Social Protection and Labor Market Outcomes of Youth in South Africa

Abstract

An Apartheid-driven spatial mismatch between workers and jobs leads to high job search costs for people living in rural areas of South Africa—costs that many young people cannot pay. In this article, the authors examine whether the arrival of a social grant—specifically a generous state-funded old-age pension given to men and women above prime age—enhances the ability of young men in rural areas to seek better work opportunities elsewhere. Based on eight waves of socioeconomic data on household living arrangements and household members’ characteristics and employment status, collected between 2001 and 2011 at a demographic surveillance site in KwaZulu-Natal, the authors find that young men are significantly more likely to become labor migrants when someone in their household becomes age-eligible for the old-age pension. But this effect applies only to those who have completed high school (matric), who are on average 8 percentage points more likely to migrate for work when their households become pension eligible, compared with other potential labor migrants. The authors also find that, upon pension loss, it is the youngest migrants who are the most likely to return to their sending households, perhaps because they are the least likely to be self-sufficient at the time the pension is lost. The evidence is consistent with binding credit constraints limiting young men from poorer households from seeking more lucrative work elsewhere.