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Surviving Unemployment without State Support: Unemployment and Household Formation in South Africa

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Author Info
Klasen, Stephan () (University of Munich, Germany and IZA, Bonn)
Woolard, Ingrid (University of Port Elizabeth, South Africa)

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Abstract

High unemployment in many OECD countries is often attributed, at least in part, to the generosity and long duration of unemployment compensation. It is therefore instructive to examine a country where high unemployment exists despite the near complete absence of an unemployment insurance system. In South Africa unemployment stood at 23% in 1997 and the unemployed have no unemployment insurance nor informal sector activities to fall back on. This paper examines how the unemployed are able to get access to resources without support from unemployment compensation. Analysing a household survey from 1995, we find that the household formation response of the unemployed is the critical way in which they assure access to resources. In particular, unemployment delays the setting up of an individual household of young people, in some cases by decades. It also leads to the dissolution of existing households and a return of constituent members to parents and other relatives and friends. Access to state transfers (in particular, non- contributory old age pensions) increases the likelihood of attracting unemployed persons to a household. Some unemployed do not benefit from this safety net, and the presence of unemployed members pulls many households supporting them into poverty. We also show that the household formation responses draw some unemployed away from employment opportunities and thus lowers their employment prospects. The paper discusses the implications of these findings for debates about unemployment and social policy in South Africa and in OECD countries.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 237.

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Length: 39 pages
Date of creation: Dec 2000
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Handle: RePEc:iza:izadps:dp237

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Related research
Keywords: Unemployment; household formation; South Africa; incentive effects;

Other versions of this item:

Find related papers by JEL classification:
J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
J12 - Labor and Demographic Economics - - Demographic Economics - - - Marriage; Marital Dissolution; Family Structure
J61 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Geographic Labor Mobility; Immigrant Workers
O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Bentolila, S. & Ichino, A., 2000. "Unemployment and Consumption: are Job Losses Less Painful Near the Mediterranean?," Papers 0010, Centro de Estudios Monetarios Y Financieros-.
    Other versions:
  2. Case, Anne & Deaton, Angus, 1998. "Large Cash Transfers to the Elderly in South Africa," Economic Journal, Royal Economic Society, vol. 108(450), pages 1330-61, September. [Downloadable!] (restricted)
    Other versions:
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    Other versions:
  8. Arulampalam, Wiji & Stewart, Mark B, 1995. "The Determinants of Individual Unemployment Durations in an Era of High Unemployment," Economic Journal, Royal Economic Society, vol. 105(429), pages 321-32, March. [Downloadable!] (restricted)
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  11. Borsch-Supan, Axel, 1986. "Household formation, housing prices, and public policy impacts," Journal of Public Economics, Elsevier, vol. 30(2), pages 145-164, July. [Downloadable!] (restricted)
  12. Klasen, Stephan, 2000. "Measuring Poverty and Deprivation in South Africa," Review of Income and Wealth, Blackwell Publishing, vol. 46(1), pages 33-58, March.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ingrid Woolard & Stephan Klasen, 2005. "Determinants of Income Mobility and Household Poverty Dynamics in South Africa," The Journal of Development Studies, Taylor and Francis Journals, vol. 41(5), pages 865-897, July. [Downloadable!] (restricted)
    Other versions:
  2. Farah Pirouz, 2005. "Have Labour Market Outcomes Affected Household Structure in South Africa? A Descriptive Analysis of Households," Working Papers 9621, University of Cape Town, Development Policy Research Unit. [Downloadable!]
  3. Johannes G. Hoogeveen & Berk Özler, 2005. "Not Separate, Not Equal: Poverty and Inequality in Post-Apartheid South Africa," William Davidson Institute Working Papers Series wp739, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
    Other versions:
  4. van Ours, Jan C. & Vodopivec, Milan, 2006. "Duration of unemployment benefits and quality of post-unemployment jobs : evidence from a natural experiment," Policy Research Working Paper Series 4031, The World Bank. [Downloadable!]
  5. Murray Leibbrandt & Ingrid Woolard, 2001. "The labour market and household income inequality in South Africa: existing evidence and new panel data," Journal of International Development, John Wiley & Sons, Ltd., vol. 13(6), pages 671-689. [Downloadable!]
  6. Gary Fields, 2005. "Minimum Wages And Poverty," Working Papers id:169, esocialsciences.com. [Downloadable!]
  7. Cally Ardington & Anne Case & Victoria Hosegood, 2007. "Labor Supply Responses to Large Social Transfers: Longitudinal Evidence from South Africa," NBER Working Papers 13442, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  8. van Ours, Jan C. & Vodopivec, Milan, 2004. "How Changes in Benefits Entitlement Affect Job-Finding: Lessons from the Slovenian "Experiment"," IZA Discussion Papers 1181, Institute for the Study of Labor (IZA). [Downloadable!]
  9. Ours, Jan C. van & Vodopivec, Milan, 2006. "Shortening the potential duration of unemployment benefits does not affect the quality of post-unemployment jobs: evidence from a natural experiment," Discussion Paper 56, Tilburg University, Center for Economic Research. [Downloadable!]
    Other versions:
  10. Michael Grimm, 2006. "Mortality and Survivors' Consumption," Discussion Papers of DIW Berlin 611, DIW Berlin, German Institute for Economic Research. [Downloadable!]
    Other versions:
  11. Miriam Altman, 2001. "Employment promotion in a minerals economy," Journal of International Development, John Wiley & Sons, Ltd., vol. 13(6), pages 691-709. [Downloadable!]
  12. Gary Fields & Ravi Kanbur, 2007. "Minimum wages and poverty with income-sharing," Journal of Economic Inequality, Springer, vol. 5(2), pages 135-147, August. [Downloadable!] (restricted)
  13. Fofack, Hippolyte, 2009. "Africa and Arab Gulf states : divergent development paths and prospects for convergence," Policy Research Working Paper Series 5025, The World Bank. [Downloadable!]
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