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Macroeconomic and microeconomic determinants of informal employment: The case of clothing traders in Johannesburg, South Africa

Jennifer E Cohen, University of Massachusetts Amherst

Abstract

This dissertation investigates labor demand constraints and labor supply barriers to informal employment opportunities in Johannesburg using a micro-macro linkage methodology. Existing literature often characterizes the “informal sector” as voluntarist, or as the result of rationing due to labor market imperfections. Such models acknowledge no explicit role for macroeconomic factors to affect employment outcomes. I argue that, far from being structurally disconnected, both formal and informal employment conditions, including those in street trading, are shaped by the macroeconomic environment. The results highlight mechanisms through which conditions in the informal economy, in which traders operate and make decisions, are shaped by macroeconomic policies, and how these policies affect employment security. ^ Based on qualitative field research on self-employed street traders conducted in 2008, I develop an analysis of trading from the level of the macroeconomy, through the retail sector, to traders and their households. The macroeconomic analysis estimates a consumption function to model impacts of alternative fiscal policy to that adopted in the post-apartheid years. The analysis uses an input-output model to isolate the impact of deficit spending on consumption by industrial sector and assess earnings and employment effects in the retail sector. Interview-based survey data enrich and contextualize the analysis, incorporating traders’ experiences and perceived challenges to self-employment. ^ I find evidence of multiple interacting constraints on labor demand and labor supply, which helps make sense of the South African paradox of high unemployment coincident with a small informal economy. Street traders have limited profitability due, in part, to constrained consumption demand, which provides some explanation for the persistence of the paradox despite low barriers to entry. Further, constraints have disproportionate impacts on certain groups: female traders perceive their self-employment as significantly more threatened by demand constraints because their households tend to rely more on trading income than do male traders' households. ^

Subject Area

Economics|Labor economics|Sub Saharan Africa studies|South African studies

Recommended Citation

Cohen, Jennifer E, "Macroeconomic and microeconomic determinants of informal employment: The case of clothing traders in Johannesburg, South Africa" (2012). Doctoral Dissertations Available from Proquest. AAI3545913.
http://scholarworks.umass.edu/dissertations/AAI3545913

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