Micro-evidence on day labourers and the thickness of labour markets in South Africa

Abstract

The South African labour market is characterised by sharp segmentation, high unemployment and apparently limited informal sector employment.  Recent work has focussed on the importance of the Micro-evidence on day labourers and the thickness of labour markets in South Africa
The South African labour market is characterised by sharp segmentation, high unemployment and apparently limited informal sector employment. Recent work has focussed on the importance of the quality of education while others have argued that the rigidity of the labour market constrains employment growth. This paper considers the spatial aspects of the day labour market and argues that the size and proximity of economic activity found in agglomerations ensure a thick labour market that allows for better matching between workers and jobs. The results indicate that the day labourers who were hired by the same employer more often received higher earnings. Once workers have a matric qualification they receive earnings above the average, as do workers who have completed vocational training. Skills, as well as factors associated with a thicker labour market are positively associated with wages. The thicker metropolitan labour market allows workers to become more specialised and receive higher earnings. This has important policy implications and calls for the development of people and places.