Macro-fiscal analysis
Working paper

Polarization in the South African labour market: Economy-wide scenarios

Rob Davies and Dirk van Seventer
October 2020

Technical change impacts both the employment intensity of production and the composition of occupations and skills of employment. Artificial intelligence, automation, and robots are already leading to machines undertaking routinizable tasks previously carried out by workers. This can lead to labour market polarization, with jobs in the middle of the wage/occupation distribution being lost relative to those at the top and bottom ends. South Africa may be a latecomer to this process, but there is already evidence it is under way and may accelerate. We offer an economy-wide perspective on this process. A standard comparative static computable general equilibrium framework is employed to explore first- and second-order impacts of equipment substituting for routine labour in production. We find that second-order economywide effects may offset some but not all of the first-order losses in routine jobs.