Is employment a panacea for poverty: A mixed-methods investigation into employment decisions in South Africa

Unemployment is a key determinant of poverty in South Africa and labour market inequalities reflect deep-rooted socio-economic inequalities. In a context of high rates of poverty and unemployment, we would expect a job loss to be associated with a decline in wellbeing. Using nationally representative panel data and original qualitative data collected in Cape Town, I find that, on average, this hypothesis holds. However, this aggregate effect conceals heterogeneities in the relationship between labour market transitions and wellbeing which are of special analytic interest. In particular, this study focuses on those cases which go against the grain of the overall labour market-wellbeing nexus – that is, cases in which black, urban youths turn down or quit wage work. An analysis of these examples helps illuminate how disadvantaged workers face non-negligible disincentives to certain forms of low-skill employment and reveals the circumstances under which these disincentives may outweigh the disincentives to unemployment. To aid this investigation, I develop a model which analyses the welfare effect of job losses as being jointly determined by the strength of outside options and disincentives to work. Using qualitative data, I provide evidence in support of this model and show that, under certain circumstances, transitioning out of employment​⬤

Recommended citation: Rocco Zizzamia. (2020). "Is employment a panacea for poverty: A mixed-methods investigation into employment decisions in South Africa." World Development, Volume 130.
Download Paper