Accounting for Changes in Manufacturing employment in South Africa

by TREGENNA, F. , 2007
Globalization and Development: A Handbook of new perspectives, Oxford University Press, October

Tregenna assesses the components and possible causal determinants of changes in manufacturing employment in South Africa. She focuses on the relationships between capital stock, capacity utilisation, relative factor utilisation, and employment. Basic decomposition techniques are used to investigate the extent to which these factors account for changes in employment between 1970 and 2004. Although this analysis does not explain underlying causal relationships, it may shed light on the various changes over time and on priorities for further research. From a policy perspective, identifying the critical blockages to employment growth may be helpful for designing focused interventions to reduce the devastating levels of unemployment in the country. The next section of the paper reviews empirical trends in manufacturing, including changes in output, capital stock, capacity utilisation, relative factor utilisation, and employment. The third section briefly discusses relevant conceptual issues, particularly the relationship between changes in capital stock and employment. Decomposition techniques are then used to disaggregate changes in employment into a capital stock effect, a capacity utilisation effect, and a relative factor utilisation effect. The results are presented for manufacturing as a whole, as well as by sector. The final section discusses the results and possible policy implications.