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 AfricaThe 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.
Highlights
South Africa’s unemployment rate is remarkably high and it is most visible in the form of the day labourers who stand at the side of the road or on street corners every day, waiting for any temporary job (Blaauw, Louw & Schenck, 2006:458)
This approach holds that the size and proximity of economic activity found in cities and large towns ensure a thick labour market that allows for better matching between workers and jobs
The key claims to test are whether large urban areas do allow for a better match between workers and jobs, whether it allows for day labourers to become more specialised and if these factors contribute to higher earnings
Summary
South Africa’s unemployment rate is remarkably high and it is most visible in the form of the day labourers who stand at the side of the road or on street corners every day, waiting for any temporary job (Blaauw, Louw & Schenck, 2006:458). A few authors have considered the spatial aspects of the labour market and recently Havemann and Kearney (2010) found that urbanisation is an important predictor of wage differentials in the formal sector This paper expands this line of work by arguing in favour of the SmithMarshallian view of agglomeration and the labour market. This approach holds that the size and proximity of economic activity found in cities and large towns ensure a thick labour market that allows for better matching between workers and jobs. The survey data allows us to estimate a crosssection regression model of the importance of the thickness of the labour market as a correlate of day labour wages, while controlling for individual-specific characteristics.
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