, lOMoAR cPSD| 48011787
STUDY UNIT 1 – INTRODUCTION
LEARNING OUTCOMES:
i. Understand the necessity of studying the labour market
ii.Be able to describe the unique characteristics of the labour
market
iii. Understand why unrealistic assumptions are sometimes made
in theory iv. Be able to describe the important characteristics of the
South African labour market
1. INTRODUCTION
1.1 LABOUR MARKET
LO1: Understand the necessity of studying the labour market
NECESSITY OF STUDYING THE LABOUR MARKET
o Help us understand the economic questions or issues that we encounter
on a daily basis such as unemployment, strikes, skills shortage,
affirmative action etc
o All stakeholders would benefit from an in-depth knowledge of the
labour market in SA as well as a theoretical analysis of the labour
market in general.
o Employers as well as employees have to deal on a daily basis with
concepts that we see and hear about in the media.
Downloaded by Vincent kyalo ()
, 1.2 UNIQUE CHARACTERISTICS OF THE LABOUR
MARKET
LO2: Be able to describe the unique characteristics of the labour market
THE SEVEN UNIQUE CHARACTERISTICS OF THE LABOUR
MARKET
o A product is not being bought but services of a person, a human being.
o Principles of fairness, equity and humanness must be applied.
o The services of the worker are being bought and not the worker
therefore a contractual agreement is important in that relationship. o The
market is characterized by great diversity o The individual worker changes
over time o There is not one single market or clearing house e.g. JSE o The
price of labour is complex
1.3 UNREALISTIC ASSUMPTIONS ON THEORY (IES)
LO3: Understand why unrealistic assumptions are sometimes made in theory
o Although at times these assumptions might appear to be rather
unrealistic, they help us to better understand the key issue under
discussion.
DISTINCTION BETWEEN A MOVEMENT ALONG a CURVE and a
SHIFT of the CURVE
, lOMoAR cPSD| 48011787
1.4 IMPORTANT CHARACTERISTICS of the SOUTH AFRICAN
LABOUR MARKET
LO4: Be able to describe the important characteristics of the South
African labour market o One of the main characteristics of the South
African labour market is a chronic skills mismatch.
Where at prevailing wage rates, there is excess demand for
skilled labour and an oversupply of unskilled labour.
The skills mismatch has its origins in the apartheid era. The
education system for the non-white population, particularly
blacks, constrained the acquisition of skills among the
majority of the population
Unemployment is particularly concentrated among
historically disadvantaged groups and is higher among the
rural, female, uneducated, and young segments of the
population
o Several authors have argued that South Africa’s labour laws impose
rigidities in the labour market that contribute to unemployment (Barker,
1999; Black and Rankin, 1998).
The argument is that the labour laws lead to higher wages than
would otherwise prevail.
Downloaded by Vincent kyalo ()
STUDY UNIT 1 – INTRODUCTION
LEARNING OUTCOMES:
i. Understand the necessity of studying the labour market
ii.Be able to describe the unique characteristics of the labour
market
iii. Understand why unrealistic assumptions are sometimes made
in theory iv. Be able to describe the important characteristics of the
South African labour market
1. INTRODUCTION
1.1 LABOUR MARKET
LO1: Understand the necessity of studying the labour market
NECESSITY OF STUDYING THE LABOUR MARKET
o Help us understand the economic questions or issues that we encounter
on a daily basis such as unemployment, strikes, skills shortage,
affirmative action etc
o All stakeholders would benefit from an in-depth knowledge of the
labour market in SA as well as a theoretical analysis of the labour
market in general.
o Employers as well as employees have to deal on a daily basis with
concepts that we see and hear about in the media.
Downloaded by Vincent kyalo ()
, 1.2 UNIQUE CHARACTERISTICS OF THE LABOUR
MARKET
LO2: Be able to describe the unique characteristics of the labour market
THE SEVEN UNIQUE CHARACTERISTICS OF THE LABOUR
MARKET
o A product is not being bought but services of a person, a human being.
o Principles of fairness, equity and humanness must be applied.
o The services of the worker are being bought and not the worker
therefore a contractual agreement is important in that relationship. o The
market is characterized by great diversity o The individual worker changes
over time o There is not one single market or clearing house e.g. JSE o The
price of labour is complex
1.3 UNREALISTIC ASSUMPTIONS ON THEORY (IES)
LO3: Understand why unrealistic assumptions are sometimes made in theory
o Although at times these assumptions might appear to be rather
unrealistic, they help us to better understand the key issue under
discussion.
DISTINCTION BETWEEN A MOVEMENT ALONG a CURVE and a
SHIFT of the CURVE
, lOMoAR cPSD| 48011787
1.4 IMPORTANT CHARACTERISTICS of the SOUTH AFRICAN
LABOUR MARKET
LO4: Be able to describe the important characteristics of the South
African labour market o One of the main characteristics of the South
African labour market is a chronic skills mismatch.
Where at prevailing wage rates, there is excess demand for
skilled labour and an oversupply of unskilled labour.
The skills mismatch has its origins in the apartheid era. The
education system for the non-white population, particularly
blacks, constrained the acquisition of skills among the
majority of the population
Unemployment is particularly concentrated among
historically disadvantaged groups and is higher among the
rural, female, uneducated, and young segments of the
population
o Several authors have argued that South Africa’s labour laws impose
rigidities in the labour market that contribute to unemployment (Barker,
1999; Black and Rankin, 1998).
The argument is that the labour laws lead to higher wages than
would otherwise prevail.
Downloaded by Vincent kyalo ()
