Earnings inequality and unemployment in South Africa

Type Journal Article - International Review of Applied Economics
Title Earnings inequality and unemployment in South Africa
Volume 25
Issue 5
Publication (Day/Month/Year) 2011
Page numbers 585-598
URL http://dx.doi.org/10.1080/02692171.2011.557053
Unemployment and earnings inequality have moved together remarkably closely in South Africa in recent years. This article explores the relationship between unemployment and earnings inequality in South Africa, investigating the extent to which changes in unemployment can account for changes in earnings inequality. Static and dynamic decompositions of earnings inequality by employment status reveal the centrality of unemployment in accounting for the both level and trend of earnings inequality. The distribution of employment in the formal and informal sectors is found to be of lesser importance in explaining earnings inequality, as is wage dispersion within each of these categories. The findings point to the central importance of reducing unemployment in South Africa if the extremely high levels of inequality are to be reduced.

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