Trade-Induced Employment Changes: Promising or Problematic for Poor Households in South Africa?

Abstract

This paper considers the impact of trade liberalisation on employment and income at the household level in South Africa using descriptive analyses and micro-simulations. Poor households are found to be weakly linked to employment opportunities, particularly so in the manufacturing sector. The location and skills requirements of manufacturing are central to this mismatch. These weak linkages make poor households less vulnerable to employments losses arising from liberalisation, but also less likely to gain from increased demand for labour arising from increased export production. An exception to this is the agricultural sector. This sector is located in the geographical proximity of the poor and entails a demand for skills that are prevalent among the poor. Therefore it is a substantial employer of the poor. Access to land and international markets for South African agricultural products are therefore important avenues through which trade can potentially alleviate poverty.