Labour Economics Essay

1776 words - 8 pages

1. Introduction
Demand for South African (S.A) labour has been undoubtedly a critical issue for the state of its economy. The country faces many issues such as jobless growth which is as a result of critical labour demand in S.A. It is important to continuously monitor changes in the labour demand because the affect several factors which have chain reactant effect. The recent financial crises for example was one of the biggest factors that recently contributed to the fragile demand for labour, many industries were hampered, jobs lost, companies left in debt amongst other things.
This paper will focus on factors that determined labour demand trends in South Africa. This paper will focus on ...view middle of the document...

However it should be borne in mind that the largest part of workforce is still unskilled component”
Although this data was taken in 2003, not much has changed as government continuously placed great emphasis on skills education and training. Furthermore low skilled and uneducated people contribute to high unemployment workers in the economically active population, this link will be disused further later on in the paper.
3.1 Productivity of the labour force
In a recent article, it was found that S.A labour market has been exhibiting negative labour productivity. Furthermore, Sharp commented in the article, adding more workers would not necessarily translate into increased corporate output (Sharp 2012; cited in Naidoo 2012).

Naidoo (2012) found that South African labour productivity growth had been negative, sitting at -1.0%. In recent news, particularly in the mining sector, skilled labour productivity fell to a slump; workers went on a protest because they wanted an increase in their salary with the help of bargaining power. When such an incident occurs in any sector, productivity diminishes because workers are unhappy. Mathews (2012) reports,
“Marikana violence reflects a complex range of frustrations among miners, unemployed people and communities, another 25000 peaceful people are employed at the mine and have been too scared to come to work for four week”
Workers from the mining sector were unproductive because they were not satisfied with their wages. Wage rate determinate is not only influenced by demand for labour but also labour productivity. Refer to Figure 1 for a graphic representation.
According to Abel & Bernanke (2001:74), shifts in labour demand curves respond to elements that alter the number of labour firms that want to employ at any given level of real wage rate. It can be argued that mine workers wanted to control their real wage rate with the help of labour unions, thus during their protesting period marginal labour productivity declined and a movement down the demand curve is experienced. The mining industry further experienced diminishing marginal returns. Abel & Bernanke (2001:p.74), further state by saying, “labour demand curves slopes downward indicating that the quantity of labour demanded falls as real wage rises.” Twine commented, in an article by Naidoo (2012), ‘if they are using the price of labour, as opposed to the volume of labour, then labour costs are rising faster that output value from workers − this is clearly not good.’ Price of labour will be elaborated later on in this paper
Figure 1

Source: Macroeconomics (2001) 4th ed.
Labour demand curve is illustrated by the downward sloping curve which is also MPN with y-axis illustrated the wage cost at each level. This graph can be looked from the mine workers point of view, miners are the MPN and face the demand curve and the company are they y-axis where they pay for labour wage at each point (w).
3.2 Economic Growth
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