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Impact of Cash Grants among South African Youth

a PSC Small Fund Research Project

Investigator:   Rebecca L. Thornton

South Africa is characterized with severely high rates of unemployment, ranging from 29% to 41%, despite evidence that both public and private job vacancies exist. Job search methods in South Africa tend to be passive – that is, individuals tend to wait for friends or relatives to secure a position for them. One reason for this may be the high costs of job searching for many job seekers. Historically, the Land Act Laws of Apartheid created significant spatial segregation between neighborhoods where job seekers reside and the hiring labor markets. This makes looking for work costly both in terms of time (indirect costs to individual and household) and direct costs such as transportation, internet access, telephone use, new clothes, or child care. Data from the Special Retrospective Survey of Employment and Unemployment indicate that approximately 18% of individuals cite cost as the primary reason for not actively searching for a job (StatsSA 1998).

This project proposes to introduce a one-shot large cash grant that could cover any of the needed costs related to search. Within this setting in South Africa is a system of social cash grants, most commonly given to the elderly or those who have children. There are a number of important questions to be addressed that are related to the relationship between these cash grants and employment. Will grants help to alleviate the costs of job search and increase employment? Or will they have a disincentive effect and reduce job search? Additionally, could youth who are given grants participate in entrepreneurship activities that may help them, and the South African economy, in the long run?

Funding Period: 03/01/2012 to 06/30/2013

Country of Focus: South Africa

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