Decomposing Shifts in Labour Demand in South Africa

Abstract

Labour market research in South Africa has typically focused on issues around either the supply of labour or the general level of demand for labour. An area that has received little attention is the structure of labour demand in the firm and its changing pattern over time. The process of economic growth and development never treats all occupational groups equally and the proportions with which different occupational groups are used to produce total output will change dramatically over time. These shifts in the structure of labour demand may occur as a result of two factors -changes in production methods used within each sector of the economy, and changes in the structure of the economy itself. The aim of this paper is to begin to fill the research gap by measuring -through a simple decomposition technique -the extent to which these two factors help explain shifts in the structure of labour demand for the South African economy from 1970 to 1995*(2). SAJE v67(3) p349The paper begins with a brief discussion of how production method and structural changes influence the structure of labour demand, followed by an outline of the main trends in South African production methods and structural change since 1970. The labour demand shifts and their decomposition to reflect the influence of these two variables are then measured. Finally, this analysis is extended to estimate the demand shifts by race and gender before some conclusions are drawn. 157

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