How does Globalisation Affect Income Distribution in South Africa

This paper evaluates the impact of globalisation on income distribution in South Africa. There are broadly two ways in which it can affect income distribution and help to address poverty. On a macro level it can stimulate economic growth, create jobs and provide salary income to people previously not employed. In a more direct way it can impact on wages. If unskilled wages increase relative to skilled wages, it should lead to a more equal distribution. Evidence for the period 1993 - 2001 indicates that South Africa experienced highly volatile capital flows, in the form of portfolio flows, with disruptive effects on the exchange rate and interest rates. On a micro level, the opening up of trade led to considerable job losses, especially semi- and unskilled workers. These were brought about mainly by the increasing importance of technology. Job losses because of import penetration were not as significant as could have been expected. On the other hand, exports did help to create jobs, but not enough to offset the negative impact of the previous-mentioned two factors. No evidence could be found that salaries of unskilled workers increased relative to highly skilled workers. Globalisation can only lead to a more equal distribution of income in South Africa if it succeeds in creating jobs and this can only happen if the skills level of our workforce meets the conditions of the market.