands

17 SEPT 2019

Socio-economic class in South Africa: playing snakes and ladders with loaded dice

Experiences of poverty over time differ markedly. Out of four South Africans, two experience persistent poverty with few future prospects. Another one moves in and out of poverty, constantly struggling to make ends meet. Only one out of four is stably middle class or elite. The unequal risk of falling into poverty is related to characteristics such as race, education and geographic location. Being employed and the type of employment are key determinants of vulnerability to poverty.

08 AUG 2019

The informal economy: Is policy based on correct assumptions?

We analyse the emphasis in informal-sector and informal-economy policy, highlighting who runs the risk of being missed. We then interrogate assumptions on which policy objectives are based – notably that the informal sector acts as a ‘shock absorber’ in times of recession and, given the emphasis on the township economy, the spatial dimensions of informal-sector employment. We argue that policy makers should pay attention to harmful regulations, the infrastructure needed and where informal activities fit in value chains.

18 FEB 2019

Why has manufacturing employment declined so rapidly?

The manufacturing sector has performed poorly and employment has fallen sharply. Policy has tended to push manufacturing onto a more capital-intensive trajectory. Paradoxically, South Africa’s actual (or ‘revealed’) comparative advantage has come to be in relatively capital-intensive products. In contrast, labour-intensive sub-sectors have performed poorly. In a context of high structural unemployment, industrial policy should focus more on supporting employment-intensive growth by subsidising labour and training rather than capital investment, electricity and infrastructure for capital-intensive firms.

03 OCT 2018

The top 1% of incomes are increasing rapidly even with low economic growth

We use tax data (which include accurate data for the very rich) to investigate the patterns of income growth over the period 2003 to 2016. Despite the need for inclusive economic growth in the light of extreme inequality, the top 5% of incomes grew at about 5% per year compared to national income growth of 3.7% per year. This divergence is striking in the post-recession period and appears to be partially driven by high growth in income from capital.

12 SEPT 2018

Creating jobs, reducing poverty V: Is ‘formalising’ the informal sector the answer?

This extract from a new REDI3x3 book proposes a constructive way to approach the possible ‘formalisation’ of the informal sector. A common impulse is to reduce formalisation to regulating and taxing informal enterprises – two blunt instruments that can be destructive. Formalisation must rather be seen as a means to aid the quest for better livelihoods for more people and stronger, more self-standing informal enterprises. Smart formalisation can be pursued with a ‘formalisation menu’.

21 AUG 2018

Creating jobs, reducing poverty IV: What policy approach to enable the informal sector?

This extract from a new REDI3x3 book outlines an appropriate and ‘smart’ policy approach to enable enterprises in the informal sector. Such policies need to be differentiated and nuanced, recognising that both one-person or multi-person enterprises are situated on a developmental spectrum from embryonic to mature states, some ‘survivalist’ and others ‘growth-oriented’, with different aspirations, entrepreneurial aptitudes, degrees of development, complexity and capacity – and different needs and challenges. Factors for good policy design are identified.

14 AUG 2018

Creating jobs, reducing poverty III: Barriers to entry and growth in the informal sector – and business cycle vulnerabilities

In this extract from a new REDI3x3 book, the focus is on the constraints faced by informal enterprises in trying to enter, survive, grow, or increase employment. A lower tier of ‘survivalist’ enterprises and an upper tier of ‘growth-oriented’ enterprises is apparent, with barriers limiting entry into the upper tier. Selling into higher-value or formal-sector markets and value chains encounter significant structural barriers. And the sector is particularly vulnerable to severe cyclical downturns.

06 AUG 2018

Creating jobs, reducing poverty II: The substantial employment performance of the informal sector

In this extract from a new REDI3x3 book, the employment-creating behaviour of informal enterprises is analysed – in particular, enterprises with employees. Almost half of those working in the informal sector work in such multi-person firms – which provide paid work to about 850 000 people (owner-operators plus paid employees). There is a growing employment orientation and employment intensity. Jobs are created via new-firm entry as well as employment expansion – also by one-person enterprises. Entrant firms are vulnerable, though.

31 JUL 2018

Creating jobs, reducing poverty I: Why the informal sector should be taken seriously and enabled properly

In the first extract from a new REDI3x3 book on the role of the informal sector in job creation and poverty reduction, a compact picture of the size, texture and impact of the sector is provided. One in every six South Africans who work, work in the informal sector. Several policy-relevant features are highlighted, such as industry, spatial and gender dimensions. This provides the backdrop for the second extract on the employment-creating performance of the informal sector.

23 JUL 2018

What affects job retention and job creation: reservation wages or reservation what?

Unemployment research typically inquires how to generate more jobs and how to keep workers working. Researchers often probe the reservation wage level (which appears to balance the interests of employees and employers). Qualitative research findings suggest that wages may be less significant factors in work-related decisions than the nature of interpersonal relationships in the workplace. Both employees and employers emphasise the importance of the quality of relationships, though employers and employees highlight different factors.

02 JUL 2018

Informal enterprise ownership: the importance of previous employment experience

Enterprises in the informal sector are known to have a precarious existence. The economic value and survival of an informal enterprise depend on the preparedness and motivation of the owner, inter alia. This article analyses the relevance of the work experience of a new, or entering, enterprise owner. It finds that prior work experience predicts informal enterprises that are larger, are more profitable, have more employees and are more likely to have their finances and premises separate from the household.

11 JUN 2018

The sudden jump in the unemployment rate in 2015: Is there a break in the QLFS data?

This article argues that there is a time-series break in StatsSA’s Quarterly Labour Force Survey (QLFS) in the first quarter of 2015. The principal cause appears to be differences between the sampling frames before and after 2015, respectively based on Census 2001 and Census 2011. The break is signalled by a significant increase in the number of one-person households surveyed in the QLFS. It is critical for economists, policy analysts and policy-makers to be aware of this break in the data.

16 MAY 2018

Does moving to a city mean a better life? New evidence

Moving to a city in search of work seems to pay off for many poor people in the countryside. Data that track changes over time indicate that as many as 385 000 people were lifted from poverty between 2008 and 2014 after moving from rural to urban areas – their poverty levels were halved together with a fall in unemployment. Government ambivalence about urbanisation should be replaced by a more positive and pro-active approach.

16 APR 2018

Structural transformation, competition and economic power: the need for better policies

The economy remains highly concentrated and existing firms have substantial advantages over entrants and smaller rivals. These firms can use their power to block rivals, also by influencing regulations in their favour. Changing the structure and the ownership of the economy simultaneously requires a package of measures to tackle the abuse of market power by large firms, change regulations to open up markets, and effectively support the development of the capabilities of smaller firms.

13 MAR 2018