Abstract
Orientation: The article investigated the application of a suitable estimation model to measure the productivity spill over effects of informal employees.Research purpose: The aim of the article was to estimate the sign and magnitude of productivity spill over effects of informal employees when employee and firm characteristics as well as external factors were considered.Motivation for the study: The researcher thought that empirical research was appropriate because of the belief that, because of low productivity levels in the South African workplace, firms are resorting to greater numbers of informal employees in order to generate positive productivity spill over effects that would improve their levels of competitiveness.Research design, approach and methodology: The researcher constructed real data series on the applicable variables from weekly data that he collected from firms in the sample group over the sample period. He then applied the Nelen, de Grip and Fourage estimation model to determine the sign and magnitude of the spill over effects for the different employee segments.Main findings: The informal employee segment created greater positive productivity spill over effects. This was especially true for older informal employees with longer tenures and lower levels of absenteeism. External factors, like variations in market demand, improved the positive spill over effects that informal employees generated.Practical/managerial implications: Firms might reconsider the composition of their workforce if the informal employee segment consistently generated higher positive productivity spill over effects.Contribution/value-add: The researcher has introduced an estimation procedure that firms can apply to measure the productivity spill over effects of formal and informal employee segments at firm and industry level.
Highlights
Stagnant job creation in the formal sector, high levels of unemployment and a potentially economically active labour force, which is increasingly looking for informal employment, characterise the South African economy (Davies & Thurlow, 2011)
There is a belief that firms are resorting to employing greater numbers of informal employees when difficult external factors, such as low levels of economic activity, fluctuations in demand, low productivity and restrictive labour legislation, confront them
There is no real research on the productivity of informal employees in the South African economy
Summary
Stagnant job creation in the formal sector, high levels of unemployment and a potentially economically active labour force, which is increasingly looking for informal employment, characterise the South African economy (Davies & Thurlow, 2011). There is a belief that firms are resorting to employing greater numbers of informal employees when difficult external factors, such as low levels of economic activity, fluctuations in demand, low productivity and restrictive labour legislation, confront them. Given the perceived growth in the demand for informal employees, it has become important to study the composition, location, mobility, skill levels and productivity of informal employees. There is no real research on the productivity of informal employees in the South African economy. This article measures the productivity of informal employees against the productivity of formal employees econometrically. International findings about the relationship between informal workers and productivity are mixed
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