Earnings and employment dynamics for Africans in post-apartheid South Africa: A panel study of KwaZulu-Natal

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 issues. This paper makes use of a regional panel data set for KwaZulu-Natal to begin the study of earnings and employment dynamics. The authors find that, on average, working-aged Africans in KwaZulu-Natal experienced large gains in earnings during the period 1993-8. 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 experienced by labour force participants. Obtaining formal sector employment is found to be an important pathway to growth in earnings, yet not exclusively so. The majority of those who get ahead do so by retaining employment in a given sector or moving into 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. © The author 2005. Published by Oxford University Press on behalf of the Centre for the Study of African Economies. All rights reserved.