The dual labour market theory and the informal sector in South Africa

Abstract

Purpose of the paper: The purpose of this paper is to revisit the dual labour market theory as far as the informal sector in South Africa is concerned. The hypothesis is that the dual labour market theory must be extended in order to be applicable to the informal sector of the South African economy. It is our view that within some informal occupations a further segmentation exists. Problem investigated: Among South Africa ’s grave socio-economic problems, unemployment is one of the most serious and intractable. An increase in informal and self-employment was experienced during the last decades. Traditional dual labour market theory maintains that jobs can be roughly divided into two groups: those with low wages, bad working conditions, unstable employment and little opportunity for advancement; and those with relatively high wages, good working conditions and opportunities for advancement. The problem that confronts researchers is that even within informal employment, further segmentation is possible. Approach: To determine whether the dualism, that described by the dual labour market theory, is also present within the informal sector itself, available data on a typical informal sector activity, namely car guarding, is analysed. This provides the evidence to achieve the objective of this paper. Findings and implications: The case study of car guards confirms that the dual labour market theory can also apply within the informal sector on the condition that it is expanded to make provision for a further segmentation of the periphery sector. This finding presents several important policy implications. A basket of policies is needed to address the problem of unemployment as effectively as possible. Value of the research: The paper provides further knowledge on informal employment in South Africa. This is an area that requires a lot of attention, given the importance of the informal sector in South Africa and Africa at large. It goes further than the traditional implications stemming from the dual labour market theory. Conclusion: The South African labour market is fragmented, consisting of a well-paid formal sector and the periphery that consists of workers in the informal sector, subsistence agriculture and the unemployed. Within the periphery, there is the possibility that a certain degree of dualism exists. The case study of car guards confirms that the dual labour market theory can be extended to make provision for this dualism, even within the informal sector.