Labour market segmentation in South Africa

Abstract

This paper questions the applicability of neoclassical theory to the South African labour market and it adopts an alternative approach, namely, segmented labour market theory. Segmented labour market (SLM) theory has emerged only recently as an alternative to neoclassical analysis of wage determination. Drawing on this approach it will be shown that a model of racial dualism provides a better explanatory framework and generates greater insight into the issues of poverty and discrimination confronting the South African labour market. Moreover, viewing the labour market within this analytical perspective sheds some light on the inadequacies and failure of recent state policy. The paper begins with an analysis of the structure of labour markets in particular, and the concepts of the internal labour market (ILM), the dual labour market (DLM), and labour market segmentation in general. This is followed by an analysis of labour markets in South Africa. Though lack of adequate data poses a problem in so far as testing of the theory is concerned, the broad tendencies within the South African labour market indicate that the DLM approach can provide a useful basis to analyse the problems of low pay and income distribution. Finally, useful policy implications flow from this analysis.