Our Research posts are about the latest academic research being done in the School of Economics. This week:
by Derick Blaauw & Waldo Krugell
Day labourers are a significant and visible component of informal employment in South Africa. The post examines the role of day labouring, the characteristics of day labourers and whether skills or location matter for earnings. We find that day labouring in South Africa has a survivalist character, providing low and uncertain wages and little prospect for regular employment. Higher levels of education, vocational training and being hired by the same employer more frequently are all positively related to earnings. Workers who report that they do a greater variety of jobs, also earn more. However, when we look at workers in the metropolitan areas, doing many different jobs means lower earnings. Compared to everywhere else, the thicker metropolitan labour market allows workers to become more specialised and productive, and this translates into higher wages. Thus, policies aimed at addressing unemployment and underemployment should also integrate issues of urban transformation, infrastructure development and local service delivery.
When the informal economy is mentioned, we tend to think of the informal street trader. However, many people work as employees in informal enterprises and many workers are in informal employment in the formal sector, i.e. they do not have employment contracts or benefits even though they work in formal businesses and institutions. This can be regular or casual work and it is here where one finds the day labourer: the casual worker in informal employment who looks for work on a day-by-day basis, in the formal or informal sector. Day labourers constitute a very visible component of informal employment: They typically stand at the side of the road, or on street corners, every day, waiting for any job that may come their way.
This post reports on research into day labourers in South Africa. The data are from the first ever country-wide survey of day labourers that was completed in 2008. Structured interviews were conducted with 3830 day labourers in 239 locations in 9 provinces (with the larger numbers of interviewees having been in Gauteng, the Western Cape, KwaZulu-Natal and the Eastern Cape). The sample was stratified according to the results of countrywide census among day labourers in 2006. The aim is to answer a number of questions:
- What is the role of day labouring in the labour market?
- What are the characteristics of day labourers in South Africa?
- Do skills or location matter for earnings?
We believe that the answers to these questions have implications for labour market and development policies.
The role of day labouring in the labour market
Day labouring can fulfill different roles in the greater labour market. It can serve as a temporary ‘place of work’ whilst searching for a formal job. Or it can be a way to gain experience or skills, to later access the formal labour market. Or, it can be a place where most of these people ‘choose’, or have no option but, to remain as a way of survival.
Valenzuela et al. (2006: 1-2) summarised the variety of roles that day labouring fulfills in the United States, as follows: “For many workers in cities with declining employment prospects, day labor provides a chance to regain a foothold in the urban economy. For others, it is a first job in the United States and an opportunity to acquire work experience, skills and employer contacts. For still others, it represents an opportunity to earn an income when temporarily laid off from a job elsewhere in the economy. As a result of these and other factors, many workers have come to rely on day-labor hiring sites for job opportunities”.
In South Africa, Harmse, Blaauw, and Schenck (2009) founds that the picture is markedly different – the day labour market is less of a stepping stone and more of a poverty trap. With a declining demand for low-skilled workers, day labourers are basically forced into the informal economy by their socio-economic circumstances. It appears to be a catchment area for people who have lost their formal employment or who have never had any form of formal employment at all. Their situation can be seen as partly a by-product of a labour market where the focus is increasingly on skills that they never had the opportunity to obtain. Some of the day labourers with pertinent skills such as carpentry may be classified as ‘between jobs’ in a segment of the labour market characterised as ‘building project-based’. However, the data shows that most day labourers will take any job offered to them, not necessarily corresponding to the specific skill set they possess.
The prospects of a return to, or progressing to the formal sector are limited for day labourers. Day labouring is similar to informal trading or other forms of survivalist self-employment in this respect: Even better skilled day labourers have been involved in this segment for long periods of time. Some differentiation may exist in terms of nationality. With higher levels of human capital and English language skills, the typical day labourer from Zimbabwe earns more than South African day labourers and may be able to make the transition into the formal economy, similar to the United States experience. This remains a difficult goal and depends among other things on the legality of the day labourer’s presence in their host country. Some day labourers do not have access to legal documentation in the form of identity documents and visas, which would allow them to attempt to find formal employment.
Day labouring in South Africa has therefore become a means of mere survival. Approximately 94 per cent of the day labourers indicated that they would prefer to have a full-time job and maintained that they are struggling to provide for their families. Given the growth in their numbers (see Blaauw, Pretorius, Schoeman, and Schenck, 2012), one can argue that their existence is ‘part of the problem‘ in South Africa. And, considering low labour absorption rates in the formal economy, it is unlikely that they are going to disappear any time soon. Indeed, our expectation is that their numbers will continue to increase.
Therefore our view is that this segment of the labour market will have to be included in policy attempts to address unemployment and underemployment. Appropriate policy responses need to be informed by further analysis of this segment. Here, we want to specifically consider the characteristics of the day labourers and ask whether skills or location matter for earnings.
Who are the day labourers?
There are nearly 1,000 places in South Africa where at least 45,000 mostly black African men stand every day and wait to be picked up for day labour (Harmse, Blaauw, and Schenck 2009). These numbers appear to be increasing continuously (Blaauw, Pretorius, Schoeman, and Schenck 2012).
Day labouring in South Africa is very much male dominated, with more than 96 per cent of day labourers being male. The majority are young, between 25 and 40 years of age. While many have low levels of formal schooling and other forms of human capital, more than two-thirds have some high-school attainment or have completed high school. Figure 1 illustrates the level of education of day labourers compared with participants in the informal economy as whole at the time of the survey.
Some of those who have completed high school also have undergone training in bricklaying, carpentry, painting, etc. The proportion is small and never exceeded 11 per cent for any of the types of training mentioned. The foreign-born day labourers have a much better distribution in terms of their educational profile. Only 0.6 per cent of the South African-born day labourers obtained a post-school qualification. This figure is no less than 8.5 per cent in the case of non-South African day labourers.
The racial composition reveals that it is principally African and Coloured members of the population that engage in day labouring. Just over 92 per cent of the respondents were Blacks, 7.3 per cent were from the Coloured population and the remaining half a per cent consisted of Whites and Indians. This reflects the overall racial composition of the broader informal economy in South Africa. The percentage of immigrants from other SADC countries increases constantly as well, but the majority was South African born when the country-wide study was completed in 2008.
Jobs and earnings of day labourers
Average earnings per week vary according to the skills level of the job. For low-skilled work such as gardening, loading and unloading, digging and domestic work, average earnings were around R350 per week (in 2008 Rands). This would increase to almost R500 per week for carpentry, roofing or plumber’s assistants, and to above R600 per week for a bricklayer, plasterer or painter. At the time of the survey, the average minimum wage was at R 2406 per month (LRS 2011) and only the more skilled workers could earn more than the minimum wage on average.
For the group as a whole, earnings in a good week averaged R386 – and in a bad week, less than half of that, i.e. R163. Even in a good week there was a significant spread of values around the mean of R386 – the standard deviation is R304.
Day labourers thus encounter a highly unstable labour market that provides low and uncertain wages and little prospect for regular employment. As a result, many day labourers, and their dependants, tend to live in poverty.
Do skills or location matter?
In follow-up analysis of the survey data Blaauw and Krugell (2012) asked whether skills or location matter for earnings. The size and proximity of economic activity found in cities and large towns ensure a large pool of labour with different skills (a “thick” labour market). This allows for a better average match between differently-skilled workers and employers’ job requirements and enhances productivity. Also, a large market allows workers to become more specialised and, therefore, to be more productive, compared to the average worker in small towns and rural villages. In both cases, greater efficiency increases workers’ wages and this attracts more workers in the formal and informal sectors.
Our analysis asked the following questions: do large urban areas (compared to everywhere else) allow for a better match between day labourers and jobs, do they allow day labourers to become more specialised and do these factors contribute to higher earnings? Table 1 shows the means of earnings in a good week, in Rand.
The results show that earnings patterns for day labourers are not that different from those of full-time workers. A higher level of education is associated with higher earnings once day labourers have a matric qualification. Workers who have completed vocational training receive earnings above the average, as do workers in higher skilled jobs. Years of experience working as a day labourer do not seem to contribute to earnings – consistent with an ‘instantaneous’ market where there is little opportunity for workers to signal their experience. On the other hand, the day labourers who are hired by the same employer more frequently, often also receive higher earnings. This is indicative of a better match between workers and jobs, which increases earnings.
We found that workers who report that they do a greater variety of jobs, earn more. On average, they do not seem to benefit from specialisation. However, when we look at workers in the metropolitan areas, the results favour specialisation: In the big cities, doing many different jobs means lower earnings. Thus it seems that compared to everywhere else, the thicker metropolitan labour market allows workers to become more specialised and productive, and this translates into higher wages. Throughout, working in a metropolitan area equates to higher wages. The conclusion is that the village, town or city where the day labourer works, matter for earnings. Better skills are leveraged better in the urban labour market.
Implications for policy
The policy debate unemployment and job creation often begins and ends with the emphasis on the importance of education and training. For those in informal employment issues such as labour market institutions, regulation and access to training are also mentioned. The results of our analysis have shown that as in all other labour markets education, vocational training and the ability to do higher skilled jobs are positively associated with employment and earnings in the day labour market. It is also clear that better skills are leveraged better in the urban labour market.
The implication is that to create employment, we have to think beyond the labour market. Chapter eight of the NDP explains that human settlements and distance have major effects on communities, local economies and labour markets. The poor and the unemployed require access to public transport networks that can provide access to the thick labour markets available in metropolitan areas. This means more rapid urbanisation and a need to facilitate the mobility of people. Urban transformation, infrastructure development and local service delivery raise a host of challenges beyond the labour market. We need more integrated analysis of HOW and WHERE labour markets work.
Blaauw, P.F. & Krugell, W.F. (2012). Micro-evidence on day labourers and the thickness of labour markets in South Africa. ERSA Working Paper, 282. (forthcoming in SAJEMS in 2014).
Blaauw, P.F., Pretorius, A.M., Schoeman, C.H. & Schenck, C.J. (2012). Explaining Migrant Wages: The Case Of Zimbabwean Day Labourers In South Africa. International Business & Economics Research Journal, 11(12): 1333-1346.
Fourie, F.C. v. N. (2012). Presentation on the NDP at the ERSA Public Economics Workshop, 8 March 2012.
Fourie, F.C. v. N. (2013). The NDP on unemployment: On consistency, coherence and comprehensiveness, Paper presented at the ESSA Conference, Bloemfontein, 25 – 27 September 2013.
Harmse, A., Blaauw, P.F. & Schenck, R. (2009). Day labourers, unemployment and socio-economic development in South Africa. Urban Forum, 20(4): 363-377.
Labour Research Service (LRS) (2011). Bargaining Indicators for 2011, available from http://www.lrs.org.za/docs/Bargaining%20Indicators%20for%202011.pdf, accessed on 22 November 2013.
National Planning Commission (NPC) (2012). National Development Plan 2030, available from, http://www.info.gov.za/issues/national-development-plan/, accessed on 22 November 2013.
Statistics South Africa (StatsSA). (2009). Statistical Release, PO2011, Quarterly Labour Force Survey, Quarter 4 2008, March 2009, Pretoria.
Theodore, N., Meléndez, E., Valenzuela, A. (2009). Worker Centers: Defending Labor Standards for Migrant Workers in the Informal Economy, International Journal of Manpower, 30(5): 422-436.
Valenzuela Jr., A., Theodore, N., Meléndez, E., Gonzalez A.L. (2006). On the corner: Day labor in the United States, Los Angeles: UCLA