Job Flows, Worker Flows and Churning in South Africa

How large are worker flows in a country where only 43% of the working age population are in employment? Rather surprisingly, the answer is that worker flows in South Africa are relatively large. In this paper, worker and job flows are estimated using anonymised IRP5 tax certificate data from the South African Revenue Service. The data used in this paper is from the 2011–2014 tax years and contains information on more than 12 million individuals and nearly 300,000 firms. The main finding of the paper is that worker flows are substantial, around 53% per year, or 58% when employers classified as engaged in “public administration” are excluded. One interpretation of this finding, as well as the patterns of separations and hires by firm growth rates, is that the labour market is not as rigid as had previously been thought. Worker flows are declining in firm size and in median earnings in the firm, they vary substantially by industry and are very low in the public sector. There is heterogeneity in worker experiences – while flows are high on average there are many workers that have very stable employment but those workers in the bottom quintile have worker flows more than three times those in the top quintile. Heterogeneity and persistence in worker flows and churning in firms are important – some firms have high levels of churning whilst others have much lower levels. Measurement error in the data about period employed from the IRP5 tax certificates is a concern but as far as can be ascertained this does not seem to be responsible for creating higher worker and job flows.