The structure of the South African labor market, 1970–83

T H E S T R U C T U R E O F T H E S O U T H A F R I C A N

L A B O R M A R K E T , 1970-83

Rudolph Daniels

The structure of the labor market in the Republic of South Africa over 1970-83 is strongly linked to the Natives Land Act of 1913, No. 27, which dispossessed blacks of their legal right to land ownership. One of the intended results of this act was to increase the supply of cheap black labor to South Africa's predominantly white-owned industry. Thus, over the 1970-83 period, as before, blacks occupied the lowest ends of the educational, occupational, employment, and income distributions among all races in South Africa. On the other hand, the white minority lived at a standard equal to that of Amer- icans and Scandanavians. However, even within these constraints, the demographics of South Africa are such that over the next decade or more, and even in the absence of major political upheaval, blacks may comprise an increasing percentage of the workforce and occupy positions which have been mainly occupied by whites to date.

Using available data, this article analyzes the educational , occupa-

tional, income, and employment distributions in South Africa.~ With this

objective, the study may be considered an extension of the work o f one o f South Africa's most notable economists, Jill Nattrass, who addressed the

structure of the labor market in South Africa between 1970-75 in her book, The South African Economy: Its Growth and Change. 2 It should be

noted that, while in some cases data pertaining to all racial groups in South Africa are presented, the discussion o f the labor market is l imited to

relevant issues and facts that relate to blacks as contrasted with their white

counterparts . There are two reasons for this emphasis: Indians and Col-

oreds consti tute a relatively small percentage o f the South African population and, as such, pose no significant threat to the political, social, and

64 The Review of Black Political Economy/Spring 1987

TABLE 1 Government Per Capita Expenditure on School Pupils by Race in

White South Africa, 1971-83 (current rands)

c~

o

~ o o o o o o , ,

, o ~ 1 7 6 . ~

~ 1 7 6 1 7 6 �9

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~ . ~ ~ ~ ,~ ~ ~ o ~ c ~

~ , , , 7 7 , ~' 7 7

0 ,C

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. ~ ' ~ 0 . ~ , = E-,.~ ~,~,..,o, , , 0 ~q3 ~ . ~

0 ~

Danie|s 65

economic stability of the Republic of South Africa; Indians and Coloreds are better off than blacks, because they are accorded more privileges than blacks (land ownership in "white" South Africa, higher earnings, better living conditions, political rights, and greater social acceptance).

EDUCATION AND LABOR MARKET STRATIFICATION

The educational disparity is perhaps the most salient feature of the South African labor supply, which has traditionally provided partial justi- fication for the unparalleled inequality in the occupational and income distributions. The inequality in the educational distribution has its foun- dation in the discriminatory patterns of government expenditure on education between the two racial groups. Table l illustrates the substantial inequality in educational expenditure between black and white residents of white South Africa over the 1971-83 period. The most interesting and revealing features of the data in this table are the relatively small expenditure per capita on black education in each financial year and the relative change that has occurred in government expenditure on black education over the period. Even though blacks experienced a 152.7% increase in their relative position (from 5.5% of whites to 13.9%), it would have neces- sitated a 1,718% change in relative position over the 1971-83 period to close the education expenditure gap between them and white South Af- ricans. It is worth noting that when black per capita expenditure figures for the whole of South Africa, including the homelands, are contrasted with white per capita expenditure, the results are more unequal. For example, in the 1977-78 financial year per capita expenditure on black education as a percentage of white expenditure was 8.1%, increasing only modestly to 9.1% in the 1982-83 financial year. 3

The extent of the educational disparity is reflected in the educational levels of adults. Table 2 indicates the highest educational levels obtained by the different races for 1970 and 1980, excluding the independent homelands of Transkei, Bophuthatswana, and Venda. Although blacks constituted 68% of the South African population in 1980, only 12% of the total number of adults who passed the school leaving examination (matric) with "exemptions" or with the necessary credentials to enter a university were black. In contrast, whites comprised 18.2~ of the constituted population but the dominant share (79.5%) of South Africans who qualified to attend a university. Moreover, in 1980, blacks comprised only 3.7% of all adults with degrees compared to whites who were 90.7% of this category.


TABLE 2 Educational Levels of Adults by Race, 1970 and 1980

�9 * ~ * �9 * �9 ~

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0

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Daniels 67

TABLE 3 Percentage and Number of Adult Population Illiterate by Race, 1980

Race Percentage Number (in millions)

Africans 33.0 3,000,000

Coloreds 15.5 247,000

Indians 7.6 39,000

Whites 0.7 23,000

Source:

Note:

P. N. Pillay, "The Development and Underdevelopment of Education in South Africa," paper presented at the Second Carnegie Inquiry into Poverty and Development in Southern Africa, Carnegie Conference Paper No. 95, Cape Town, 13-19 April 1984.

Figures for blacks exclude the independent homelands.

Blacks were slightly better off in 1980 in the diploma category where passing the matric with exemptions is not required and is sufficient to gain admittance to a college or technical institution. From the data in Table 3, it appears blacks also were better offin terms of a reduction in the total number of illiterates in 1980 contrasted with 1970 when the figure was 50.60/0. 4 However, the total number of blacks affected by illiteracy in 1980 exceeded the figures given in Table 3, since the independent homelands are not included in the 1980 data. If the independent homelands had been considered, the total number of illiterate blacks would have outnumbered the combined total of the Indian and Colored populations in 1980, which was estimated to be 3.5 million. 5

Recent research on the educational disparity offers findings equally dismal as those presented in the foregoing analysis. Barcum, for example, observes that the proportion of blacks who passed the matric with exemptions dropped from 33% (3,236) in 1978 to 11% (6,336) in 1982. Many blacks who pass the matric with exemptions and go on to pursue a course of study at one of the three black universities (University of the North, Fort Hare, and Zululand) will be included in the attrition rate among


TABLE 4 Occupational Distribution of the Racial Groups, 1970 and 1980 (in percent)

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Daniels 69

students at these universities of at least 50%. 6 Other researchers present equally disappointing statistics. Corke, for example, holds that

while 40 percent of the African population has no formal education, the comparable figure for the white population is 4.1 percent . . . . In the African community less than 0.1 percent are university graduates, but 6 percent of the white community hold university degrees. These dis- parities are rooted in our history. Racial ideologies have enjoyed the support of the majority of white people from the time that indus- trialization began in South Africa. The desire of white settlers to get rich caused the economic development of black people to be arrested and their educational opportunities circumscribed. The hope for mate- rial advantage continues to motivate the thoughts and actions of the white community. 7

It is clear from the foregoing that the relatively disadvantaged position of blacks in terms of the quantity and quality of education ensures that the other racial groups in South Africa, particularly whites, will almost ex- clusively occupy the jobs which require high levels of formal education.

OCCUPATIONAL STRATIFICATION IN THE LABOR MARKET

Evidence of the impact of the education disparity and discriminatory legislation is reflected in Table 4, which indicates that blacks are heavily concentrated in low-paying blue-collar occupations. However, since 1970, blacks have moved into higher occupational categories in greater numbers while the white share of these jobs has been diminishing. In 1970, for example, the white share of professional and technical jobs was 65% compared to 60% in 1980. Moreover, the white share of managerial and administrative jobs fell from 93.5% in 1970 to 91.8% in 1980 while their share of clerical jobs dropped from 72% to 61% over the same period. The data presented in Table 4 do not provide reasons for unbridled optimism, since they do not reflect the fact that within the upper echelon occupations where modest progress has been made, blacks are disportionately represented in lower level positions. Little has changed since 1977 when, in the professional and technicai category, 90% of blacks were either teachers or nurses compared to 35% for whites. Blacks were clustered in lower level positions in clerical occupations (filing clerks and stock clerks) while there was an overwhelming preponderance of whites in such higher level clerical positions as bank clerks and bookkeepers. 8 It is also worth


TABLE 5 Distribution of Whites and Non-Whites in Some Key Occupations, 1981

Occupations Whites Non-Whites

Engineers 98.6 1.4

Architects 99.1 0.9

Doctors 89.7 10.3

Dentists 96.4 3.6

Chemists (Industrial) 93.0 7.0

Pharmacists 97.1 2.9

Accountants 98.2 1.8

Draftsmen 94.0 6.0

Surveyors 97.5 2.5

Source:

Note:

Manpower Survey No. 14, 1981.

These data exclude the independent homelands.

noting that, although blacks in 1980 constituted 28.5% of professional and technical jobs, the total number of blacks in these positions amounted to only 3.2% of employed blacks contrasted with 19.5% for whites. Moreover, these blacks were mainly employed in the homelands and in black estab- lishments in "white" South Africa.

The South African economy is clearly characterized by a stratified labor market in which skills are almost entirely monopolized by a better educated and better trained white labor force who dominate the occupations that require high levels of education and skill. The data in Table 5 indicate the magnitude of this domination by whites in 1981. Apartheid education "which consigns black children to palpably inferior schools and tribal universities" assures that few blacks will gain access to the upper rungs of the job ladder; it also plays its part in maintaining a stratified or divided labor market characterized by stark racial inequalities. 9

Daniels 71

EARNINGS FROM WAGE LABOR IN THE MODERN SECTOR

The earnings profiles of the two racial groups mirror the educational and occupational stratification that prevails in South Africa. Greater relative increases in government expenditure on black education and an abol- ishment of statutory work reservations in 1979, which had reserved certain occupations for whites, are partially responsible for the apparent improvements in the relative earnings of blacks employed in the modern sector that have occurred since 1970. ~~ (The modern sector in 1980 ac- counted for 80% of total employment and consists of all industrial components except the agriculture, forestry and fishing sector, and the informal sector of street vendors and small shops.)

Using available data, at least two important trends in average nominal earnings in the modern sector can be distinguished over 1970-82. The wages of blacks increased at an annual average rate of about 3.6% contrasted with 2.1% for whites (Table 6). Second, increases in black average earnings were large enough relative to white earnings to increase the earnings ratio from .146 in 1970 to .220 in 1982. This increase in the relative earnings position of blacks of 51% seems appreciable. However, a change in relative position of approximately 585% would have been required to close the gap in average nominal earnings over the period 1970-82.

Improvements in nominal earnings of blacks appear to have resulted from differences in the rate of increase in cash wages paid them relative to their white counterparts, and in small part to some occupational mobility. According to a noted South African labor economist, A. Spandau, the mining and quarrying component is most responsible for improvements in the relative earnings of blacks where the pay ratio in 1970 in current rands was 1:19.77 compared to 1:6.72 in 1979. ~ For example, (Table 7) while black relative earnings show improvements in 1982 over 1970, with the exception of construction and trade and accommodation services, mining and quarrying show the most pronounced increases in the earnings ratio with a 212.3% improvement in blacks' relative earnings position. Manufacturing ranked second with an improvement of 63.7% in blacks' relative position.

In 1970, a substantial earnings differential also prevailed between blacks employed in mining and quarrying and those employed in other components of the modern sector. Average earnings of blacks in mining and quarrying were 183.3% lower in 1970 than the aggregated average


TABLE 6 Black/White Modern Sector Wage Differentials (current rands)

Average Annual Earnings

Year Blacks Whites Earnings Ratio

1970 471 3,224 .146

1972 576 3,804 .151

1974 864 4,776 .181

1976 1,284 5,892 .218

1978. 1,644 7,020 .234

198,0 2,267 9,207 .246

1982 2,890 13,110 .220

Sources: Central Statistical Services, Bulletin o_~f Statistics, March 1984, Republic of South Africa, Government Printing Office, Pretoria; south Africa 1984; Official Yearbook of the Republic of South Africa, (Johannesburg, Chris Van Rensburg Publications), 1984; Survey of Race Relations. 1983, (Johannesburg: South Africa Institute of Race Relations).

earnings of blacks in the other components, but unprecedented increases in black wages, particularly in mining, reduced this differential to 22.1% by 1983.12 It can be concluded that a marked increase in the total wage bill paid to blacks in mining and quarrying had the most significant impact on the relative earnings differential between blacks and their white counterparts over the 1970-83 period. This is not to imply that such factors as increased government expenditure on black education and upward occupational mobility did not have their impact on the improved earnings position of blacks. It is reasonable to assert that they did influence the modest diminution in the wage differential.

THE ALLOCATION OF EMPLOYMENT BY SECTOR AND RACE

As the South African economy was transformed from a primitive economy, with an agriculture base, into a capitalistic one, growth in the

Daniels 73

TABLE 7 Black/White Average Annual Earnings by Sectoral Components,

1970 and 1982 (current rands)

1970 1982

Earnings Earnings Sectoral Component Black White Ratio Black White Ratio

Manufacturing 694 3,603 .193 4,980 15,756 .316

Mining and qarrying 244 4,272 .057 3,024 16,992 .178

Electricity, gas and water 658 3,951 .167 4,416 16,500 .268

Construction 731 3,787 .193 2,928 15,948 .184

Trade and accommodation services 639 2,496 .256 2,520 10,104 .249

Transport and communication 639 3,369 .190 3,324 12,804 .260

Finance and insurance 867 3,128 .277 4,716 12,144 .388

Services 611 3,179 .192 2,976 11,796 .252

Sources: Central Statistical Services, Bulletin of statistics, March 1984, Vol. 18 No. i, Republic of South Africa, Government Printing Office, Pretoria; South Africa 1984: Official Yearbook of the Republic of South Africa, Johannesburg: Chis Van Rensburg Publications, 1984)

manufacturing and commercial sectors contributed substantially to the decline in the importance of the agriculture, forestry, and fishing sector as an employer. For instance, eight years after the Natives Land Act of 1913, No. 27 had stripped blacks ,of their rights to land ownership, requiring them to serve as a source of cheap labor supply to white farmers, the agriculture, forestry, and fishing sector employed 63% of the South Af- rican workforce.J3 By 1970, the agriculture, forestry, and fishing workforce had declined to 29.3% of the workforce and by 1980 had dropped to 16.6% (Table 8). The 74% decline in this sector's workforce over the period 1921-80 largely reflects the outflow of blacks whose labor had been most heavily relied upon to operate this sector. Much of the relative decline in the black labor supply in the agriculture, forestry, and fishing sector was involuntary, caused by capital substitution, mainly in agriculture.


TABLE 8 Racial Employment Distribution by Major Employment Sectors,

1970 and 1980 (in percent)

Sector

Workforce

1970 1980

Slack White

1970 1980 1970 1980

Total Percent

Agriculture, forestry, and fishing

Mining and quarrying

Manufacturing

Electricity, gas, and water

Construction

Commerce

Transport and communication

Finance

Services

100 100 I00 100 I00 100

29.3 16.6 38.0 21.4 6.7 5.5

9.3 11.0 12.l 14.7 4.3 4.8

14.6 18.7 11.0 15.9 19.4 19.4

0.7 0.i 0.6 0.9 1.0 2.0

6.5 5.8 6.0 5,4 6.7 5.4

i0.0 13.0 6.1 ii.i 18.5 16.0

4.8 5.4 3.0 3.7 11.3 10.3

2.7 3.7 0.7 i.i 9.9 11.1

22.1 25.4 22.0 25.9 22.2 25.7

Source:

Note:

South Africa 1984t Official ~ of the Republic of South Africa. (Johannesburg: Chris Van Rensburg Publications, 1984).

These data are based on a five percent sample from the 1980 Census of Population, excluding the informal sector, the unemployed and the homelands.

However, many blacks voluntarily left this sector to earn higher wages in the burgeoning manufacturing and commercial components of the modern sector, which demanded greater quantities of cheap black labor to foster and accelerate economic growth. Some blacks who were unable to secure employment in the manufacturing and commercial components found jobs as domestic workers.

Table 8 indicates the growth of the black and white workforces in each sector over the 1970-80 period, with the exception of the informal sector.

Daniels 75

The services, particularly domestic services, manufacturing, mining and quarrying, and trade and accommodation (commerce) components, led the way in the relative growth in employment of the black workforce. There are three notable features in the data in Table 8. First, services absorbed the greater percentage of employed blacks who left the agriculture, forestry, and fishing sector. Second, the shift of blacks out of agriculture, forestry, and fishing reduced that sector to the position of second largest employer of blacks in 1980, led only by the services component. Third, the employment distribution for whites changed modestly over the 1970-80 period. In 1980, whites remained heavily concentrated in high productivity components of the modern sector (manufacturing, commerce, finance and professional services) where, like elsewhere in the economy, they are assured employment in the higher level positions in the various occupational categories. In manufacturing alone, the most pro- ductive industrial component in the economy, the representation of whites in 1980 exceeded the percentage of those whites employed in the low productivity sector of agriculture, forestry, and fishing by 13.9 percentage points (an increase of 1.2 percentage points over 1970). In contrast, the percentage of blacks employed in 1980 in the agriculture, forestry, and fishing sector industrial segments was 5.5 percentage points higher than those in manufacturing. But, this is a considerable improvement over 1970 when those blacks employed in the agriculture, forestry, and fishing sector were 27.0 percentage points higher than the percentage employed in manufacturing.

The distribution of the black and white workforces among the various sectors and sectoral components has had a significant influence on the earnings accruing to the two racial groups. In 1981, for instance, some of the 1.2 million blacks employed in agriculture, where blacks remained most heavily concentrated, earned no cash wage while others had max- imum earnings of about R952, roughly two-thirds in fringe benefits. 14 The lowest average earnings in the modern sector in 1981 were R2,124 in commerce (trade and accommodation services), 123% higher than agriculture.

Several factors account for the relatively lower earnings in agriculture including an abundant supply of black labor relative to the demand, attributable to the inability of blacks to secure a permit to work in an urban area or to the return of unemployed blacks to rural white areas in search of jobs. Moreover, monopsony power on the part of white farmers, South Africa's wealthiest occupational group, who are at liberty to pay virtually what they choose for black labor, keep the earnings accruing to


black agriculture workers substantially lower than those that can be fetched in the modern sector. It is worth noting that, although the Wage Act (1957) permits the government to determine minimum wages in industries where employers and employees are unorganized, the act does not apply to workers employed in agriculture, private households, and public service.~5

Apartheid education and discriminatory legislation since 1970, as before this time, have ensured that whites would occupy the majority of jobs requiring a high level of formal education. Consequently, the high productivity sectors of the South African economy comprised in 1980 the largest representation of whites. Table 8 indicates that the percentage distribution of whites in these modern sector components changed only modestly over the 1970-80 period. This is not particularly surprising since the South Africa government and South African industry are resolute in their efforts to preserve the supremacy of the white labor supply. The most noticeable changes in the allocation of employment in the most produc- tive components of the economy (manufacturing, commerce, finance and professional services, respectively) favor blacks who marginally improved their representation in each category. However, those blacks who found jobs in these components were concentrated in lower level positions within each of these categories. 16

While the occupational and employment distributions analyzed in the preceding discussion do not favor blacks, the demographics of South Africa are such that even in the absence of major political upheaval, blacks may markedly improve their occupational and employment status in the next decade or so. In part, this is because the immigration of highly educated, highly skilled whites, upon whom the South African economy has been able to rely heavily for fostering economic growth and interna- tional competitiveness, is diminishing. For example, over the 1970-84 period, the net gain in immigration was 333,454--an average of 23,818 individuals per year. However, the most recent data covering three quar- ters of 1985 indicate that the net increase in immigration was only 5,860 contrasted with 20,243 in 1984, a decline of 71.1%. t7 In addition to this inauspicious trend, the white birth rate is declining and is expected to continue declining in the decades to come. Presently, the rate of natural increase in the white population is less than 1.0% per year compared to 3.2% for blacks, who have the highest increase of all racial groups. 18

One of the most important consequences of these population trends is white labor shortage in positions whites have traditionally filled, particularly technical and managerial positions. Thus, given the prevailing

Daniels 77

trends in white populat ion and the fact that Indians and Coloreds con-

stitute only a t iny fraction of South Africa's populat ion and workforce, labor shortages may require white employers to meet their labor needs mainly by drawing upon the black labor pool.

It seems reasonable to conclude that the labor market structures that current ly exist in South Africa had their roots in landmark events and legislative measures that sought to implement a single native policy and foster white monopol iza t ion of South Africa's natural resources, labor skills, and higher level occupations. Such monopol iza t ion would en-

gender a lopsided income distribution favoring whites, enabling them to cont inue their economic dominat ion of the Republic.

Earlier it was pointed out that in the decades to come, blacks may markedly replace whites in functions blacks have rarely performed. If such dramatic changes in the employment and occupational structures are to occur while the count ry realizes economic growth and a higher standard of living for all races, South Africa may be required to relax its racial policies and embark on an ambit ious course of providing for educa- t ion of roughly equal quant i ty and quality for blacks as well as its other races.

NOTES

1. The author acknowledges his indebtedness to Mr. Ralph Turner, formerly of the School of Journalism at The Florida A&M University, and to Drs. James Cobbe and James H. Gwartney of the Department of Economics at Florida State University for criticisms of previous drafts. He also is grateful to an anonymous referee for numerous constructive comments on a previous draft and to Mr. Johnny Jones for statistical assistance.

2. J.H. Nattrass, The South African Economy: Its Growth and Change, (Cape Town: Oxford University Press, 1981).

3. P.N. Pillay, "The Development and Underdevelopment of Education in South Africa," paper presented at the Second Carnegie Inquiry into Poverty and Develop- ment in Southern Africa, Carnegie Conference Paper No. 95 (Cape Town, 13-19 April 1984), p. 3.

4. Pillay, p. 26. 5. See Pillay, p. 26. 6. South Africa 1984: Official Yearbook of the Republic of South Africa, (Johan-

nesburg: Chris Van Rensburg Publication, 1984), p. 930. 7. M.A.S. Corke, "Business, Poverty and Education," paper presented at the Second

Carnegie Inquiry into Poverty and Development in Southern Africa, Carnegie Con- ference Paper No. 106 (Cape Town, 13-19 April 1984), pp. 1-2.

8. See Nattrass, pp. 50-51. 9. See Corke, p. 1. 10. See Nattrass, pp. 51-52.


11. A. Spandau, "A Note on Black Employment in South African Mines," The South African Journal of Economics, 48 (February 1980): pp. 214-217.

12. South Africa 1984, p. 485. 13. See Nattrass, p. 54. 14. "Farm Labor," Financial Mail, 17 September 1982. 15. See South Africa 1984: Official Yearbook of the Republic of South Africa, p. 500. 16. See Nattrass, p. 50. 17. South African Labor Statistics, 1986, Vol. 1, Central Statistical Services, Pre-

toria, p. 267. 18. "The Size of the Problem: A Crippling Shortage of Skills," Manpower Survey,

Financial Mail, 27 August 1982, p. 5; See South Africa 1984, p. 29.

Documents

The structure of the South African labor market, 1970–83