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Coordination Failure and Employment in South Africa

  • David Fryer
  • Désiré Vencatachellum


    (HEC Montreal, Université de Montréal)

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    South Africa lost more than 890,000 jobs, but saw an increase in the number of skilled workers from 1989 to 1999. We argue that this is the consequence of well-documented acute apartheid-era distortions which led to a current coordination failure where (i) firms are locked into a mostly skillintensive technology where they have very little demand for semi-skilled and unskilled labour, and (ii) there are too few semi-skilled and skilled blacks. It follows that the average level of blacks human capital is too low for firms to adopt a technology which makes intensive use of less skilled workers in the production process. A firm cannot unilaterally change technology because current skilled (mostly white) workers would lose and move to other firms. All of this points to a missing market for semi-skilled workers. Wealth redistribution and public investments in both the quantity and quality of education are shown to be Pareto-improving.

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    File Function: First version, 2004
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    Paper provided by University of Cape Town, Development Policy Research Unit in its series Working Papers with number 04086.

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    Length: 28 pages
    Date of creation: Jun 2004
    Date of revision:
    Publication status: Published in Working Paper Series by the Development Policy Research Unit, June 2004, pages 1-28
    Handle: RePEc:ctw:wpaper:04086
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