Ex-ante evaluation of a targeted job program: Hypothetical integration in a social accounting matrix of South Africa

To analyze policy impacts of a targeted employment program calls for a new approach of estimation. This study proposes a simple modification to a Social Accounting Matrix (SAM) in order to analyze the multiplier effects of a new sector. A different input composition, or technology, of the sector with targeted job provision makes a conventional analysis of final-demand injections on existing sectors invalid. Instead of a costly full-scale rebalancing, we apply the modification—so-called hypothetical integration—into a SAM to assess a proposed expansion of social care sector within the Expanded Public Works Program in South Africa. Input–output multiplier analysis has been one of the workhorses for ex-ante employment impact assessment. Its comprehensive description of an economic structure enables one to map out industry-level employment generation due to an external shock, such as government fiscal expansion. Social accounting matrix (SAM) as an extension of the input–output approach adds socioeconomic aspects, i.e. workers and their household characteristics, coherently into the framework. Multiplier analysis based on SAM thus provides an adequate simulation platform to analyze policy impacts on disaggregated subgroups of households as well as industries. The method however rests on the supposition that the technical coefficients of production remain constant. Hence, modification of the SAM is necessary if an intended simulation exercise entails, in one form or another, a new technology requirement. A government fiscal expansion, intended to provide jobs to a specific subpopulation group who are otherwise marginalized in the labor market, may require contractors to use a more labor-intensive production technology than a conventional one would demand. This type of intervention, in effect, changes the technology coefficients of the recipient industry, and it should appear as a new industry in the SAM for more accurate estimation. However, rebalancing the SAM can be costly and sometimes does not augment any economic meanings. This paper proposes a simple method to overcome the limitation in context of a policy simulation for South Africa. As is well known, South Africa is experiencing one of the highest rates of unemployment among middle-income countries, reaching 25 to 30% over the last decade. To ameliorate the associated socioeconomic pressures, in 2004 the government introduced a direct job creation initiative, the Expanded Public Works Program (EPWP), which has yielded some positive outcomes, but has been incommen-surably small to the scale of needed intervention. Currently the scaling-up of the EPWP is under discussion and much research is under way. It …