Would More Skills Raise Demand for Those Who Do Not Get Them?: Evidence from South African Manufacturing

Policy-makers claim that a shortage of skills is constraining output and that a rise in skill supply would benefit less skilled occupations in South Africa. This assumes/implies that skilled and unskilled labour are complements. To test the claim, this paper estimates Hicks elasticities of complementarity and elasticities of factor price with manufacturing data. Aggregate estimates suggest that white-collar labour complements blue-collar labour, so a rise in skill supply would lead to a rise in demand for less skilled labour. Disaggregated results show skilled/artisanal and unskilled labour are complements, while semi-skilled and unskilled labour are substitutes.