15. Can an Unexpected Loosening in the Labour Market Reforms Reduce the Growth of Income Inequality in South Africa?

Evidence indicates that an unexpected loosening in the labour market reforms reduces income inequality growth when complemented by increased government consumption expenditure, income tax cuts, low economic policy uncertainty and inflation below 6 % and not by a weak exchange rate regime. A weak exchange rate mitigates the reduction in the income inequality growth induced by an unexpected loosening in the labour market reforms. In addition, evidence suggests that the declining consumer price inflation and the improvement in economic growth, the increased employment growth, and the declining unemployment rate, following an unexpected loosening in labour market reforms, amplifies the decline in income inequality growth to an unexpected loosening in labour market reforms.