CHAPTER 6

STUDY UNIT 4:
The South African Labour Market
LEARNING OUTCOMES: o Employment levels

 Labour market principles of o Income distribution

demand and supply
o Socio-economic welfare
 Unemployment and
underutilization  It brings together:

 Balancing demand and supply o Employers (demand for labour)

 The Government and Labour o Workers (supply of labour)

market

 Variable impacting on
Demand for Labour
employment levels
 Labour demand is derived demand
 Employment initiative post 2008
 Depends on:
 The reality on the ground
o Demand for goods and services
 Planning for the future
o Productivity of labour

o Cost of labour
Labour market principles of
 Relationship:
demand and supply
o Higher wages → lower demand

o Lower wages → higher demand

Supply of Labour

 Labour supply refers to:

o Number of people willing and able

to work

 Influenced by:

o Wage levels

o Population growth

o Education and skills

The Labour Market
o Migration
 The labour market is the primary
institution determining: o Working conditions
  Underutilisation:

o Labour not fully absorbed into

productive work

 Underemployment:

o Working fewer hours than desired

o Working below skill level

Unemployment and
underutilization

Definition of Unemployment

Unemployed persons are:

 Those without work

 Available for employment

 Actively seeking work

 Includes:

o Temporarily laid-off workers

o Long-term unemployed

Classification of Unemployment

 Frictional unemployment

o Short-term job searching

 Structural unemployment

o Skills mismatch

 Cyclical unemployment

o Economic downturns
Underutilisation and Underemployment
  Seasonal unemployment  Monopsonistic practices (single buyer of
labour)
o Certain industries only

 Technological unemployment
Wages and Employment Levels
o Automation and mechanisation
 High wages may:

o Reduce demand for labour

 Low wages may:

o Increase employment

o Increase poverty and inequality

The Government and Labour

market

Balancing demand and supply Government as Regulator

 Democratic government must:

Labour Market Perfection o Balance interests of labour and

capital
 Ideal labour market assumptions:
 Uses:
o Full employment
o Policy
o Perfect information
o Legislation
o No discrimination
o Economic intervention
o High mobility

 Rarely exists in reality

Government as Employer

 Government is:
Labour Market Imperfections
o One of the largest employers
Major causes of unemployment:
o Provider of essential services
 Capital mobility
 Influences:
 Wage rigidity
o Wage standards
 Productivity differences

 Demographic changes o Employment practices

Variable impacting on employment
levels

Employment levels are influenced by:

 Economic growth

 Education and skills

 Technological change

 Globalisation

 Labour legislation

 Union activity

 Investment levels

 Political stability

Employment initiative post 2008

Employment Initiatives (1994–2008)

Tripartite Alliance
  Alliance between: Human Resource Development Strategy
(HRDS)
o Government
Key priorities:
o Labour
 Eradicate adult illiteracy
o Business
 Retain youth in education until 18
 Aimed at cooperative socio-economic
development  Improve access to training

 Skills-focused immigration

 Promote equity in education

Reconstruction and Development

Programme (RDP)

Focused on:

 Redistribution

 Human development New Growth Path (NGP)

 Education and training Objectives:

 Affirmative action  Create 5 million jobs in 10 years

 Public works programmes  Promote green economy

 Reducing unemployment  Expand agriculture

 Reindustrialise manufacturing

Growth, Employment and Redistribution  Strengthen state capacity

(GEAR)
 Encourage social partnerships
 Market-oriented strategy

 Emphasis on:
National Development Plan (NDP)
o Economic growth
Aims to:
o Fiscal discipline
 Reduce poverty
 Criticised for:
 Reduce inequality
o Limited job creation
 Increase employment

 Increase investment
Employment Initiatives Post-2008
  Continuous research and data analysis

Radical Economic Transformation  Skills development aligned to labour

demand
Focuses on:
 Investment in education and training
 Land redistribution
 Stronger coordination between:
 Inclusive growth
o Government
 Breaking monopolies
o Business
 Social justice
o Labour

 Adaptation to technological change

The reality on the ground

Despite initiatives:

 Unemployment remains extremely high

 Youth unemployment critical

 Skills mismatch persists

 Informal sector growing

 Labour unrest common

 Inequality remains entrenched

Planning for the future

Future labour market planning requires: