Econometric Analysis of Labour Demand in Textiles, Clothing and Footwear Manufacturing Sector in South Africa: 1990 – 2011

Abstract

South Africa in its quest for socio-economic improvement still faces the problem of persistent high rate of unemployment. Unemployment in South Africa is very intricate and therefore makes it a complex challenge to tackle for policy makers. Differing rates of unemployment do exist in different sectors of the economy. Some sectors are facing employment growth while others are declining. This study examines the possible major determinants of labour demand (employment) in the Textiles, clothing and footwear manufacturing sector in South Africa. The study is based on quarterly time series data from 1990 to 2011. The Johansen (1991) model is used to examine these trends. The model is an error correction model imposed upon a vector autoregressive model. The results obtained showed that wages and imports both have negative relationships with the demand for workers. Based on these two important results, the study recommended the introduction of a sector-based wage subsidy. The wage structure in South Africa is a perpetually problematic factor of the labour market and therefore is also a significant determinant in the viability of business and investment. Secondly, the import structure on textiles, clothing and footwear is not clearly and thoroughly defined. A complete restructuring of import tariffs on the entire sector is also herein suggested.

DOI: 10.5901/mjss.2013.v4n14p227