Have you ever wondered how it happens that some employers or a geographic cluster of industries become enclaves of people who come from the same area or share some other connection, including familial?
I grew up on anecdotes about workers finding job openings where they work, or nearby, for their relatives or homeboys. And some of my major career breaks came about through referrals by someone who knew me and my potential employer — the network effect.
I recently found research by two US economists that talks to this phenomenon and, most importantly, explains one of its drivers, especially among blue-collar workers. The answer lies in what economists refer to as complementarities in labour supply, which can have huge implications for labour market outcomes.
Their findings might shed light on the choices blue-collar workers make about which job opportunities they take up, and in which firms or industries. The findings potentially have implications for programmes that match unemployed workers with jobs — labour activation.
It turns out that three factors — commuting time and the quality and safety of public transport — are key. In countries where travel times to and from work are long and unsafe, blue-collar workers prefer to have familiar faces to travel with.
There’s lots of economic literature showing that employers globally often hire by asking existing employees for referrals, which explains “homophily in worker type within firms”. Some of this literature emphasises the sharing of information of potential jobs between workers — the network effect.
Long travel times
But a study by Aletheia Donald of the World Bank and Florian Grosset of Columbia University examined the issue from a different angle: the effect of long travel times to and from work on worker behaviour in Abidjan. The labour market in Ivory Coast’s capital is dense and characterised by long commutes, which are unsafe because of a combination of poor urban planning, congestion and a lack of adequate transport infrastructure.
“Most opportunities for formal blue-collar jobs are concentrated in industrial areas located close to the commercial harbour and areas with high housing prices, but far away from the denser and poorer residential areas where most potential blue-collar workers live.”
Workers commute by walking and public transport — the latter mostly informal minibuses, which come with risks of both harassment and accidents. These characteristics — long commutes and use of informal minibus transport — are found in most developing countries, including SA.
Citing research from developing and developed countries, the two economists say commuting is “one of the most important nonwage job amenities” that influence worker decisions.
“Travelling from home to work is long and often unsafe, entailing walking and (mostly informal) public transportation. Given this, the ability to commute with friends and neighbours could serve as an important amenity that offsets disutility from commuting.”
In a guest blog for the World Bank, Grosset explained that the research findings “indicate that making commuting shorter, more pleasant and/or safer (in particular for women job seekers, who reported safety as a key benefit of co-commuting)” offered promise for policymakers’ search for ways of increasing employment in lower-income countries.
SA has the same features. Most blue-collar workers live far from potential employment — the long shadow of colonial and apartheid economic development. Public transport remains poor and unsafe too, in terms of accidents and other risks. The commute for most blue-collar workers involves a combination of public transport and walking, either from home to the nearest transport point, or from where public transport drops people off to the place of employment.
Commute times are long in SA, with train users travelling 107 minutes on average, according to Stats SA’s 2020 National Household Travel Survey. Bus travellers took 84 minutes and minibus taxi passengers 63 minutes. Those who drove took 44 minutes.
Late ANC activist Shadrack Maphumulo wrote in his unpublished biography about how his father arranged for him to take over his post when the older man retired from a Standard Bank branch in Durban in 1958. An outlet of a major grocery retail chain in Norwood, Johannesburg, had the same practice in recent decades, asking an employee going on retirement to bring in his son or daughter as a replacement.
Such practices have benefits for employers too. The literature shows that by using referrals from existing employees they can reduce search, screening and monitoring costs. Given that hiring is all too often a hit and miss affair, these costs can be substantial.
• Sikhakhane, a former spokesperson for the finance minister, National Treasury and SA Reserve Bank, is editor of The Conversation Africa. He writes in his personal capacity.
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