Macro-fiscal analysis

Presentation: Labour Market Effects of South Africa's Electricity Crisis at GTAC Webinar Series

MAY 2024

The SA-TIED Working Paper "Watts happening to work? The labour market effects of South Africa's electricity crisis" was presented by Tim Köhler at the Government Technical Advisory Centre (GTAC) webinar series on 31 May 2024.

The presentation focused on the findings which demonstrate that frequent electricity outages threaten to impede the benefits of expanded access achieved by many developing countries in recent decades. A large body of literature documents these negative effects; however, almost none consider labour market effects. These are of particular interest given the labour market’s central role in determining socio-economic wellbeing, especially in high-unemployment contexts like South Africa where decent job creation is key to achieving meaningful poverty alleviation.The research merges labour force survey microdata with high-frequency electricity supply and demand data to provide the first estimates of the relationships between scheduled electricity outages (load shedding) and labour market outcomes in South Africa. 

Exploiting temporal variation in load shedding incidence and intensity, the study finds that load shedding is associated with significantly lower employment rates, working hours, and monthly earnings on average. Employment appears more sensitive relative to intensive margin outcomes, threatening job creation and preservation efforts. The monthly earnings reductions appear to be explained by reductions in working hours as opposed to hourly wages. These negative relationships, however, are not evident for low levels of load shedding, but their strength markedly increases with load shedding intensity. The research documents further effect heterogeneity, highlighting the vulnerability of jobs in manufacturing and the varied responses of small and large firms.

The aim of the GTAC weekly webinar series is to share knowledge and engage in discussions on a number of broad themes such as strategic projects and initiatives by GTAC, strategic outcomes of government, public sector administration and policy analysis, global events, major social issues, and more.