ECS2604
STUDY GUIDE
,ECS2604 LABOUR ECONOMICS
STUDY GUIDE
LEARNING UNIT 1
Introduction
PRESCRIBED BOOK: Chapter 1 – ECONOMICS IN ACTION
Introduction
The purpose of this module is to introduce you to the South African labour market,
including its main features, challenges and the way in which it operates. Particular
attention is given to the theoretical principles underlying labour-market operations. By
studying these principles, you will develop a clearer understanding of how the labour
market functions in the real world. Graphical illustrations will be used throughout the
module to demonstrate the theoretical concepts relating to labour markets.
Issues such as high unemployment, shortages of skilled workers, inequalities in
employment, discrimination, affirmative action, industrial strikes, trade-union activities,
collective bargaining, minimum wages and human-capital development through
education, training and skills development are all important aspects of the South African
labour market. These issues affect virtually everyone, whether they participate in the
labour market as employees or employers.
The importance of studying labour economics therefore becomes clear because these
issues influence economic and social conditions throughout South Africa.
LEARNING OUTCOMES
After completing this chapter, you should be able to:
explain why it is important to study the labour market;
, identify and explain the distinctive characteristics of the labour market;
explain the purpose of using assumptions in economic theory, even when some
assumptions may not reflect reality;
describe the major characteristics of the South African labour market; and
understand how the prescribed textbook is organised and structured.
CONTENTS
This chapter introduces the field of labour economics and explains why studying the
labour market is important.
1.1 Why study the labour market?
STUDY
Section 1.1 of the prescribed book.
This section provides an introduction to the course by considering why the labour
market should be studied.
Labour economics is an important and interesting area of economics because it helps
us understand many economic issues that arise in everyday life.
A sound understanding of the South African labour market, together with the theoretical
principles used to analyse labour markets, can be useful to almost everyone. Employers
and employees regularly encounter issues discussed in the media, including
unemployment, shortages of skills, the employment of unskilled foreign workers, the
movement of skilled South Africans to other countries, affirmative action, industrial
strikes, wage negotiations, minimum wages, poverty, inequality and discrimination.
Labour economics is particularly important for people who intend to develop careers in
economics or related fields.
, While working through this section, it is important to understand the distinction between
positive economics and normative economics, particularly when these concepts are
applied to labour-market issues.
1.2 Unique characteristics of the labour market
STUDY
Section 1.2 of the prescribed book.
The labour market can be viewed as a theoretical marketplace where employers and
workers interact, with labour being exchanged for remuneration. Although labour
markets operate according to the fundamental forces of supply and demand, much like
markets for other goods and services, they possess several features that make them
different.
An important distinction between a labour market and an ordinary goods market is that
labour is provided by human beings. A worker is therefore not simply a commodity or
physical product. This human element creates several characteristics that make labour
markets unique.
One particularly important feature concerns the nature and complexity of the price of
labour, which is represented primarily by the wage or remuneration received by
workers. The determination of wages is considerably more complex than the pricing of
many ordinary goods.
The section also considers how labour markets should operate in a manner that
contributes towards broader economic and social objectives.
1.3 Why theory with unrealistic assumptions?
STUDY
Section 1.3 of the prescribed book.
STUDY GUIDE
,ECS2604 LABOUR ECONOMICS
STUDY GUIDE
LEARNING UNIT 1
Introduction
PRESCRIBED BOOK: Chapter 1 – ECONOMICS IN ACTION
Introduction
The purpose of this module is to introduce you to the South African labour market,
including its main features, challenges and the way in which it operates. Particular
attention is given to the theoretical principles underlying labour-market operations. By
studying these principles, you will develop a clearer understanding of how the labour
market functions in the real world. Graphical illustrations will be used throughout the
module to demonstrate the theoretical concepts relating to labour markets.
Issues such as high unemployment, shortages of skilled workers, inequalities in
employment, discrimination, affirmative action, industrial strikes, trade-union activities,
collective bargaining, minimum wages and human-capital development through
education, training and skills development are all important aspects of the South African
labour market. These issues affect virtually everyone, whether they participate in the
labour market as employees or employers.
The importance of studying labour economics therefore becomes clear because these
issues influence economic and social conditions throughout South Africa.
LEARNING OUTCOMES
After completing this chapter, you should be able to:
explain why it is important to study the labour market;
, identify and explain the distinctive characteristics of the labour market;
explain the purpose of using assumptions in economic theory, even when some
assumptions may not reflect reality;
describe the major characteristics of the South African labour market; and
understand how the prescribed textbook is organised and structured.
CONTENTS
This chapter introduces the field of labour economics and explains why studying the
labour market is important.
1.1 Why study the labour market?
STUDY
Section 1.1 of the prescribed book.
This section provides an introduction to the course by considering why the labour
market should be studied.
Labour economics is an important and interesting area of economics because it helps
us understand many economic issues that arise in everyday life.
A sound understanding of the South African labour market, together with the theoretical
principles used to analyse labour markets, can be useful to almost everyone. Employers
and employees regularly encounter issues discussed in the media, including
unemployment, shortages of skills, the employment of unskilled foreign workers, the
movement of skilled South Africans to other countries, affirmative action, industrial
strikes, wage negotiations, minimum wages, poverty, inequality and discrimination.
Labour economics is particularly important for people who intend to develop careers in
economics or related fields.
, While working through this section, it is important to understand the distinction between
positive economics and normative economics, particularly when these concepts are
applied to labour-market issues.
1.2 Unique characteristics of the labour market
STUDY
Section 1.2 of the prescribed book.
The labour market can be viewed as a theoretical marketplace where employers and
workers interact, with labour being exchanged for remuneration. Although labour
markets operate according to the fundamental forces of supply and demand, much like
markets for other goods and services, they possess several features that make them
different.
An important distinction between a labour market and an ordinary goods market is that
labour is provided by human beings. A worker is therefore not simply a commodity or
physical product. This human element creates several characteristics that make labour
markets unique.
One particularly important feature concerns the nature and complexity of the price of
labour, which is represented primarily by the wage or remuneration received by
workers. The determination of wages is considerably more complex than the pricing of
many ordinary goods.
The section also considers how labour markets should operate in a manner that
contributes towards broader economic and social objectives.
1.3 Why theory with unrealistic assumptions?
STUDY
Section 1.3 of the prescribed book.
