Reads Each year South Africa commemorates Human Rights Day, marking the 1960 Sharpeville massacre, when police opened fire on people protesting against the pass laws. The day invites reflection on the many ways apartheid denied millions of South Africans their rights and opportunities. The passbooks are gone. Job reservation laws are gone. The racially tiered wage schedules are gone. But tax records and payroll data filed as recently as 2018 tell a more unsettling story: the labour market distortions that apartheid’s economic laws had created are still measurably present today, in the very sectors and regions where those laws were enforced.
For decades, these laws determined who could apply for skilled jobs, who could join a trade union, and how wages were set across industries. The system was granular, deliberate, and enforced at the level of individual sectors and specific geographic districts through ministerial decrees published in official government gazettes. What research shows is that those decrees left an economic imprint that neither the end of apartheid nor 30 years of subsequent reform has fully erased.
To understand why, it helps to look at how the system actually operated. Under the 1956 Industrial Conciliation Act, white trade unions bargained for minimum wages set deliberately high to price black workers out of competition. Some job categories were legally reserved for white workers through ministerial decree. Black workers who wanted to change employers needed approval from a government bureau; those who moved to a city without permission could be convicted of a criminal offence. By 1967, nearly 700,000 people a year were being prosecuted under these mobility laws.
That system left a paper trail. For 40 years, every decree, every wage determination, every job reservation was published in official government gazettes, the formal, legally binding record of who could work where, and who could not. Cross-referenced with modern payroll and tax data from the National Treasury and the South African Revenue Service, covering the period 2012 to 2018, those gazettes make it possible to draw a direct line between a job reservation order issued in the 1960s and the labour market in that same area today.
What that paper trail reveals, when mapped on contemporary economic data, is a labour market that has never fully corrected itself.
That is precisely what emerges when those historical decrees are mapped against contemporary payroll and tax records. In the sectors and regions where those decrees were most heavily enforced — covering sectors from furniture manufacturing to textiles to metal foundries, and 278 of South Africa's 369 magisterial districts at the height of their enforcement — labour misallocation today is 4% to 14% higher than in comparable areas less exposed to those restrictions.
Some workers remain employed in lower-productivity firms, while more productive firms struggle to hire the workers they need.
That gap has survived 30 years of post-apartheid reform. In sectors where the labour minister issued explicit job reservation decrees, the most targeted and deliberate exclusions, misallocation ran 8% higher than in unaffected areas. Within the broader picture, the minimum wage system emerges as the most pervasive channel, its distortions stretching across more sectors and regions than any other restriction.
Yet one of the most striking findings cuts across all of these differences. Firms in historically affected sectors and districts are not, on average, systematically less productive. This suggests that the legacy of apartheid persists in a specific way: workers are not optimally distributed across these firms.
Some workers remain employed in lower-productivity firms, while more productive firms struggle to hire the workers they need. Even after formal restrictions were removed and firms had adapted, workers may still face barriers that prevent them from moving to where they would be most productive.
The departure of skilled white workers after 1994 might seem a plausible explanation, but the data rules it out as the driver here. Firms appear to have adjusted to that shift. The problem is not with firms; it is that workers cannot reach the most productive ones. The result is an economy that operates below its potential, not because firms are inefficient, but because labour cannot flow to its most productive uses.
South Africa continues to face labour market challenges, including high unemployment and uneven regional development. While many factors contribute to these outcomes, the evidence shows that historical labour market institutions may still shape how labour markets function today.
Human Rights Day is not only a moment of remembrance. It is an invitation to look honestly at what those rights violations actually did, not only to individuals, but to the economic structures they were embedded in. The government gazettes that encoded apartheid’s labour rules were formally closed in 1994, though some, like the pass laws, had already been made unworkable by popular resistance years before.
The distortions they created were not. Dealing with them is not an act of historical sentiment. It means reviewing collective bargaining frameworks that perpetuate historical wage compression, investing in transport and housing infrastructure that still limits workers’ access to economic opportunities, and targeting skills programmes at the sectors and districts the research identifies as most distorted. It is one of the more concrete steps available to raise South Africa’s economic potential. The distortion is measurable. That means, in principle, it can be corrected.
This article is based on a Southern Africa – Towards Inclusive Economic Development (SA-TIED) working paper: "Legacy of Apartheid: Misallocation of Labour and Firm Productivity." It was first published in the Sunday Times.
Image details: Protest against illegal and unfair trade practices by various unions on Day 1 of Proudly SA Local Summit and Expo at Sandton Convention Centre. Picture: Veli Nhlapo (Veli Nhlapo)
