Cash transfers, employment and informality in South Africa.

Summary This thesis examines the effects of cash transfers on employment in the South African labor market, which is highly segmented between the formal and informal sectors. The first and main chapter shows that an unconditional cash transfer program for mothers has had lasting positive effects on the quality of their jobs. In the long run, mothers receiving the transfer are more likely to be employed in the formal sector. This is a consequence of changes in the way treated mothers seek employment. By giving them the opportunity to remain unemployed for a longer period of time, the unconditional transfer program allows them to seek higher quality jobs. The second chapter examines the employment effects of a reform of South Africa's non-contributory, means-tested public pension system. This reform lowered the retirement age from 65 to 60 for men. It has led to a sharp decline in the participation rate of informal workers, who stop working when they reach 60 and become eligible for the non-contributory pension. On the contrary, workers in the formal sector do not quit their jobs and do not turn to the informal sector to qualify for the retirement pension. Finally, this thesis addresses the issue of the low number of self-employed in South Africa. The final chapter shows that South Africans are not becoming more self-employed in response to cash transfers. This indicates that liquidity constraints are not the main reason for the lack of self-employment in South Africa. This low level of self-employment probably has historical roots related to apartheid. This third chapter examines the potential implications of this explanation, as well as possible future research avenues for a more detailed understanding of this phenomenon.