Is employment a panacea for poverty in South Africa? A mixed-methods investigation

Abstract

Unemployment is a key determinant of poverty in South Africa and job losses are closely associated with descents into poverty. Disparities in opportunities that characterise individual fortunes in the labour market, in turn, reflect deep-rooted structural inequalities in South Africa. I focus on a black, urban demographic and investigate the conditions under which transitions out of employment lead to descents into poverty and/or declines in self-reported wellbeing. Of particular relevance are those cases in which a transition out of employment leads to a descent into money-metric poverty without resulting in a fall in self-reported wellbeing. These apparent inconsistencies – especially prevalent in cases where workers choose to leave work – may help illuminate how disadvantaged workers face non-negligible disincentives to certain forms of low-skill employment, which, under certain circumstances, may outweigh the disincentives to unemployment. Analysing both NIDS panel data and qualitative data collected by the author in Cape Town, I show how a purely quantitative analysis cannot provide an adequate account of the relationship between job loss and changes in self-reported wellbeing. In contrast, a qualitative analysis can illuminate the causal mechanisms which explain why, under certain circumstances, transitioning out of employment will be the welfare optimising choice for workers. To aid this explanation, I develop a model which analyses the welfare effect of job losses as being jointly determined by the strength of outside options and the disincentives to work. Younger workers with no dependants and with alternative sources of support can be said to have stronger outside options, and are especially likely to turn down or quit “bad” jobs. Older workers, with dependants and without alternative sources of support, are more likely to accept and persist in “bad” jobs – leading me to characterise wage work in these instances as a “survivalist” livelihood choice. This study shows that understanding the complexity and multidimensionality of the incentives that workers face and which inform labour market choices will be indispensable in effectively designing policies which aim to reduce inequalities in the labour market – in South Africa and beyond.