Job creation and destruction in South Africa

Abstract

Analysts of the South African labour market have predominantly used household surveys to analyse the labour market. It has been more di fficult to explore labour demand from the firm side, as a result of limited data from relatively small cross sectional firm surveys, mainly funded by the World Bank. We use the Quarterly Employment Survey conducted by Statistics South Africa that allows us to explore how South African enterprises create and destroy jobs, shedding light on many of the policy questions that are relevant in a high unemployment society like South Africa. We find job creation and destruction rates are similar to those found in OECD countries. There is little evidence that labour legislation creates rigidities that prevent firms from hiring or fi ring workers. We also find that larger firms are better net creators of jobs than small firms and that net job creation rates are negative in manufacturing, consistent with work using household surveys. Our research has important policy implications - particularly for the National Planning Commission's suggestion that new jobs will come mainly from small and medium sized fi rms. Our research suggests this is not likely without changes to policy or legislation. This is a joint SALDRU/DataFirst Working Paper ; We thank Naume Malepe and Mandla Masemula of Statistics South Africa for their help in explaining the QES data and sampling procedures. We are grateful for helpful comments from participants at the SALDRU seminar, University of Cape Town, the Firms and Labour Markets conference, University of Oxford and the Micro-econometric analysis of South African data conference, Durban. This research was made possible by an exploratory grant awarded by the Private Enterprise Development in Low-Income Countries (PEDL) research initiative. PEDL is a joint research initiative of the Centre for Economic Policy Research (CEPR) and the UK Department For International Development (DFID). It aims to develop a research programme focusing on private-sector development in low-income countries.