Revisiting Informal Employment and Segmentation in the South African Labour Market

Abstract

This study revisits the definition of informal employment, and it investigates the puzzle of high open unemployment co-existing with relatively limited informal employment in South Africa. We estimate earnings equations using data from the September 2004 Labour Force Survey and present evidence of persistent earnings differentials not only between formal and informal employment, but also between types of informal employment. These persistent earnings differentials are suggestive of complex segmentation in the South African labour market and challenge the presentation of informal employment as an undifferentiated residual with no barriers to entry or mobility. Copyright (c) 2008 The Authors. Journal compilation (c) Economic Society of South Africa 2008.

Profiling South African gender inequality in informal self-employment

“…Men in self-employment tend to report higher average earnings than women, with men in informal self-employment earning on average almost R3 more per hour than women in 2007. By contrast, the difference between men and women in informal wage employment was significantly smaller, at only about R1 per hour (Heintz and Posel 2008). Moreover, women tended to be a minority in the more lucrative areas of the informal economy which are male-dominated.…”

“…Studies on gender differences provide information on broad trends in self-employment in South Africa (see, for example, Casale andPosel 2002, Casale 2004). A rough parity exists in the South African informal labour market with 19% of employed women and 17% of employed men engaged in self-employment in 2007 (also see Heintz and Posel 2008). Indeed, the self-employment rate is low given South Africa's high unemployment rates (Kingdon and Knight 2007).…”

Revisiting unemployment levels and trends in South Africa since the transition

“…Casale et al (2004) also take this issue into consideration, and estimates that between OHS 1995 and LFS 2003 at most 1.4 million new jobs are created, instead of two million as suggested by the data. Yu (2012) re-estimates the informal sector employment using the recent proposed methodologies (e.g., Devey et al, 2006;Heintz & Posel, 2008) and finds that both the 1995 -2007 and 2008 Stats SA methodologies underestimate informal sector employment. However, Yu assumes that the total employment remains unchanged (for instance, if informal sector employment should have been 0.2 million higher in a particular survey, formal sector employment is assumed to decrease by 0.2 million).…”

Dirty Cities

“…2 Attempts to explain this apparent paradox generally rely on the theory of labour market segmentation, in which 'barriers to entry' such as lack of credit and poor access to training, as well as constraints like low demand and variable income may limit not only intersectoral mobility but entry into the informal economy (World Bank 2002; Kingdon and Knight 2004;Skinner 2005;Cichello et al 2006;Heintz and Posel 2008).…”