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The influence of social transfers on labour supply: A South African and international review

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  • Leibbrandt, Murray

    (SALDRU, School of Economics, University of Cape Town)

  • Lilenstein, Kezia

    (SALDRU, School of Economics, University of Cape Town)

  • Shenker, Callie

    (SALDRU, School of Economics, University of Cape Town)

  • Woolard, Ingrid

    (SALDRU, School of Economics, University of Cape Town)

Abstract

This paper surveys the South African and international literature surrounding the impact of cash transfers on labour supply. We find that although social transfers are condemned for creating state-dependency, the reality is that their effect on labour force participation is both ambiguous and dependent on a number of factors. At the most basic level, transfers either decrease participation by transferring time from work towards leisure activities, or increase participation by covering the fixed costs and credit constraints associated with working, particularly for women, those with low levels of education and other vulnerable groups. Child-support grants may cover childcare or education costs, thus allowing mother's to enter the labour force. Grants can also have an effect on the labour supply of non-recipient household members, particularly when the recipient is a female, as women tend to allocate funds more freely throughout the household. The State Old Age Pension has been seen to induce both in and out-migration of household members. Programme design may also play a role, as means-testing can induce potential beneficiaries to reduce labour participation in order to become eligible for benefits. The education and health-care conditions attached to many transfers can also increase human capital formation and therefore create a long-term positive impact on labour market participation.

Suggested Citation

  • Leibbrandt, Murray & Lilenstein, Kezia & Shenker, Callie & Woolard, Ingrid, 2013. "The influence of social transfers on labour supply: A South African and international review," SALDRU Working Papers 112, Southern Africa Labour and Development Research Unit, University of Cape Town.
  • Handle: RePEc:ldr:wpaper:112
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    6. d'Agostino, Giorgio & Scarlato, Margherita, 2016. "Gender Inequality in the South African Labour Market: the Impact of the Child Support Grant," MPRA Paper 72523, University Library of Munich, Germany.
    7. Roosa Lambin & Milla Nyyssölä & Alexis Bernigaud, 2022. "Social protection for working-age women in Tanzania: Exploring past policy trajectories and simulating future paths," WIDER Working Paper Series wp-2022-82, World Institute for Development Economic Research (UNU-WIDER).

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