ECOE 312

SS/LG 4.1

Miss L Maubane
 Study Section: 4.1 The Labour Issue in the RSA /
Leergedeelte 4.1 Die arbeids-vraagstuk in die RSA
 Learning outcomes
Having studied study section 4.1, you should be able to:
• Identify some of the unique features that distinguish the labour force from other
markets;
• Propose methods to increase the demand for labour in South Africa;
• Define “supply of labour”;
• Briefly discuss the factors that influence the supply of labour in South Africa;
• Identify the source that can best be utilised to determine the population size of a
country;
• List a few factors that can lead to problems with the accurate determination of the
total population of South Africa;
• Explain to learners the process of how wages are determined in South Africa;
• Identify factors that influence the size of wages in practice;
• Discuss labour demand and supply in the context of the South African economy;
• Discuss and critically evaluate the labour issue in South Africa.
 Resources

Study material
Study the information on pp. 225 – 231 of Mohr and pp. 112, 189, 290,
292 and 295 of Levin.
 Study Section: 4.1 The Labour Issue in the RSA /
Leergedeelte 4.1 Die arbeids-vraagstuk in die RSA

Introduction
The labour field in South Africa is characterised by particular
problems, but fortunately also by exciting and dynamic changes.

The labour changes were introduced by:

• The removal of job reservation,
• The protection of basic worker rights through legislation,
• Extension of negotiation between equal labour partners
• The legalisation of labour unions.
 Study Section: 4.1 The Labour Issue in the RSA /
Leergedeelte 4.1 Die arbeids-vraagstuk in die RSA

1. The removal of job reservation:

• Job reservation is a historical term
that refers to the legal setting aside of
certain jobs for certain ethnic groups.
• In South Africa, the government used
job reservation under the apartheid
system to limit job opportunities for
Black people.
• This practice previously limited
certain jobs to specific racial groups.
By eliminating it, the playing field
became more level and opportunities
opened up for all qualified workers.
 Study Section: 4.1 The Labour Issue in the RSA /
Leergedeelte 4.1 Die arbeids-vraagstuk in die RSA

2. The protection of basic worker rights through legislation:

Laws were enacted to ensure fair treatment, safe working conditions,
and minimum standards for things like wages and benefits.

3. Extension of negotiation between equal labour partners: This

shift encourages communication and collaboration between
employers and employees. Unions representing workers can now
negotiate for better working conditions and wages.
 Study Section: 4.1 The Labour Issue in the RSA /
Leergedeelte 4.1 Die arbeids-vraagstuk in die RSA

4. Legalisation of labour unions: This allows workers to form unions

which can collectively bargain for better working conditions and
represent their interests.
 Study Section: 4.1 The Labour Issue in the RSA /
Leergedeelte 4.1 Die arbeids-vraagstuk in die RSA

In the labour issue in South Africa, however, not only the employers
and the employees are involved, but indeed the entire society.

Events taking place in the labour field spread out to all members of
the community; for example, consumers, tax payers and ordinary
people.
 Study Section: 4.1 The Labour Issue in the RSA /
Leergedeelte 4.1 Die arbeids-vraagstuk in die RSA

The labour issue in South Africa is more greatly influenced in the

economic fields by aspects such as:
• The economic growth rate: A strong economy can create more
jobs, reducing unemployment.
• The ability to create more job opportunities: It is important to
create more jobs for people to earn a living and contribute to the
economy.
• Unemployment: High unemployment is a major concern as it can
lead to other socio-economic issues such as poverty.
 Study Section: 4.1 The Labour Issue in the RSA /
Leergedeelte 4.1 Die arbeids-vraagstuk in die RSA

• A shortage of a skilled labour force: A lack of skilled workers can

hinder economic growth.
• Training low skilled persons: Training programs are needed to
address the issue of shortage of a skilled labour force.
• Labour union action: Labour unions can fight for worker rights but
may also lead to strikes that disrupt businesses.
4.1.1 The unique features of the labour market in South Africa
4.1.1 Die unieke kenmerke van die arbeidsmark in Suid-Afrika
 4.1.1 The unique features of the labour market in South Africa
4.1.1 Die unieke kenmerke van die arbeidsmark in Suid-Afrika

The labour issue can only be properly understood by understanding

the unique features of the local labour market.
Although the labour market in principle functions the same as any
other market, it possesses some distinctive features that must be
taken into account.
 4.1.1 The unique features of the labour market in South Africa
4.1.1 Die unieke kenmerke van die arbeidsmark in Suid-Afrika

Some of the features that distinguish the labour market from

other markets are, for example:
• There is no single labour market, but rather a variety of labour
markets such as a market for highly trained specialists, a market for
professional engineers, a market for typists, etc.;
• The “product” of the labour market is not a “thing”, but a person with
the right to human dignity, justice, equity and respect;
 4.1.1 The unique features of the labour market in South Africa
4.1.1 Die unieke kenmerke van die arbeidsmark in Suid-Afrika

• Labour cannot be stored; what is not done at a given moment is

technically lost;
• Workers’ ability to work depends on health conditions, relaxation,
rest, working conditions, food, etc.;
• The level of labourers’ productivity can be increased by the right
training, motivation, management, better equipment, etc.
 4.1.1 The unique features of the labour market in South Africa
4.1.1 Die unieke kenmerke van die arbeidsmark in Suid-Afrika

• The employer can only buy the services of the employee and not the
employee itself.
• Labour is not homogenous.
• The personality of the worker has an influence on the output.
• The price of the labour is influenced by factors like the standard of
living, inflation, subsidies, tax rates etc.
 4.1.1 The unique features of the labour market in South Africa
4.1.1 Die unieke kenmerke van die arbeidsmark in Suid-Afrika

• The situation at work and job satisfaction are often more important
factors than the price of labour (salary)
• Disorganized employees are in a weaker position in terms of
collective bargaining.
4.1.2 Labour demand
4.1.2. Arbeidsvraag
 4.1.2 Labour demand
4.1.2. Arbeidsvraag

The declining demand for labour in the South African economy during
the early 1990s contributed to the labour issue in South Africa.
Unemployment and under-employment are but a few of the major
problems caused by the inadequate demand for labour (Van Zyl et al.,
2002:245).
 4.1.2 Labour demand
4.1.2. Arbeidsvraag

Issues that must be addressed to increase the demand for labour

in South Africa are:
• Economic growth rate higher than the population growth rate;
• Creation of new job opportunities;
• Increased labour productivity;
• Scaling down excessive wage demands by labour unions; and
• Considering labour intensive production methods rather than
mechanisation.
 4.1.2 Labour demand
4.1.2. Arbeidsvraag

Factors that contributed to the decrease in demand for labour in

the RSA since the 1990s:
• The low economic growth rate
• Lack of capital
• Lack of new investments and expansion
• Lack of initiative
 4.1.3 Supply of labour
4.1.3 Aanbod van arbeid
 4.1.3 Supply of labour
4.1.3 Aanbod van arbeid

The supply of labour can be described as the number of people who offer
their labour for payment on the labour market.

Factors that influence the supply of labour in South Africa are:

• The total population size;
• The population growth rate;
• The labour force participation rate;
• Hours of work;
• Migration; and
• The level of skill.
 4.1.3 Supply of labour
4.1.3 Aanbod van arbeid

Total Population Size: A larger population generally means a larger

number of potential workers.
Population Growth Rate: A faster growing population can lead to a
larger labour supply over time, as more people reach working age.
Labour Force Participation Rate: This is the percentage of the
working-age population that is actively employed or looking for work.
Factors like education levels, social norms, and government policies
can influence this rate.
 4.1.3 Supply of labour
4.1.3 Aanbod van arbeid

Hours of work: The total number of hours people are willing to work
affects the overall labour supply. This can be influenced by factors like
wages and benefits.
Migration: The movement of people between countries can impact
labour supply. Immigration can increase the workforce, while
emigration can decrease it.
Level of Skill: The skills and qualifications of the workforce play an
important role. Skill shortages can limit the supply of labour for
specific jobs.
4.1.4. Wages
4.1.4. Lone
 4.1.4. Wages
4.1.4. Lone

Wages may be regarded as the “price” of labour in the labour market.

As in any other market, the price of wages is determined by the
interaction between the market demand and the market supply.
The contemporary wage issue is that the market forces can allow
wages to be adjusted upward, but that the same market forces cannot
necessarily allow wages to decline in the opposite direction (for
example, as a result of the action of labour unions)
 4.1.4. Wages
4.1.4. Lone

The price of wage is determined by:

• The interaction between the market demand and the market supply
• Profitability of the company
• Inflation rate
• Standard of living
• Market conditions
• Productivity
• Unions
• Business cycles
• State policy
 4.1.4. Wages
4.1.4. Lone

• The interaction between the market demand and the market

supply: When there is high demand for labour with limited supply,
wages will be driven up. Vice versa, when there is low demand for
labour with a surplus of workers, wages will be pushed down.
• Profitability of the company: Businesses can only afford to pay
wages based on their profits. Companies with higher profits have
more flexibility to offer higher wages to attract and retain qualified
workers.
 4.1.4. Wages
4.1.4. Lone

• Inflation rate: Inflation decreases the purchasing power of wages.

To maintain their standard of living, workers may need to negotiate
for higher wages to keep pace with inflation.
• Standard of living: Ideally, wages should be high enough to allow
workers to maintain a decent standard of living, which includes
things like food, housing, clothing, healthcare, and transportation.
 4.1.4. Wages
4.1.4. Lone

• Market conditions: Broader economic conditions can also influence

wages. For example, a strong economy with low unemployment may
lead to higher wages due to increased competition for workers. On
the other hand, a weak economy with high unemployment may lead
to a decrease in wages.
• Productivity: If workers are producing more goods and services,
businesses can afford to pay them higher wages.
 4.1.4. Wages
4.1.4. Lone

• Unions: Strong unions can bargain collectively with employers to

negotiate higher wages and better working conditions for their
members.
• Business cycles: The economy goes through periods of expansion
and contractions, which can affect wages. During economic
expansion, there may be a shortage of labour, which can drive up
wages. During recessions, businesses may be forced to lay off
workers or cut wages in order to reduce costs.
 4.1.4. Wages
4.1.4. Lone

• State policy: Government policies can also influence wages. For

example, minimum wage laws set a floor for how much workers can
be paid.
 Remember / Onthou

eFundi test 2: Study Unit 1 to Study Unit 4

Remember