across all sectors of the economy. The second is a diagonal matrix with elements equal to the compensation of employees’ shares of the sector’s total output. Using these two intermediate matrixes as multipliers of a diagonal matrix with elements equal to either the sector’s domestic production or exports, one can obtain the compensation of employees’ shares of final outputs or exports. Appendix 1 provides more details and formalizes these calculations.

Using the same method, we can isolate the jobs content of exports by replacing the underlying labor value added share in production with the number of jobs contained in production, which can be derived from ILO employment data or country-specific data sources. ILO employment statistics contain data for a number of countries, including South Africa, for 11 macro sectors. In order to get a more refined sectoral disaggregation, we also match the GTAP data with employment statistics from South Africa’s labor force surveys. This allows the examination of a different type of disaggregation across 16 sectors.

With this methodology, we can split the _total_ contribution of labor (either the labor value added or the number of jobs) to final output and exports into its _direct_ and _indirect_ components based on the linkages with the rest of the economy. The direct component measures the wages paid or number of jobs a sector uses to produce its own output or exports directly. The indirect component measures the wages paid or number of jobs a sector contributes to other sectors’ output or exports—if measured by forward linkages— or the wages paid or number of jobs a sector uses from other sectors to produce its output or exports—if measured by backward linkages. _Forward linkages_ are the indirect contribution of a sector when considering the contribution of that particular sector as an input to other sectors’ domestic production or exports. This treats the particular sector as an upstream activity, and measures how much labor a particular sector is used by all other sectors. _Backward linkages_ are the indirect contribution of a sector when considering the contribution of all other sectors to that particular sector’s value added. This treats the particular sectors as a downstream activity, and measures how much labor a particular sector uses from all other sectors. These contributions can be further split between skilled and unskilled employees. As such, the paper can consider not only the wages paid and jobs employed directly within export sectors, but also the linkages with the rest of the economy that South Africa’s exports support. That is particularly important for a large middle-income economy like South Africa, where such indirect linkages are typically more important.

The labor value added of exports is measured as nominal values in US$ (denoted LVAX), and as a share of gross exports (LVAX share), which is a measure of the labor intensity of a country’s or sector’s exports. The jobs content of exports is measured as the number of jobs (denoted JobX), and relative to gross exports (JobX share), which is a measure of the job intensity of a country’s or sector’s exports. We also use measures of the labor value added and job content of domestic production (denoted LVAD and JobD) for comparisons.

# **3. Economy-wide Labor Content of Exports**

We begin our analysis of how exports support labor in South Africa by looking at aggregate trends in the total labor value added and jobs content. We measure across all sectors of the economy when looking at the country-wide labor and jobs content of exports, including services, industry and agriculture. We measure how the total labor value added and jobs content of South Africa’s exports has changed since 2001, in nominal values and relative to gross exports. Without yet taking a sectoral perspective, we uncover sources of these changes by decomposing them into direct versus indirect contributions, as well as capital 6