August 2012

IZA DP No. 6811: Coping with Intra-Household Job Separation in South Africa's Labor Market

In the context of South Africa's pervasive poverty and mass unemployment, households provide an important private safety net for the unemployed. Using new South African Labour Force Survey panel data, I investigate how households cope with job separations and the resulting loss of earned income. Unsurprisingly, I find no evidence of an added worker effect among either men or women. Neither increases in employment or labor market attachment in the year following a household job separation. Instead, households rely on remittances and, to a lesser extent, savings in the wake of a job separation. I find some evidence that households are worse off after a job separation: households reduce expenditures (even in the absence of household composition changes), hold fewer financial assets and are more likely to report frequent food insecurity. Households have viable income replacement strategies to cope with the loss of earned income in the short run, but over the long run job separations are likely to strain these strategies. Addressing structural factors in the labor market that constrain an individual's response to a household shock will enable households to respond more quickly to adverse employment events and limit the long term negative repercussions.