Earnings volatility in South Africa

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University of Cape Town


How much volatility is there in earnings in South Africa? The South African labour market has been shown to be a key determinant of welfare, both in terms of poverty and inequality. These are a function of both the high levels of unemployment as well as the wage distribution, conditional on being employed. One aspect of welfare that derives from the labour market, which has been relatively understudied to date, is the amount of volatility in earnings that various groups of South Africans experience over time. This has implications directly for welfare, as well as for inequality. We make use of the first three waves of data from the National Income Dynamics Study to describe the amount of earnings volatility experienced by different demographic groups. We then make use of a regression model to estimate the partial correlation between the various characteristics that we use and earnings volatility. Our main findings are that earnings volatility is high over a four year interval. The mean within‐person standard deviation in earnings across the three waves lies between 50% and 66% of the mean earnings depending on the time period, and the mean within‐person coefficient of variation in earnings is 0.641.

Vimal Ranchhod - Chief Research Officer, SALDRU, Dept. of Economics, University of Cape Town. Email: vimal.ranchhod@gmail.com