Factors affecting labour absorption in South Africa

Abstract

Orientation: South Africa’s continually growing unemployment rates appear to be acute if measured by means of labour absorption. The country’s labour continues to struggle being absorbed in the labour market, let alone finding good and sustainable employment, hindering potential economic growth and development.

Research purpose: The study aims to analyse and understand factors affecting labour absorption in South Africa.

Motivation for the study: South Africa is characterised by limited job opportunities and a rapidly expanding labour force. Therefore, critically understanding factors contributing to low absorption rates could assist in harnessing and re-evaluating the effectiveness of existing labour policies.

Research approach/design and method: The study uses quarterly time series data from 2008Q2 to 2019Q1. The Autoregressive Distributed Lag (ARDL) model was used to estimate the long-run and short-run relationships between the chosen variables.

Main findings: The study found a long-run relationship between the selected variables and labour absorption. One main finding is that in the long run, the number of male work-seekers leads to a declining labour absorption rate, whilst the number of female work-seekers results in an increase in labour absorption.

Practical/managerial implications: For many years, females have endured negative employment outcomes as a result of existing inequalities in the labour market. The findings of this study reveal the potential effectiveness of South Africa’s employment policy in reversing such statistics. A further study with a more defined focus on labour absorption, employment policy and gender should be undertaken to enhance the understanding on labour’s absorptiveness in the labour market.

Contribution/value-add: Labour absorption is a broader measure of labour market performance than unemployment, because it comprises the labour force participation behaviour. Therefore, this study takes a much broader angle than most studies on unemployment.