The relationship between formal and informal employment in South Africa

Over the last several decades several theories have dominated debates about the nature of informal employment in developing countries. The dualistic theory claims that the informal sector is a substitute for formal employment, the alternative theory claims that the informal sector is a compliment to formal employment, and the structural articulation theory claims that informal employment is both a substitute for and compliment to formal sector employment because heterogeneous groups exist within the informal sector. This study contributes to the literature by providing empirical evidence that heterogeneous sub-sectors do exist within South Africa???s informal sector, and that the Structural Articulation theory, with its focus on dynamic and static sub-sectors, is the most appropriate framework to adopt when thinking about informal employment in South Africa . Furthermore, the study also adds to the literature by providing evidence that a national poverty line can be used to identify the dynamic and static sub-groupings within South Africa???s informal sector. Finally, I suggest that the existence of heterogeneous sub-groupings implies the need to better target policy interventions for the informal sector