Youth unemployment and the transition from school to work in Cape Town

Doctoral Thesis


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University of Cape Town

This thesis utilises, in the main, a unique panel survey of youth in Cape Town to gain insights into the functioning of the labour market in relation to transitions from schooling to work for youth. The Cape Area Panel Survey (CAPS) was conducted between 2002 and 2006, a period which coincides with upswing in the South African economy culminating in relatively high economic growth in recent history. The introductory chapters utilise cross-sectional data (Labour Force Survey, 2005) in order to contextualise the panel data analysis that follows in subsequent chapters. A large portion of the South African population is youth. Either this facet of the demography of the country can be converted to a positive social benefit through reaping a demographic dividend or a high price could be paid through carrying a large contingent of unemployed. Indeed, much of the country's social safety net, social returns on investments in education and health and even infrastructure depend on the absorption of youth into a productive place in society. The labour market sits centre stage of all of this. The softest version of the South African dream is that post-apartheid youth cohorts have better opportunities and possibilities than their parents. These intergenerational concerns require the delivery of better education and health care but also the opportunities to use these human capital investments in gainful employment. In the introductory chapter, the perspective taken is to look at the labour market entry situation through the eyes of the youth. What does the employment situation look like to the youth as they consider leaving education to enter the labour market? How does this labour demand picture mesh with their individual, household and community contexts that they bring into the labour market? Through this interrogation, the chapter teases out a few key barriers to youth labour market participation and employment. The operation of these barriers is then illustrated by looking at the reality of securing employment for South Africa's youth. In particular, the disparities in youth unemployment observed by age, race and gender are investigated in Chapter 2. This is done by using the Labour Force 2005 data (LFS 2005) and applying the residual difference method of decomposing group wage differences (Oaxaca, 1973) to discrete choice models. I find that most of the employment gap by age is explained by individual characteristics. Slightly more than half of the racial employment gap however is unexplained by individual characteristics while an even higher percentage of the gender employment gap is unexplained by individual characteristics. In Chapter 3 the nature and degree of duration dependence in the Cape Town labour market is examined using survival analysis. The CAPS has month-by-month data on job search and employment and is ideal for the duration analysis. I find positive duration dependence and a monotonically increasing hazard of exiting unemployment. Chapter 4 then investigates the extent to which the disadvantage experienced in securing employment translates into disadvantage in wages in the first job. A decomposition analysis of the race and gender wage gaps is also carried out. I find racial and gender wage gaps that are largely unexplained by observable individual characteristics.

Includes bibliographical references.