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Labour Economics

Labour Economics . Lecture 1. INTRODUCTION. WHY STUDY THE LABOUR MARKET? Some people say unemployment is the root cause of crime, others point to the large number of foreign workers. But is unemployment that serious? Should the country refuse to accept immigrants?.

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Labour Economics

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  1. Labour Economics Lecture 1

  2. INTRODUCTION WHY STUDY THE LABOUR MARKET? Some people say unemployment is the root cause of crime, others point to the large number of foreign workers. • But is unemployment that serious? • Should the country refuse to accept immigrants?

  3. WHY STUDY THE LABOUR MARKET? Government has published draft BEE codes. • Does the country have sufficient black people to appoint? • What about the white people currently in these positions? • Has affirmative action worked in other countries?

  4. WHY STUDY THE LABOUR MARKET? Cosatu argues trade liberalization has negative effect on employment in SA. • What is the impact of trade liberalization on the labour market? • How can SA compete more successfully?

  5. WHY STUDY THE LABOUR MARKET? There has been a large number of strikes about wages. • To what extent do unions affect wage levels? • Do sharply increased wages actually have an impact on employment?

  6. WHY STUDY THE LABOUR MARKET? Minimum wages have been introduced for farm and domestic workers. • Is this interference in the operation of markets? • Will it not lead to an increase in unemployment?

  7. WHY STUDY THE LABOUR MARKET? Some small businesses argues that the imposition of bargaining council agreements impact unfairly on their right to conduct business. • What is the impact of bargaining councils? • Do they fairly protect workers against exploitation or do they unfairly damage small business interest?

  8. WHY STUDY THE LABOUR MARKET? A study of the operation of the labour market will assist the student to acquire an informed opinion about these issues listed…….!!!!!!!!!!!!!!!

  9. UNIQUE CHARACTERISTICS OF THE LABOUR MARKET(labour market vs. goods market) • Fairness, equity& humanness important, since worker is not a product. • Contractual relationship btwn employers and workers since labour are embodied in the workers. • Labour is heterogeneous (skills, character etc varies) and unlike goods cannot be standardized.

  10. UNIQUE CHARACTERISTICS OF THE LABOUR MARKET(labour market vs. goods market) • There are a variety of labour markets (occupations, locations etc). • Individual skills level may improve overtime due to training and experience. • Prices in the labour markets are determined by a variety of other things (inflation, medical aid, standard of living etc).

  11. UNIQUE CHARACTERISTICS OF THE LABOUR MARKET(labour market vs. goods market) 2 Functions of a labour market: • Allocate human resources among sectors, enterprises, locations and occupations. • Distribute incomes as rewards to workers.

  12. UNIQUE CHARACTERISTICS OF THE LABOUR MARKET(labour market vs. goods market) Objectives of the labour market: • Efficiency, ito maximum output and input. • Equity, implying equal opportunity for all ito access to jobs, training, treatment at work and payment • Growth, i.e. higher productivity and incomes. • Social justice, minimizing any negative effects labour markets may have on workers welfare.

  13. WHY THEORY WITH UNREALISTIC ASSUMPTIONS? Assume: Perfectly competitive labour market Characteristics: • Full and perfect knowledge of markets. • Workers and employers are entirely rational. • Neither workers nor enterprises exercise any influence on the market wage. • There is perfect competition. • Workers are perfectly mobile.

  14. WHY THEORY WITH UNREALISTIC ASSUMPTIONS? Graphic analysis of the labour market • Graph plots the number of workers supplied and demanded against the wage rate. • Supply curve is upward sloping. • Demand curve is downward sloping. • Equilibrium is where the supply and demand curves intersect, as in FIG1.1

  15. WHY THEORY WITH UNREALISTIC ASSUMPTIONS? • FIG1.1

  16. WHY THEORY WITH UNREALISTIC ASSUMPTIONS? Changes with regard to curves: • Movement along the curves, caused by changes in the wage rate. • Shift in the curves, caused bay external factors other than the wage rate. • Change in gradient, the steeper the demand for labour, the more inelastic the curve and vice versa.

  17. CHARACTERISTICS OF SA’s LABOUR MARKET • Poverty primarily a rural phenomenon. • Income inequality has been extensive, i.e.: Income gap between races is closing while the gap within race groups is widening. • Unemployment, particularly among black population and females.

  18. CHARACTERISTICS OF SA’s LABOUR MARKET • High labour cost and low productivity, LAC (% of new entrants to the labour market who find a job in the formal sector) in SA is declining due to the following reasons: • Increasing capital intensity New technologies allowed labour to be replaced by capital.

  19. CHARACTERISTICS OF SA’s LABOUR MARKET • Trade liberalization Globalization leads to increase in SA’s exports, since export sector capital intensive; the impact on employment becomes negative. • High wages and other labour cost increases Wage increases contributed to reduced demand for labour. ……………………….THE END!!!!!!!!!!!!!!

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