Unemployment and wages in South Africa: A spatial approach

Type Working Paper - The Centre for the Study of African Economies Working Paper
Title Unemployment and wages in South Africa: A spatial approach
Issue 96
Publication (Day/Month/Year) 1999
Page numbers 0-0
URL http://www.bepress.com/cgi/viewcontent.cgi?article=1097&context=csae&sei;-redir=1&referer=http://sch​olar.google.co.za/scholar?hl=en&q=kingdon+and+knight+unemployment+and+wages+in+south+africa&as_sdt=0​,5&as;_ylo=&as_vis=0#search=
A large amount of recent evidence ands a negative relationship between local unemployment and wages in OECD countries, a relationship christened a `wage curve'. This contradicts the conventional model of the labour market in which high unemployment regions have higher wages to compensate for search and other costs. This paper discovers a wage curve in South Africa, a country with several times the typical unemployment rate of OECD countries. The wage curve elasticity in South Africa is similar to that in OECD countries (-0.1) but persists over a much larger range of unemployment rates, implying that unemployment can have a large impact on wages in South Africa. However, this wage exibility does not extend to union wages which are well insulated from local unemployment conditions. The results here also shed light on the segmentation of the labour market based on labour immobility and on the debate about the appropriate denition of unemployment in South Africa.

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