Skills-related underemployment amongst South Africa’s informally employed and self-employed: A case study of Potchefstroom

Abstract

Orientation: Mainstream development theory views the informal sector as a shock absorber in an economic crisis. South Africa’s informal sector is smaller than that of many developing countries and very little research has investigated underemployment in marginal informal economic activities.Purpose: This study investigated the prevalence of skills-related underemployment as well as the possible determinants and impact thereof on the income and poverty of car guards, day labourers and waste pickers in Potchefstroom.Motivation: There is a need to expand the debate on skills-related underemployment to the informal sector in order to improve our understanding of the shock absorber role of the informal sector and the implications of underemployment for the labour market.Research design and method: A cross-sectional survey design yielded the data for the analysis. Ordinary least square and probit analysis were used as the statistical methods of analyses to answer the three research questions.Main findings: Almost half (48%) of all the respondents experience skills-related underemployment (vocational over-skilling). Age and gender (for car guards), previous formal employment and day labour experience (day labourers) increase the likelihood of skills-related unemployment.Practical implications: The findings question the shock absorber role of informal employment and self-employment in South Africa in times of economic crisis. Alternative theoretical approaches deserve consideration.Contribution/value added: The prevalence of skills-related underemployment in the informal sector points towards the inefficient allocation of labour resources in South Africa. The study paves the way for studies with a broader geographical scope and qualitative focus.