Wage Subsidy And Labor Market Flexibility In South Africa

Abstract

The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

Job flows, worker flows, and churning in South Africa

“…Worker flows are found to be substantial, higher than all but two of the worker flow rates estimated for 24 OECD (Organisation for Economic Co-operation and Development) countries by Bassanini et al (2010). 1 This is perhaps surprising given the reputation of the South African labour market as rigid (see Go et al 2009). The finding in this paper of extensive worker flows when using the IRP5 tax data is consistent with previous work using worker-level panel data by Banerjee et al (2008), and contradicts the assertion of Go et al (2009) that the high level of worker flows estimated by Banerjee et al (2008) was due to more fluid transitions between non-employment and the informal sector.…”

“…1 This is perhaps surprising given the reputation of the South African labour market as rigid (see Go et al 2009). The finding in this paper of extensive worker flows when using the IRP5 tax data is consistent with previous work using worker-level panel data by Banerjee et al (2008), and contradicts the assertion of Go et al (2009) that the high level of worker flows estimated by Banerjee et al (2008) was due to more fluid transitions between non-employment and the informal sector. A key finding of this paper is that even in the SARS IRP5 data of individuals working for PAYE tax registered firms there are still very substantial worker flows.…”

Job Flows, Worker Flows and Churning in South Africa

“…Thus the estimates of relatively large worker flows from the IRP5 data shed some light on the extent to which South African firms are constrained by labour legislation, which is a common concern raised by the business community, and suggest that rigidities on hiring and firing may not be as much of a concern as had previously been thought (Go et al ., ). However, Martin and Scarpetta's () view that only parts of the labour market may be highly regulated and that this would lead to inefficiently high worker flows in the unregulated parts is also a possibility, albeit a minority view in the literature.…”

“…(), and contradicts the assertion of Go et al . () that the high level of worker movement between the informal sector, the formal sector, unemployment and not economically active estimated by Banerjee et al . () was due to more fluid transitions between non‐employment and the informal sector.…”

“…Worker flows are substantial, around 53%, or 58% if public administration is excluded, which is higher than most European countries but lower than in the United States and the few developing countries for which worker flows have been estimated using administrative data (Davis and Haltiwanger (), Bellmann et al ., ). These relatively high worker flows are perhaps surprising given the reputation of the South African labour market as extremely rigid (see Go et al ., ). The finding in this paper of extensive worker flows when using the IRP5 tax data is consistent with previous work using worker‐level panel data by Banerjee et al .…”