- Low-waged and informal employment in South Africa
This paper forms one component of a larger project of the Human Sciences Research Council (HSRC) to assess the state of knowledge of the labour market in South Africa, and to identify research gaps. Our paper has two primary objectives: to outline the extent and incidence of low-waged employment in South Africa and to review the literature on informal employment, one important component of low-waged employment. We begin by provided a statistical overview of low-waged employment using the Labour Force Survey of March 2000 and March 2004. Based on these data, we summarise trends in low-waged employment. In Section B, we focus on informal employment in South Africa, and discuss some of the conceptual and statistical literature and apply it to the South African context. Section C provides trends on informal employment. Section D, using a unique panel drawn from the Labour Force Survey, provides analysis of some of the linkages between informal employment and other labour market statuses, including unemployment. Finally, in Section E, based both on our analysis of low-waged employment and on the review of the informal economy, we offer some suggestions for a research agenda.
The issues of low-waged employment and informal employment are both important considerations for labour market policy in South Africa. One of the key debates about employment in South Africa is the relationship between wages and employment, with the argument often made that the high levels of unemployment in South Africa are a result of rapid increases in wages, particularly of unskilled black workers (see Fallon and Lucas 1998, Lewis 2002). In the last comprehensive overview study of the labour market [End Page 90] in South Africa, Standing et al (1996) reject this argument and point to the extreme inequalities in wage income and to the high levels of low-waged income in South Africa. Whatever the merits of these arguments may be, it is imperative that any assessment of labour market policy in South Africa takes cognisance of the high levels of low-waged income in the labour market.
The South African labour market has not been shielded from rapid growth in informal employment across the globe (see Standing 1999, Charmes 2000). As we show below, a large proportion of the workforce is employed in the informal economy. Understanding trends and patterns of informal employment is critical for broader labour market policy for a number of reasons. First, and related to low-wages, the increasing informalisation of work has resulted in a segment of the workforce being unable to access the formal institutions that govern the labour market, and they do not have access to retirement provisions and medical insurance, which form part of the remuneration package for employees in formal employment. As President Mbeki remarked recently, 'casualisation has produced the phenomenon of the working poor…(who) have little say over their wages …(and) their employers are not required to provide them with medical and retirement benefits' (Business Report July 25, 2005). Second, an understanding of informal economy employment is important for contextualising policy discussions about employment and unemployment. What, for example, is the potential for the unemployed to enter informal employment and then to progress to better paying, more secure forms of employment? Or, is the growth in informal employment largely the result of the 'hollowing out' of the lower segments of formal employment as firms restructure in response to a more open international trade environment? Is the distinction between formal and informal employment really appropriate for South Africa?
Section A: Low-waged employment in the South African labour market
We employ two simple benchmarks to assess low-waged employment in South Africa -earnings below R2,500 per month, and earnings below R1,000 per month. Table 1 shows the distribution of low-waged workers in South Africa. On this basis, a large proportion of workers employed in South Africa earn low incomes. On the basis of the 2000 Labour Force Security (LFS), 77.8 per cent of the workers fall under the low-waged category when a R2,500 cut off point is used. A...