Earnings and employment dynamics for Africans in post-apartheid South Africa: A panel study of KwaZulu-Natal created Paul L. Cichello, Gary S. Fields and Murray Leibbrandt

The labour market is central in determining individual and household well-being in South Africa. Therefore, an understanding of earnings and employment dynamics is a key policy issue. However, the absence of panel data has constrained empirical work addressing these topics. This paper conducts such a study using a regional panel data set, the KwaZulu-Natal Income Dynamics Study (KIDS). The authors find that, on average, working aged Africans in KwaZulu-Natal experienced large gains in earnings during the 1993 to 1998 period. These gains were progressive in nature, with the highest quintile of 1993 earners and those originally employed in the formal sector actually experiencing zero or negative growth in their average earnings. The average gain in earnings varied substantially depending on the employment transitions that labour force participants experienced. Obtaining formal sector employment is found to be an important pathway to growth in earnings, yet the vast majority of those who get ahead do so by retaining employment in a given sector or moving to the informal sector. The dynamism of the informal sector over this period is shown to be an important contributor to the progressive growth in earnings. Government policies that seek to increase employment and earnings in the informal as well as formal sectors are recommended. Understanding the constraints preventing the vast number of unemployed from engaging in informal employment is shown to be a key issue for future work