New evidence on subjective well-being and the definition of unemployment in South Africa

Abstract

Access to new nationally representative, individual-level panel data from South Africa has allowed for the revalidation of Kingdon and Knight's discussion on the definition of unemployment. This paper investigates subjective well-being as a measure of comparison between labour-market statuses. It finds that on the grounds of subjective well-being the non-searching unemployed (or 'discouraged') are significantly worse-off than the not economically active. Moreover, evidence suggests that, with regard to the relationship between life satisfaction and labour-market status, the non-searching unemployed consistently are the worst-off. This is especially true of both the young and senior non-searching unemployed; however, the findings are largely driven by the African subsample. This paper does not advocate for a change in the official definition of unemployment but does advocate for the inclusion and recognition of the non-searching unemployed in policy relating to labour and development in South Africa.

The unemployed and the formal and informal sectors in South Africa: A macroeconomic analysis

“…10 This finding might be consistent with either of the models set out in Figures 1 and 2. However, read together with the findings of Lloyd and Leibbrandt (2014) on the unemployed not being voluntarily unemployed, the above analysis appears to confirm the theoretical model of Figure 1, and not that of Figure 2. Thus, the results show that a significant portion of the unemployed fail to find employment in the informal sector because of entry barriers.…”

“…Thus, should the unemployment rate increase after a shock, the question would be: did the workers not enter the informal sector because their reservation wages remained higher than the prevailing wage in the informal sector (in which case the newly unemployed are voluntarily unemployed), or because they faced barriers to entry? Lloyd and Leibbrandt (2014) provide some insight into this. Using household survey data, they compared the levels of dissatisfaction reported by the not-economically active, the job searching, as well as the discouraged unemployed, and the employed.…”

Getting ahead or falling behind: Findings from the second wave of the National Income Dynamics Study

“…This is testable and it is this key insight that led Kingdon & Knight (2006) to use questions on subjective well-being from a 1993 South African survey to test whether the nonsearching unemployed are as dissatisfied with their lives as the searching unemployed. Lloyd & Leibbrandt (2013) repeat this exercise and find that the non-searching unemployed are indeed 'discouraged' rather than choosing to be idle. Indeed, they are the more dissatisfied than the searching unemployed and are the most dissatisfied group amongst the working-age population.…”

“…The paper by Lloyd & Leibbrandt (2013) looks at a topic that sits at the interface of the papers by Posel (2013) and Cichello et al (2013) in that it uses the questions on subjective well-being and labour-market status from both waves of the survey to investigate the relationship between being unemployed and subjective well-being. The fact that this issue can be explored in NIDS serves as an important illustration of the many possibilities that there are in NIDs for doing important and innovative work on 10 I Woolard et al…”

Racially Inclusive Governance Makes (Almost) Everyone Happier: The End of Apartheid as Evidence for Procedural Utility

“…Understanding the varying degrees to which employment and other social and economic conditions impact individual life satisfaction should be an important policy consideration. For example, Lloyd and Leibbrandt (2014) find that South Africa's non-searching chronically unemployed report significantly lower levels of SWB than those still attached to the labour force. Others have argued that determination of the optimal level of unemployment insurance should account for the fact that the subjective cost of unemployment is far greater than the associated loss of income (Clark & Oswald, 1994;Di Tella, MacCulloch, & Oswald, 2001;Oswald, 1997).…”