Social protection and labor market outcomes in South Africa: Employment and Youth Transitions to the Marketplace

South Africa has put in place an extensive system of social grants over the post-apartheid years. It is well known that these grants have important direct impacts on poverty alleviation. However, not much is known about the interactions between these social grants and successful integration of individuals into the labor market. On the basis of little evidence, there is loud speculation in policy circles about South Africa’s culture of dependency and the effects of social grants on incentives to work as it was once the case with social welfare transfers in the USA. However, it is also possible that social grants facilitate job search by financing costly search activities. Both, positive and negative labor supply effects are possible and it is crucial that this debate is informed by careful analysis of the evidence. In this paper we use longitudinal data to assess the impact of social grants on the labor market behavior of youth.