The Impact of Health on Labour Force Participation in South Africa

• Published date: 01 December 2017
• Author: Chijioke O. Nwosu,Ingrid Woolard
• DOI: http://doi.org/10.1111/saje.12163
• Date: 01 December 2017

THE IMPACT OF HEALTH ON LABOUR FORCE

PARTICIPATION IN SOUTH AFRICA

CHIJIOKE O.NWOSU*

,†

AND INGRID WOOLARD

†

Abstract

This paper estimates the effect of self-assessed health (SAH) on labour force participation (LFP)

in South Africa. This is motivated by a high disease burden and declining LFP in South Africa

during the study period. Data is sourced from the four waves of the National Income Dynamics

Study. The results indicate a positive and significant effect of self-reporting excellent, very good

or good health on LFP (relative to fair or poor health). The effect is more pronounced for men

relative to women. The result indicates that health policy can be a tool for significantly improv-

ing LFP in South Africa.

JEL Classification: I1, J01

Keywords: Labour force participation, health, fixed effects, pooled ordinary least squares

1. INTRODUCTION

The labour market is an important institution which mediates the relationship between

health and the economy; healthy people are more likely to be financially better off than the

sick due to a greater capacity to work harder, longer and more consistently (Jack and Lewis,

2009). Poor health therefore generally affects productivity and output adversely, thereby dis-

couraging the sick from participating in productive activities due to decreased opportunity

cost of leisure. Moreover, ill health may increase the utility derived from time spent away

from market-related activities given that seeking health care is time-consuming. Conversely,

low earnings due to poor health may induce an income effect. This results in increased

labour supply (an effect reinforced by the often high cost implications of ill health), thus

suggesting a negative relationship between better health and labour market participation

(Cai and Kalb, 2006). It is therefore important to quantify the impact of health on labour

market participation especially in developing countries where physical fitness is a very

important attribute given the mainly manual nature of many jobs.

Moreover, unobserved factors which vary across individuals, such as preferences, may

independently affect labour supply (Cai, 2010). Perhaps equally important in labour sup-

ply determination are personality traits like persistence and motivation (see e.g.Heckman

et al., 2006). For instance, it is expected that individuals with stronger labour market

* Corresponding author: Research Specialist Economic Performance and Development Unit,

Human Sciences Research Council, 116–118 Buitengracht Street, Cape Town 8000, South Africa.

E-mail: nwosuchijioke@gmail.com

†

School of Economics, University of Cape Town, Rondebosch, South Africa.

Author Contributions: C.O.N. conceived of the paper. Both authors participated in refining

the research questions. Both authors participated in the analysis, wrote the final draft, read

and approved the final manuscript.

Conflict of Interest: The authors declare no conflict of interest.

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C2017 Economic Society of South Africa. doi: 10.1111/saje.12163

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South African Journal of Economics Vol. 85:4 December 2017

South African Journal

of Economics