Correlates of vulnerability in the South African labour market

Type Working Paper - DPRU Working Paper
Title Correlates of vulnerability in the South African labour market
Issue 99/27
Publication (Day/Month/Year) 1999
Page numbers 0-0
URL WP99-027.pdf
Using the October Household Survey of 1995 (OHS95), this paper seeks to understand the determinants of indigence in the South African labour market. To this end the study presents a description of the labour market, focusing on how covariates such as race, gender, education and location help explain the poverty observed in the labour market. A key innovation of the paper is the application of traditionally household poverty measures to individuals in the labour market. Hence through utilising cumulative distribution functions drawn from the Foster, Greer, Thorbecke (FGT) class of poverty measures, we are able to understand the distribution of earnings within a stochastic dominance framework. Such distribution functions are then derived for a series of labour market categories ranging from employment by race to employment by sector and occupation.In addition, by setting two individual poverty lines, specific measures of poverty are also determined according to the different labour market cohorts. Some of the key results of the study are that farm workers and household domestic workers constitute the most vulnerable individuals amongst the employed. In addition, apart from race, gender and education are crucial determinants of low or zero earnings. Rural labour markets also surface as a key component of poverty in the labour force. Finally, there is sufficient evidence to suggest that a different labour market seems to be operating for Africans and Coloureds on the one hand, and Asians and Whites on the other.

The paper utilises a class of poverty measures to determine the potential cost to the fiscus, in 1995 Rands, of alleviating poverty in South Africa. The simulations are undertaken for both households and individuals in the society, by the different covariates of poverty. The study finds that the commitment required from the state to reduce poverty, is fairly modest, albeit within the realm of very strict assumptions. In addition, the paper illustrates that individual and household level data imparts differential poverty information, which is important for policy prescriptions. Finally, it is evident that for state targeting purposes, the nature of household poverty is fairly easily reduced to a small sub-group of labour market defined household types.

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