Is employment a panacea for poverty in South Africa? A mixed-methods investigation

Unemployment is a key determinant of poverty in South Africa and job losses are closely associated with descents into poverty. Disparities in opportunities that characterise individual fortunes in the labour market, in turn, reflect deep-rooted structural inequalities in South Africa. I focus on a black, urban demographic and investigate the conditions under which transitions out of employment lead to descents into poverty and/or declines in self-reported wellbeing. Of particular relevance are those cases in which a transition out of employment leads to a descent into money-metric poverty without resulting in a fall in self-reported wellbeing. These apparent inconsistencies – especially prevalent in cases where workers choose to leave work – may help illuminate how disadvantaged workers face non-negligible disincentives to certain forms of low-skill employment, which, under certain circumstances, may outweigh the disincentives to unemployment. Analysing both NIDS panel data and qualitative data collected by the author in Cape Town, I show how a purely quantitative analysis cannot provide an adequate account of the relationship between job loss and changes in self-reported wellbeing. In contrast, a qualitative analysis can illuminate the causal mechanisms which explain why, under certain circumstances, transitioning out of employment will be the welfare optimising choice for workers. To aid this explanation, I develop a model which analyses the welfare effect of job losses as being jointly determined by the strength of outside options and the disincentives to work. Younger workers with no dependants and with alternative sources of support can be said to have stronger outside options, and are especially likely to turn down or quit “bad” jobs. Older workers, with dependants and without alternative sources of support, are more likely to accept and persist in “bad” jobs – leading me to characterise wage work in these instances as a “survivalist” livelihood choice. This study shows that understanding the complexity and multidimensionality of the incentives that workers face and which inform labour market choices will be indispensable in effectively designing policies which aim to reduce inequalities in the labour market – in South Africa and beyond.I am grateful to Pramila Krishnan, Hannah Dawson, Vimal Ranchhod, Stefan Dercon, Murray Leibbrandt, Joshua Budlender, Ravi Kanbur, David Neves, Debbie Budlender, participants at talks and conferences including the 2017 HDCA Conference in Cape Town, the 2018 CSAE Conference in Oxford, and at SALDRU, ReSEP and Oxford African Studies Centre seminars, as well as several anonymous reviewers at the Oxford Department for International Development for helpful suggestions on earlier drafts. Nina Zizzamia provided excellent assistance with proofreading. Arden Finn provided helpful Stata code for cleaning and deflating National Income Dynamics Study data. I am especially grateful to Simone Schotte, who has been an inimitable partner in both the design of this research project and in running field research in Khayelitsha, and who also helped with the design of weights for the NIDS balanced panel. I am also indebted to an exceptional team of fieldworkers, among whom Mzulungile Cabanga, Sibongile Mthini, Andiswa Mtini and Amanda Moocha deserve special mention. Fieldwork was implemented with the financial support of the Southern African Labour and Development Research Unit, the German Institute for Global and Area Studies, St Anne’s College, Oxford, and the Department of International Development at the University of Oxford. I am grateful for support through the Skye Foundation and the Dulverton and Michael Wills Trusts. Responsibility for any errors remains my own