The effects of structural changes on the demand of labour, with special reference to the South African textile and clothing industries

Abstract

The textile and clothing industry, one of the oldest industrial sectors in the world, has contributed in important ways to the development of economies and increased the living standards of inhabitants in regions around the globe. Since 1990, production in the South African textile and clothing industry has declined due to many factors like inadequate competitiveness. The dissertation’s main objective relates to the investigation of the factors that were responsible for the structural adjustment in the sector and how it had an impact on the sector, specifically the sector’s performance in production and employment. The research considers that any strategy or policy that would improve employment and output in the production will simultaneously have to be a strategy of international competitiveness for the South African textile and clothing industry. The most important results of the literature review is that evidence suggests a new role for the state in managing business in the current globalisation and liberalisation environment, with the sole purpose of increasing a nation’s welfare from international trade. This new role of the state is that of a strategic partner whose aim is to create an enabling environment for business in its country through selective and flexible intervention, some of which may involve the labour market, education and training, multi-and bilateral trade affairs, domestic structural adjustment, competitiveness and research and development issues. A detailed historic analysis of each of the sectors and sub-sectors in the clothing and textile industry for the period from 1996, at the time projected to the year 2001 and some of the more recent dynamics in the sector are discussed. Although the dissertation is mainly based on a literature survey, it was decided to investigate the factors that have an impact on the production of clothing and textile industry in South Africa further, using quantitative methods. Using co-integration techniques (Engle Granger approach) test the impact of some of the independent variables in the production function it was possible to show that these factors led to a decrease in production, which explains the decrease in the demand for labour in the sector.