Determinants of skills demand in a state- intervening labour market

Abstract

PurposeThe purpose of this paper is to improve the understanding of the drivers and determinants of skills demand in South Africa, given the country’s history and its current design as a developmental state.Design/methodology/approachIn this study, a mixed methods approach is used. The study draws information from in-depth interviews with transport sector stakeholders including employers, professional bodies, sector regulatory bodies and training providers. Complementary to the interviews, the study also analyses employer-reported workplace skills plans from 1,094 transport sector firms updated annually. A Heckman correction model is applied.FindingsThe study finds that changes in competition, technology, ageing employees, market conditions and government regulations are among the most frequently stated determinants reported through interviews. Using a Heckman regression model, the study identifies eight determining factors, which include location of firm, size of a firm, occupation type, racial and generational transformation, subsector of the firm, skills alignment to National Qualification Framework, reason for skills scarcity and level of skills scarcity reported. The South African transport sector skills demand is therefore mainly driven by the country’s history and consequently its current socio-economic policies as applied by the state itself.Research limitations/implicationsWage rates are explored during stakeholder interviews and the study suggests that wage rates are an insignificant determinant of skills demand in the South African transport sector. However, due to poor reporting by firms, wage rates did not form a part of the quantitative analysis of the study. This serves as a limitation of the study.Practical implicationsThrough this research, it is now clear that the state has more determining power (influence) in the transport sector than it was perceived. The state can use its power to be a more effective enabler towards increasing employer participation in skills development of the sector.Social implicationsWith increased understanding and awareness of state’s influence in the sector, the country’s mission to redress the social ills of the former state on black South Africans stands a better chance of success. Private sector resources can be effectively mobilized to improve the social state of previously disadvantaged South Africans. However, given the economic dominance of the private sector and its former role in the apartheid era in South Africa; too much state influence in a supposedly free market can result in corporate resistance and consequently, market failure which can be seen as result of political interference.Originality/valueSouth Africa has had an unprecedented social and economic trajectory to date. This said, its economic and social policies are unlike what we have observed before. Thus, identification of determinants and understanding of mechanisms of influence, on skills demand in the sector in which an African state plays such a close and active role, is in itself a unique contribution to knowledge and compels us to revisit our traditional assumptions about market behaviour. This study is one of the very few of its kind in the labour market research with a South African context.