n South African Journal of Labour Relations - An evaluation of the role and potential of the informal economy for employment creation in South Africa

Volume 30, Issue 1
  • ISSN : 0379-8410
  • E-ISSN: 2520-3223



The South African labour market is strongly segmented into various components. In this article a distinction is made between the formal and informal labour segments. The aim of this article is to reflect the changes in the labour market by illustrating the production elasticity of employment and the increasing role played by the informal economy which acts as a safety net for the unemployed. Macroeconomic explanations are advanced for the increasing accommodation of workers in the informal economy. It is argued that the economic environment is showing the characteristics of capital deintensification, movement towards a knowledge economy and hence a growing appetite for highly educated and skilled labour. This structural movement supports the hypothesis that skills development provides the single best way to accommodate the demand for skilled labour in the formal economy while at the same time allowing for improved entrepreneurial activity in the informal economy.

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