The effects of climate change on South African labour markets: implications for fiscal and monetary policy planning (WP/26/08)

The effects of climate change on South African labour markets Using the University of Pretoria General Equilibrium Model, we model three climate risk scenarios – declining agricultural productivity, increasing water scarcity and climate-induced labour migration – to assess their macroeconomic and employment effects. The results indicate that reduced agricultural productivity and climate-induced migration have the most significant negative impacts on employment, while the effects of water scarcity are comparatively muted. Across all scenarios, low-skilled workers are disproportionately affected, with climate-induced migration intensifying insider-outsider dynamics and depressing wages for the most vulnerable segments of the workforce. We argue that addressing these disruptions requires coordinated fiscal interventions – including active labour market policies and investment in climate-resilient infrastructure – alongside further research on the effect of climate change on employment and inflation dynamics in order to future-proof the South African Reserve Bank’s monetary policy and forecasting frameworks.