A test of satisfaction, experience and hours of work as mediators of the relationship between education and informal earnings

Abstract

At the heart of policies aimed at eliminating informal street trading seems to be a ‘marginalist’ perspective of the sector which does not see it as contributing to socio-economic development. What is not clear, however, is what underlies the financial dysfunctionality associated with the sector. Using a sample of 303 inner city street traders drawn from Johannesburg, a large South African city, tests of regression and mediated regression were used to test theory that predicts the existence of certain human capital relationships that may contribute to increased earnings for these traders. Findings suggest that certain human capital relationships in this sector may differ from those normally found in formal working contexts, in that although education is significantly associated with earnings, continuance satisfaction, experience and expenditure of effort, or hours worked per day, all do not mediate relationships between education and earnings. It is suggested that current policies might be keeping traders in a state of ‘flux’, where human capital transmission to financial performance might be unable to take root through seeking to ‘crack down’ on the sector instead of investing in the sector to enable its functionality, and hence its potential contribution to economic development.