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SEGMENTATION IN THE SOUTH AFRICAN LABOUR MARKET IN 1999

South Africa’s labour market has performed dismally over the last 25 years in respect of its ability to create formal-sector jobs for the labour force. While poor economic growth over most of this period has undoubtedly been a major contributory factor, it is clear that factors internal to the labour market have also had a role to play. Since the early 1980s a wide variety of workers’ rights has been entrenched, in particular since 1994. A probable effect of these measures is to protect existing formal-sector workers, in particular unionised workers, at the expense of those who seek such jobs, creating classes of relatively privileged insiders and increasingly marginalised outsiders. This would be expected to result in segmentation of the market with wage differentials between the segments which cannot be explained by differences in skills and working conditions. This study estimates the degree of segmentation using earnings data from the 1999 October Household Survey, and finds substantial earnings differentials between (i) unionised and nonunionised formal-sector employees, (ii) non-unionised formaland informal-sector employees, and (iii) employees in what can be termed the ‘regulated’ and ‘unregulated’ formal sectors, after taking due account of differences in productive characteristics. These differentials are compared with findings from an earlier study using data from the 1995 October Household Survey, and most of the differentials appear to have increased substantially, particularly in the case of unionised and nonunionised members of the formal sector labour force. It seems therefore that the degree of segmentation has grown, particular within the formal sector. It seems clear that a hierarchy of workers has emerged, with those at the top in relatively good protected jobs. This protection comes at the expense of employment creation, meaning that increasing numbers of individuals are denied employment in these segments through no fault of their own, with those having such employment increasingly becoming a privileged elite. Given South Africa’s situation of increasing dissatisfaction of a growing mass of the population which was disadvantaged under apartheid with the lack of delivery of jobs and better standards of living, the current situation can only be viewed with increasing alarm.