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Surviving unemployment without state support: Unemployment and household formation in South Africa

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  • Stephen Klasen
  • Ingrid Woolard

    () (SALDRU, School of Economics, University of Cape Town)

Abstract

While in many African countries, open unemployment is largely confined to urban areas and thus overall rates are quite low, in South Africa (and a few other Southern African countries), open unemployment rates hover around 30%, with rural unemployment rates being even higher than that. This occurs despite the near complete absence of an unemployment insurance system and little labour market regulation that applies to rural labour markets. This paper examines how unemployment can persist without support from unemployment compensation. Analysing household surveys from 1993, 1995, and 1998, we find that the household formation response of the unemployed is the critical way in which the unemployed assure access to resources. In particular, unemployment delays the setting up of an individual household by young persons, 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 response draw some of the unemployed away from employment opportunities, and thus lowers their employment prospects.

Suggested Citation

  • Stephen Klasen & Ingrid Woolard, 2005. "Surviving unemployment without state support: Unemployment and household formation in South Africa," SALDRU/CSSR Working Papers 129, Southern Africa Labour and Development Research Unit, University of Cape Town.
  • Handle: RePEc:ldr:cssrwp:129
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    References listed on IDEAS

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    More about this item

    JEL classification:

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

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