On exporting, wages and inequality Reply

Carli Neil Marianne

Carli with the supervisors Proff Marianne Matthee and Neil Rankin

Last week colleague and PhD candidate Carli Bezuidenhout presented her ongoing research at the seminar series of the Department of Economics at Stellenbosch University. In a nutshell…

Unemployment and inequality are two of the major challenges facing South Africa, moreover, the economy is struggling to grow. Exporting has always been advocated as a means to create jobs and grow the economy. Indeed, recent research has shown that South African manufacturing exporting firms do employ more people and pay higher wages than non-exporters.

But, we know from the literature that there is a lot of churning in terms of exporter dynamics – this affects wages and employment and we also know that exporters may contribute to wage inequality. We consider these aspects in the South African context by using the newly made available SARS firm-level data.

The preliminary findings suggests that, indeed the South African manufacturing exporters employ more workers and pay higher wages – they create more and better jobs. But some manufacturing exporters’ jobs are better than others – it depends on the destination they serve, the number of products exported, the number of destinations exported to and the export status. There is this hierarchy for exporting firms to be larger (number of employees) and pay more as you export further away. Firms exporting to the International market (to African countries and outside of Africa) pay more than firms exporting only to Africa. Interestingly the inequality within a firm (wages per person) also increase as you export further away. Therefore, some sort of trade-off exists between the levels of wages and inequality.

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