Occupational shifts and shortages: skills challenges facing the South African economy

This report extends the analysis of labour demand trends to the 2001-2012 period. It consists of a descriptive analysis of skill-biased labour demand changes, through an examination of sectoral and occupational employment growth trends. We also consider, through the use of the Katz and Murphy (1992) decomposition technique, whether between or within-sector forces play a greater role in the labour demand for workers in different occupations. Within-sector employment shifts are those changes in labour allocation that come from within the industry itself. Sources include technological change in a sector that may create the need for a certain skill-type over another or a change in the price of a non-labour factor that results in an altered preference for certain labour types. Between-sector changes are relative employment shifts occurring between sectors in the economy as a result of changing shares in relative output of different sectors. As sectors typically have differing patterns of skill demands, a growing or declining share in production of a sector may alter labour demand at different skill levels. The share of domestic output due to trade flows can similarly affect labour demand between sectors.