The welfare consequences of labour market volatility: the south african case

Zizzamia, Rocco Marco Antonio (1); Schotte, Simone (2) (2018). 'The Welfare Consequences of Labour Market Volatility: The South African Case' Paper presented at the annual conference of the HDCA, Buenos Aires, Argentina 2018.

Abstract

While the poorest South Africans remain concentrated in rural areas, the geography of poverty is shifting towards urban areas as a result of de-agrarianisation, rural-to-urban migration, and high population growth in cities. As Visagie and Turok (2017) show, cities have failed to adapt quickly enough to effectively integrate new entrants, and as a result, high un- and underemployment, socio-economic insecurity and crime have come to characterise the densely populated townships on the fringes of South Africa’s cities. These townships are often located far from employment opportunities, suggesting a high degree of spatial mismatch in South African cities (Budlender, 2016). This paper focusses on the dynamic intersection of poverty and unemployment in urban South Africa.

Unemployment is uncontroversially acknowledged as a primary determinant of poverty in South Africa. However, a static perspective on the relationship between poverty and unemployment overlooks important differences in patterns of poverty and unemployment over time. In particular, chronic poverty is predominantly associated with persistent unemployment in rural areas, where the majority of job seekers have never been employed, or have been unemployed for an extended period of time. Urban poverty in South Africa, on the other hand, is often more transient, with households moving into and out of poverty frequently over time (Schotte et al, 2017). In urban areas, the frequency of these transitions is closely associated with employment volatility, where precarious forms of employment predominate for black workers and where employment and unemployment are both temporary states.

Drawing on qualitative data (focus group discussions and life history interviews) I collected in 2017 in urban townships in Cape Town, I find that voluntary decisions to leave jobs are surprisingly frequent amongst precisely that population for whom jobs appear indispensable as a core livelihood strategy. This phenomenon is confirmed in a quantitative analysis of National Income Dynamics Study Panel Data (2008-2014). This paper sets out to resolve the tension between the assumption that jobs are routes out of poverty, and the observation that poor South Africans often quit (and refuse) these jobs.

I demonstrate how a purely quantitative analysis – even using high quality panel data which is available in South Africa – is unable to provide a full resolution to this tension. Instead, I draw on qualitative evidence to explain the heterogeneity underlying frequent movements into and out of employment. To accomplish this, I focus on the reasons respondents in my sample lost jobs and define two groups: “never-quitters” are defined as those who do not have an outside option strong enough to allow them to make a choice to leave “bad” jobs, while “voluntary-quitters” are defined as those in possession of an outside option strong enough to allow them to leave “bad” jobs. The strength of this outside option is determined by the strength of social networks and the existence of alternative sources of income. Further, I draw on qualitative evidence to develop an account of the substantial material and psychological burden that employment imposes on workers in those occupations in which most unskilled, urban black workers are employed (such as private security, hospitality, cleaning, and retail).

Taking these costs into account, I illustrate how applying a capability approach allows us to appreciate that “voluntary quitters” may use job quits as means of exercising agency to pursue non-monetary well-being, even at the cost of sacrificing labour income. For “never-quitters”, on the other hand, the absence of an outside option means that job losses will have severe impacts on material and non-monetary well-being, often with long-term impacts.

Distinguishing between the welfare consequences of labour market volatility in these two cases is not possible with the quantitative data currently available in developing countries such as South Africa. However, demystifying this link remains important for understanding how individual well-being is affected by job loss under different circumstances in a labour market characterised by high levels of precariousness and volatility.

Keywords: welfare dynamics; earnings volatility; labour markets; mixed methods; South Africa

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